Governor Wanda Vázquez Garced seemed pleased yesterday with the Oversight Board request to postpone the hearing before federal Judge Laura Taylor Swain - who handles cases under PROMESA – over Puerto Rico Electric Power Authority´s (PREPA) Restructuring Support Agreement (RSA), as this would allow to better review the document.
The governor said they will use this period to seek the best alternative for the public utility fiscal situation, which has not paid its creditors including bondholders, banks and suppliers since 2014.
"This is an important issue for people. We have to look for the best alternative for the Electric Power Authority. That is essential. I think this is a time we have to reach the best decision. We are going to look for the best alternative, and the people are the ones to benefit from it,” said the governor at a press conference in the Miramar Convention Center.
Almost a month before Judge Swain starts evaluating the agreement with PREPA bondholders group (Ad Hoc-PREPA), the Board and the Puerto Rican government asked Swain for more time, which includes postponing the hearing so PREPA can reach more operational transformation progress and the Legislature discusses and approves the law necessary to implement the agreement.
If Swain grants the extension requested by the Board, it would be the eighth amendment to the order issued by the judge to analyze PREPA agreement and the fifth in which the agency asks to postpone what would be the second agreement with creditors under PROMESA Title III.
According to the Board's motion, the government is advancing its agenda to privatize the transmission and distribution of electricity in Puerto Rico. Specifically, according to the motion, the Public-Private Partnerships Authority (P3A) is in conversations with companies interested in the infrastructure and is negotiating the final terms.
The Board states in the document that they are working with P3A to speed up the privatization process and the agency must make "the final selection of proponents and complete the related contracts early next year."
About a year ago, the P3A reported that Duke Energy, Exelon Corporation, PSEG Services Corporation and a consortium led by ATCO Ltd and Quanta Services had reached the final stage of the bidding process.
However, Exelon would have withdrawn from the process a few months ago, as El Nuevo Día reported.
According to the joint motion, the branches of the government are working in the legislative process to support PREPA's exit from Title III and the transactions contemplated under the RSA. The document is virtually assuming that the legislative branch will endorse the agreement that has been challenged by business organizations, economists and civic and financial analysis organizations.
Despite the Board's proposals in court, several legislative leaders stated that they will not give their support to the deal.
In its motion, the fiscal entity argues that the agreement, as well as motions filed by creditors to disclose documents or the process followed in the negotiation, could be discussed at an upcoming general hearing on Title III cases.
A seven-month delay
The Board, FAFAA, and PREPA´s joint motion filed yesterday is similar to a motion filed on December 14 for the same purposes and the fiscal entity´s argument to the objections that Assured Guaranty and National Public Finance Guarantee, like Cortland Capital, filed before Swain seeking to postpone the hearing.
Last summer, the Board asked the court to approve the RSA between the Ad Hoc-PREPA group and Assured and National insurers as a prelude to the public corporation's adjustment plan.
The request resulted in at least two adversarial proceedings and creditors objecting to the Board's proposal seeking to know how the entity worked the transaction, invoking Bankruptcy Code Rule 9019.
Since then, Swain granted additional time, extending the deadlines for the Board to submit documents in court, and postponed the hearing to discuss the matter at least five times, according to Assured and National.
Now, the deadlines for the Board to comply with the established process are today December 18, in the case of the 9019 motion under Rule 9019, and December 23 in the case of adversarial proceedings. The Board requested to postpone that until January 10.
The RSA includes clauses to compensate creditors who support the agreement as its discussion in court is delayed.
"The RSA was signed on May 3, 2019, more than seven months ago," Assured and National attorneys said, partially opposing to postpone the hearing.
Municipal insurers insisted that the parties supporting the agreement should not be forced to wait any longer before obtaining the certainty that can only be achieved through court approval of certain RSA provisions.
Meanwhile, Cortland Capital, one of the firms that administer the loans granted to PREPA for the purchase of fuel, indicated that they do not oppose to postpone the hearing for January 14, 2020, but added that, if it were the case, it would be necessary to modify the schedule of the adversarial proceedings.
Wanda Vázquez Garced, who took office as provided in the Constitution, announced her aspiration to the governor’s candidacy under the New Progressive Party (PNP).