Bonds

Puerto Rico Oversight Board seeks dismissal of PREPA appeal

The Puerto Rico Oversight Board asked the First Circuit Court of Appeals to dismiss an effort by a Puerto Rico Electric Power Authority bondholder and bond insurer to let them appoint a receiver for the authority.

The board told the court the issue was still before the District Court, which hasn’t fully ruled on the adversary proceeding.

The board said the litigants were trying to use a section of the bankruptcy code to guarantee an accelerated appeal, but it allows the stay to be extended under current circumstances.

The Puerto Rico Oversight Board asked the appeals court to stop GoldenTree and Syncora’s effort to appoint a receiver for the Puerto Rico Electric Power Authority.

Bloomberg News

The District Court has ruled litigants “lacked any security interest in their receivership remedy and the remedy was not a property of PREPA,” the board said.

GoldenTree Asset Management and bond insurer Syncora Guarantee filed a brief in mid-September asking the First Circuit Court of Appeals to lift the PREPA bankruptcy’s stay on a bondholder appointment of a receiver.

While GoldenTree and Syncora said they are entitled to enforce local law to lift the stay and appoint a receiver, a bankruptcy stays otherwise enforceable laws and to lift it now would be to “prefer appellants at the expense of all other creditors,” the board said. 

The appeals court lacks jurisdiction on the appeal, the board said. In a motion the board filed in mid-September, it said the “collateral-order doctrine” allowing appeals of ongoing cases didn’t apply to the appeal.

It said the District Court had not yet conclusively determined a disputed question and that the issue of whether the stay should be lifted couldn’t be separated from other key issues in the case, including the litigants’ claimed property interests. Established law requires these conditions for an appeals court to rule on an appeal of an ongoing case.

Finally, the litigants’ notice of appeal only addressed the timeline for resolving their lift-stay motion but they now seek to lift the stay altogether. The board said U.S. law bars the appeals court from considering the second issue since it wasn’t in the notice of appeal.

The board asked the appeals court to dismiss the litigants’ appeal “for lack of jurisdiction” but if the court choses to address the appeal’s “merits,” it should affirm the lower court’s order.

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