U.S. District Judge Laura Taylor Swain has scheduled oral arguments for November 18 in the litigation over the Puerto Rico Electric Power Authority’s (PREPA; AEE in Spanish) bond debt, in a case that could influence how billions of dollars in claims are treated in the utility’s bankruptcy restructuring. In an order issued October 29, Swain said the court will hear competing motions for summary judgment in adversary proceeding 19-00391-LTS, which stems from PREPA’s Title III case under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA).
The hearing is set for an omnibus session beginning at 9:30 AM. Atlantic Standard Time, with no more than two and a half hours for arguments; the parties must coordinate in advance on dividing the time. The suit was originally filed by the Financial Oversight and Management Board on behalf of PREPA against U.S. Bank National Association, trustee for holders of more than $8 billion in bonds issued under a 1974 trust agreement.
It seeks to determine what security bondholders have over PREPA’s revenues and what claims they can assert. Bondholders argue for broader claims, while the board says their rights are more limited. Swain previously ruled that bondholders do not hold a continuing lien on all present and future revenues, limiting secured claims to specific funds and accounts, and estimated a substantial unsecured claim.
The current phase concerns the "accounting counterclaims," over how PREPA handled revenues and whether certain funds should have been deposited into accounts benefiting bondholders. Because the summary judgment filings contain extensive redactions, the parties must submit a joint status report by November 9 on how arguments can proceed in open court, including whether confidentiality designations will be removed or waived.