San Juan, PR – June 12, 2024 – The Financial Oversight and Management Board for Puerto Rico today issued the following statement:
The Oversight Board is reviewing the ruling by the United States Court of Appeals for the First Circuit on appeals of the rulings of the U.S. District Court for the District of Puerto Rico on the extent of the bondholders’ collateral and recourse claim against the Puerto Rico Electric Power Authority (PREPA). The Oversight Board is also analyzing the impact, if any, of the ruling on PREPA’S proposed Plan of Adjustment.
The Oversight Board is gratified that the First Circuit ruled the bondholders’ claims are non-recourse and limited to payment from collateral, namely net revenues. The First Circuit left to the U.S. District Court how that ruling impacts the confirmation of the Plan of Adjustment.
PREPA does not generate any net revenues unless and until electricity rates are increased. Under bankruptcy law, the court must determine the value of the bondholders’ collateral on the confirmation date, which is prior to any rate increase. Therefore, the implications of the First Circuit decision and the value of the bondholders’ collateral will depend on careful consideration and additional determinations by the U.S. District Court.