From The Star Team
The Financial Oversight and Management Board of Puerto Rico, acting on behalf of the Puerto Rico Electric Power Authority (PREPA) in its bankruptcy proceedings, has put forth a modification to the utility’s debt restructuring plan, indicating that stakeholders are likely nearing a consensus.
Earlier this year, U.S. District Judge Laura Taylor Swain implemented a moratorium on the case, mandating that the involved parties engage in negotiations to resolve a deadlock following a ruling by the U.S. Court of Appeals for the First Circuit in Boston affirming that bondholders retained a secured interest in the utility’s obligation payments.
The “First Amendment” submitted to the court on Tuesday involves BlackRock Financial Management Inc., Black Rock Advisors LLC, Whitebox Advisors LLC, Nuveen Asset Management LLC, Franklin Advisers Inc., and Taconic Capital Advisors LP, along with their respective accounts.
This First Amendment revises the amended plan support agreement (PSA) by pushing the effective date deadline from October 1, 2024, to October 1, 2025, introduces an updated “most favored nation” clause, and incorporates the parties’ consensus in PREPA’s Master Trust Agreement.
The oversight board indicated that “the First Amendment Parties possess over 50% in amount or voting authority of the Bond claims owned by the Supporting Bond Parties.”
“Therefore, the First Amendment is a legitimate modification to the amended PSA, which is binding on all supporting bond parties,” the entity confirmed.
This so-called Amendment 1 adjusts the timelines for approximately $1.3 billion in bonds scheduled for issuance, extending their maturity to 30 years. Blackrock, Whitebox, and Taconic will take their proportional share of 3% of the Series B bond’s principal amount in cash.
The most favored nations clause was revised to stipulate that if the oversight board proposes an adjustment plan that treats any PREPA bondholder or insurer’s PREPA bond claim differently from those of the supporting bondholders, each supporting bondholder will have the option to elect to accept such different treatment on their PREPA bond claim instead of the conditions outlined in the agreement. This is in place of the entitlement to the RSA (restructuring support agreement) fee, the structuring fee, and the $30 million reimbursement costs.
