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Judge Laura Taylor Swain. (GFR Media)
Judge Laura Taylor Swain. (GFR Media)

Although the Puerto Rican government has been in emergency mode for almost a month as a result of the earthquakes that affected the island´s southern region, the Oversight Board would not make any changes to the fiscal plan or its negotiations with creditors.

According to the Board's main legal advisor, Martin Bienenstock, although Board President José B. Carrión, and  Executive Director Natalie Jaresko have visited the southern area on three occasions after the earthquakes that have kept thousands of people on tenterhooks for almost a month, so far, the fiscal entity has not received enough information to conclude that the public debt restructuring process and the budgetary adjustments they propose should change its course.

Bienenstock told Judge Laura Taylor Swain, who presides over Title III cases and was visibly concerned about the impact of the earthquakes that hit the island,  that the Board has not determined if there is sufficient basis to change its plans and negotiations.

Swain went back to Puerto Rico's debt restructuring process yesterday by holding the first 2020 Title III general hearing. The process would enter its crucial stage this year since the court will have to consider the Puerto Rico Electric Power Authority (PREPA) debt restructuring process and other obligations payable from specific revenue sources such as slot machines and rum taxes. And the constitutional debt restructuring - preferably through a court-ordered mediation process- is still pending.

Bienenstock told Swain the Board is evaluating requests from Congress members - such as Democrat Nydia Velázquez - to revoke the pact reached in PREPA, as well as changing the government's fiscal plans. The lawyer then successfully managed to get Swain to accept a request to postpone the debate over PREPA Restructuring Support Agreement (RSA).

This is the third time, the Board postpones the RSA debate in court, an agreement that according to economists, will increase the cost of electricity on the island. 

The RSA had to be discussed last December and was rescheduled for yesterday and then rescheduled for March, which will not happen now either.

Bienenstock anticipated that the Board has already met with the legislative leadership to discuss the legislation needed to implement the RSA. That bill would be introduced in the coming weeks.

The May 2019 RSA between the Board and PREPA's bondholders even resulted in a battle with the Electrical Industry and Irrigation Workers Union (UTIER) and the Unsecured Creditors Committee (UCC). Both parties requested in court that the Board discloses how the controversial agreement was reached and also to disclose a study by London Economics International, a firm that would have analyzed the impact of the transaction on PREPA's economic and operational conditions.

Swain gave the Board until February 10 to answer the parties' arguments before setting a new date to discuss the RSA.

Damage assessment

While the Board was discussing the restructuring process, the Fiscal Agency and Financial Advisory Authority (FAFAA) described a Puerto Rico focused on the aftermath of the earthquakes.

FAFAA lawyer Luis Marini Biaggi told Swain that the earthquakes in the island´s southern area caused preliminary damage for $460 million and that permanent repairs to schools and roads require over $1.5 billion.

"The damage assessment is still at a preliminary stage," Marini Biaggi told the judge.

According to the lawyer representing the local agency, until January 15, the government had documented that some 790 houses in the southern region were damaged by the earthquakes and that only emergency repairs to schools and roads reach between $40 million and $66 million.

During the hearing, as reported earlier by El Nuevo Día, Marini Biaggi indicated that the local government continues to assess the damage to the Costa Sur power plant and that PREPA will call for a request for proposals (RFP) process that will allow the agency to buy emergency generators with 500 megawatts capacity.