Bonds

The Puerto Rico Oversight Board said Puerto Rico Electric Power Authority bondholders are making “unreasonable” demands in their discovery in the agency’s bankruptcy.

“The bondholders’ approach to discovery in this case has been marked by unreasonable demands and timelines,” the board said through its attorney in a response filed late Friday in the bankruptcy. “The Oversight Board has sought to work cooperatively to propose options for narrowing the bondholders’ extraordinary broad and burdensome requests so that meaningful confirmation-related discovery can occur.”

The board says its disagreements with the bondholders and their allied bond insurers and bond trustee focus on various document and board deposition requests.

The board’s filing responded to a bondholder filing in late March, in which the bondholders asserted the board “intends to forestall discovery with an endless stream of additional queries, promises that it is ‘looking into’ matters, and other delay tactics.”

The bondholders said, “to date” the board had produced only a “few plan [of adjustment]-specific analyses.” While bondholders have complained that the board did not respond to late January requests for documents, the board said all these documents were related to confirmation of the plan of adjustment and thus the board was not required to release them at that time.

The board said that bondholders are seeking for the past 10 years all analyses, forecasts, projections, or estimates of eight technical and financial topics, such as the authority’s electric load, its revenues and expenses, and its debt sustainability, for which the board said it has already provided documents for several of these eight topics.

Despite this, the bondholders want analyses and forecasts that underlie other positions that the board has had over the years, besides the current plan of adjustment. “Yet such documents, to the extent they exist, are plainly not relevant to the confirmability of the plan [of adjustment],” the board told the court. Much of the documents are confidential as they were used to prepare proposals made in mediation.

“[B]bondholders have a right to obtain documents, depositions, and disclosures that are not dictated by the Oversight Board’s unilateral declarations of what is and isn’t ‘relevant’ or ‘what makes the most sense,’ ” the bondholders said in their filing.

The board also objected to the bondholders’ request for documents concerning the early 2022 termination of the 2019 Restructuring Support Agreement between the board, bondholders, and the Puerto Rico Fiscal Agency and Financial Advisory Authority. Since the proposed plan of adjustment isn’t based on the 2019 RSA, the RSA is not relevant to the proposed plan. It would not be admissible evidence to the case, the board said.

The bondholders said they wanted documents and communications about the board’s termination of the 2019 RSA because they think it was terminated for reasons other than those the board stated and because they think they can show the 2019 RSA is affordable now.

The board said it would be unreasonable and pointless to allow the bondholders to depose all seven members of the Oversight Board, as they are requesting. The board said it was offering Chairman David Skeel and Executive Director Robert Mujica. “Decisions relating to PREPA and the plan are made by the Oversight Board as a whole and not by any individual member.”

The board said it was willing to consider additional board depositions if the bondholders could identify “relevant additional knowledge any other member of the Oversight Board would have.”

The board also disagreed with the bondholders’ argument that bankruptcy rules require the board requested oral experts in the case to also submit written reports. The board said since the witnesses have worked for the board for several years they should not be treated as witnesses who are “recruited” for the litigation.

The PREPA bankruptcy stillappears to be moving on the road toward a plan confirmationmoving on the road towards a plan confirmationmoving on the road toward a plan confirmation hearing in July after Judge Laura Taylor Swain ruled against a bondholder lien on future revenues in late March.

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