Bond insurance companies that were not part of a preliminary deal to restructure debt issued by the Puerto Rico Electric Power Authority (PREPA) have relaunched litigation seeking a receiver for the bankrupt agency.
The move could signal that Puerto Rico has a ways to go to reach a final deal that includes the insurers.
A motion filed late on Wednesday in U.S. District Court in Puerto Rico by National Public Finance Guarantee Corporation, Assured Guaranty Corp., Assured Guaranty Municipal Corp. and Syncora Guarantee Inc. asks the judge overseeing the U.S. commonwealth’s bankruptcy case to allow another federal judge to appoint an independent professional to take over the utility’s operations.
“PREPA must be led by a receiver, free from impermissible political influence, with experience and proven expertise managing public utilities in the best interests of all of its constituents,” the court filing stated.
U.S. Judge Laura Taylor Swain last year struck down a previous receiver bid by bond insurers, only to have an appeals court remand the matter back to her in August. The latest motion points to PREPA’s “abysmal” efforts to collect almost $3.4 billion in accounts receivable, a revolving door at PREPA’s helm, and the agency’s “notoriously and catastrophically deficient” response to hurricanes Irma and Maria, which struck the island in September 2017.
The insurance companies, which guarantee payments on about 27 percent of PREPA’s $8.3 billion of outstanding bonds, claim they have statutory and contractual rights to obtain a receiver after the utility began defaulting on bonds and filed for bankruptcy last year.
The head of the Puerto Rico Fiscal Agency & Financial Advisory Authority, Christian Sobrino, stated on Thursday that “the motion rehashes many of the same arguments previously raised by the monoline insurers and is based on false and stale information.”
He added that PREPA’s current leadership “is focused on improving operations and continuing to address the impacts of the hurricane.”
There was no immediate comment from Puerto Rico’s federally appointed oversight board, which filed a form of bankruptcy in 2017 to restructure the island’s $120 billion of debt and pension obligations.
Meanwhile, local media in Puerto Rico reported on Thursday that Governor Ricardo Rossello and PREPA plan to cut electric rates for residents.
The insurers were not part of a tentative deal reached in July with a group of bondholders who own more than $3 billion of PREPA debt. That deal, which currently falls short of the creditor participation threshold needed for court approval, would exchange existing PREPA bonds for new debt and link future payments to the island’s economic recovery.
Puerto Rico also has deals in the works to restructure debt issued by its bankrupt Sales Tax Financing Corporation, known as COFINA, and its defunct Government Development Bank.
Despite the renewed motion, Assured said it “stands ready, and would prefer, to work cooperatively with the Financial Oversight and Management Board for Puerto Rico to consensually appoint a receiver for PREPA.”
(Reporting by Karen Pierog in Chicago and Luis Valentin Ortiz in San Juan Editing by Matthew Lewis)
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