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The Financial Oversight and Management Board of Puerto Rico has objected to a motion filed by non-settling bondholders of the Puerto Rico Electric Power Authority (PREPA) that seeks to end the litigation stay in the utility’s Title III bankruptcy case.
In addition, the oversight board has criticized the restructuring proposal put forth by the same bondholders.
According to the board, many of the disputes that the non-settling bondholders wish to litigate would serve no useful purpose, such as the appointment of a receiver who would not be able to control PREPA’s revenue and expenses. Additionally, the oversight board argues that attempts to determine the amount of administrative claims would be futile until the court decides whether the bondholders are recourse – meaning they can be paid with funds beyond those to which they are entitled.
The oversight board emphasizes that engaging in unnecessary litigation would only prolong the bankruptcy proceedings, which have already lasted over seven years. The board’s primary goals include restructuring PREPA’s debt to ensure its sustainability, paying all creditors their legal entitlements, and providing reliable and affordable electric power to the people and businesses of Puerto Rico.
In a related development, the Unsecured Creditors Committee (UCC) has objected to the PREPA mediation team’s motion to retain PJT Partners as its financial adviser due to concerns over the proposed fees, which the UCC says are excessive. The mediation team has proposed a monthly advisory fee of $1 million for PJT, with $350,000 held back and paid once the restructuring is consummated. The minimum amount the mediation team would pay PJT is $7.8 million if no restructuring occurs, and $12 million if a restructuring takes place.
The UCC argues that such a fee structure is problematic for several reasons. The monthly fee, excluding the holdback, is considered “excessive” and is several times more than what the mediation team paid its former financial adviser, Moelis, which earned $250,000 monthly for three months and then $150,000 per month thereafter.
Furthermore, the proposed fee is higher than what PJT was paid when it served as the financial adviser to the oversight board, despite having a significantly broader role at the time.
