From The Star Staff
The Commonwealth asserts that the reconciliation monitors are standing firm in their efforts to push for the subordination of the Puerto Rico Electric Power Authority (PREPA) bond claim, as stated in a newly released court filing.
The monitors, who were designated by the Unsecured Creditors Committee (UCC), have also dismissed a PREPA bondholder’s assertion that removing the litigation freeze in the PREPA bankruptcy process to address the matter would not enhance judicial efficiency.
“The objection fails to acknowledge the fact that the commonwealth’s general unsecured creditors deserve finality regarding the commonwealth plan to allow them to begin receiving distributions,” the claims reconciliation monitors commented.
The U.S. Bank National Association, serving as the PREPA trustee, opposed the monitors’ plea for a partial lift of the confirmation stay in PREPA’s case to initiate litigation aimed at reclassifying PREPA’s bond trustee debt claim against the commonwealth.
Although the court approved the commonwealth debt adjustment plan for the bankruptcy case in 2022, the claims of general unsecured creditors have not been settled due to the ongoing dispute. The U.S. Bank National Association claims an $8 billion unsecured debt against the commonwealth, matching the amount owed in PREPA bonds.
The claims monitors, Carol Flaton and Ramón Ortiz, are pushing to reclassify the debt, contending that they do not deem the U.S. Bank National claim as a general unsecured claim of the commonwealth but rather assert that it should be classified as an unsubordinated claim under the Commonwealth Plan.
U.S. District Judge Laura Taylor Swain has requested submissions from the parties regarding the possibility of permitting the litigation to begin during the stay in September after the monitors indicated in a motion that once the bondholders’ claim has been designated, the commonwealth could initiate payments to unsecured creditors.
Unsecured creditors of the commonwealth, who have been awaiting payment since the effective date of the commonwealth plan in March 2022, have yet to receive anything because the court has not ruled on whether PREPA bondholders possess an $8 billion unsecured claim against the commonwealth.
The reconciliation monitors have stated that they possess the authority to file a case.
“This classification matter is clearly within the scope of authority granted to the claims reconciliation monitors under the commonwealth plan, and it should not be surprising that the objection fails to cite even one instance where a party, granted specific rights under a confirmed reorganization plan, was later determined (by the court that confirmed the plan) to lack standing to exercise those rights,” the response noted.
The monitors further challenged a bondholders’ assertion that the classification litigation was irrelevant to PREPA’s Title III case. The total estimated amount of CW general unsecured claims is around $3.5 billion. While the proof of claim submitted by the trustee is yet to be quantified, the Financial Oversight and Management Board has set aside $8.4 billion in relation to it.
