While thousands of customers still lack power after Hurricane Maria hit the island, the Oversight Board, the administration of Ricardo Rosselló Nevares and bondholders are engaged in a secret power struggle to control the Electric Power Authority (PREPA).
This was shown in a letter that the organized group of bondholders of PREPA (Ad Hoc-PREPA) sent in December to the executive director of the Board, Natalie Jaresko, in which it is even revealed that they were willing to accept not to increase electricity rates while the public corporation's debt is being renegotiated.
According to a letter examined by this newspaper, during the first week of December, Jaresko supposedly met with members or lawyers of the Ad Hoc-PREPA group. The meeting between Jaresko and the Ad Hoc-PREPA would have taken place two weeks after Judge Laura Taylor Swain dealt a hard blow to the Board. This happened, when Swain said that the federal entity had no power to take control of PREPA by appointing Noel Zamot as Transformation Officer.
In that meeting, despite the setback in court and based on the letter signed by lawyer Amy Caton, from the law firm Kramer Levin Naftalis & Frankel, Jaresko would have shown interest in knowing if PREPA bondholders were willing to accept that the Board could dismiss the trustee appointed in PREPA, in case that litigation was resumed for that purpose.
"Granting that right to the Board would mean granting it powers beyond what Judge Swain has interpreted in the PROMESA law," reads Caton´s letter, to which legal references on the powers of creditors in case of non-payment were attached.
The saga in Court
By mid 2017, the Ad Hoc-PREPA and several insurers requested Swain to lift the automatic suspension in litigation in the case of Title III for PREPA and give way to a demand to appoint a trustee in PREPA. According to the law of that corporation and bond contracts, in situations of default, bondholders can request for a trustee be appointed and the rate to be increased in order to pay them.
When the Ad Hoc-PREPA petitioned the Court for the appointment of the trustee, the Board and the government of Ricardo Rosselló Nevares joined forces to stop the creditors. But then, while the island remained in the dark after Maria's passage and the Board tried to name Zamot in PREPA, the Rosselló Nevares administration successfully fought the Board.
The power of Rosselló
Rosselló Nevares interpreted Swain's decision as a victory over the Board, and immediately the Governing Board of PREPA appointed Todd W. Filsinger as financial advisor to the Authority at a cost of $ 5 million.
However, in the letter, Caton indicates to Jaresko that Rosselló Nevares "has no capacity (in law) to control or stop the appointment of atrustee" in or out of Title III of PROMESA, to which PREPA is now subject.
Canton´s letter denotes a new attempt by bondholders, whose Restructuring Support Agreement (RSA) had been rejected in the summer, to reach an understanding with the Board. This is because, according to the letter, bondholders were willing for the Board to remove the PREPA trustee, provided that it was notified in advance and that this figure was chosen from a list of candidates previously approved by the Board and Ad Hoc-PREPA.
Bondholders even said that they were willing for that trustee not to have the authority to increase the rates as long as the Title III process remained in effect and neither to sell assets of the public corporation.
Two months after Swain´s endorsement to the government by giving it the control of PREPA, a third of the subscribers still have no power and the Board, which has has the corporation under its jurisdiction for 15 months, received a revised fiscal plan this week in which it is indicated that PREPA has run out of liquidity to operate.
According to sources, the bondholders´proposal did not receive a response.
This week, Jaresko told El Nuevo Día that the Board favors the privatization of PREPA as a way of restoring the economic growth of the Island.
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