PREPA judge rejects immediate consideration of bondholders’ efforts for a receiver

U.S. District Judge Laura Taylor Swain rejected Puerto Rico Electric Power Authority bond parties’ motion for immediate consideration of their request for a receiver.

Bond parties last week requested a hearing within 30 days to lift the bankruptcy’s stay on remedies, like their appointment of a receiver for PREPA.

Swain said she would consider the motion during a scheduled May 22 bankruptcy hearing. Since the plan of adjustment confirmation hearing is scheduled to end March 19, it is possible Swain will have ruled on the plan before considering the motion, at which point she might rule the request irrelevant or inappropriate.

Swain said a September 2022 litigation schedule the bond parties agreed to remains in effect and takes precedence over a section of the bankruptcy code the bond parties point to as requiring hearings within 30 days on their request to lift the stay.

When the U.S. Court of Appeals for the First Circuit in late January upheld her rejection of a lift stay hearing and said her November release of a decision on certain lien issues “could open the door to a prompt ruling on a renewed (or entirely new) motion for relief from the automatic stay,” this did not mean the bond parties had access to the bankruptcy code’s 30-day provision, Swain said.

Swain said the bond parties knew as of Feb. 5, three days before the deadline for filing matters for a
March 6 hearing, they would file a lift stay motion, yet they waited until Feb. 16 to file, after the hearing had been cancelled.

The bond parties making the lift stay motion were GoldenTree Asset Management, Syncora Guarantee, and the PREPA Ad Hoc Group.

In a footnote Swain said if she were to rule immediately there is “more than a ‘reasonable likelihood'” she would rule against lifting the stay.

All PREPA parties are waiting to hear how the First Circuit Court rules on a bond party appeal of Swain’s lien decision. The ruling may come before, during, or after the confirmation hearing, which is scheduled to start March 5.

The Puerto Rico Oversight Board told The Bond Buyer, “The Oversight Board welcomes the U.S. District Court’s decision to move forward as planned with the confirmation hearings for the plan of adjustment that provides PREPA with an urgently needed path to end bankruptcy and remain a sustainable utility.”

A GoldenTree spokesman didn’t immediately respond to a request for a comment.