The First Circuit Court of Appeals ruled Wednesday that US National Bank’s attempt to secure payment from Puerto Rico’s central government for Puerto Rico Electric Power Authority (PREPA) bondholders is unfounded. A panel of judges — Julie Rikelman, Jeffrey R. Howard, and Seth W. Dunlap — upheld a January 2025 ruling by federal district judge Laura Taylor Swain, finding that PREPA bondholders, represented by their fiduciary, held only a subordinated claim against the central government.
The Financial Oversight and Management Board (JSF) had classified US Bank’s $8.5 billion claim as subordinated under Section 510(b) of the Bankruptcy Code, placing it in a class of the central government’s Plan of Adjustment that receives no payment. Rikelman authored the opinion, a setback for US Bank and other claimants including municipal insurers Syncora Guarantee and National Public Finance Guarantee Corp. The ruling came nearly two months after oral arguments and one week after the same court examined a separate case over bondholders’ priority payment claims against PREPA.
The decision applies to the case filed by SIG Structured Products LLC and five other consolidated lawsuits. US Bank, which custodies and distributes PREPA’s public debt payments, filed two claims seeking to recover roughly $8.5 billion in bonds, one in PREPA’s Title III case and another in the central government’s bankruptcy process.