FOMB CONTINUES STRATEGY OF DENYING ECONOMIC REALITY AND IGNORING PREPA’S BONDHOLDERS’ RIGHTS; PROLONGS PREPA’S BANKRUPTCY BY PUBLISHING NEW UNWORKABLE PROPOSAL TO THE DETRIMENT OF ALL, EXCEPT FOMB ADVISORS

PREPA’s Bondholders Remain Ready to Lead Swift Bankruptcy Exit

Certain bondholders of the Puerto Rico Electric Power Authority (“PREPA”) today issued the following statement:

As the tenth year of the Puerto Rico Electric Power Authority (“PREPA”) bankruptcy commences, five points remain clear:

(1) the Financial Oversight and Management Board (“FOMB”) continues to pursue an approach that does not account for the legal rights of PREPA’s bondholders or the overwhelming evidence that repayment can be achieved with fair and reasonable rates;

(2) PREPA’s bankruptcy is impeding it from accessing the funding—including from the capital markets and from PREPA’s bondholders—needed to repair, upgrade, and properly maintain PREPA’s power system;

(3) under the FOMB’s oversight, more than $12 billion in available U.S. federal funding for PREPA’s power grid remains underutilized while PREPA languishes in bankruptcy;

(4) as PREPA’s bankruptcy continues to drag on, the condition of PREPA’s power system continues to deteriorate, affecting reliability, public safety, and economic growth in Puerto Rico; and

(5) the FOMB’s advisors extend their multi-billion-dollar payday.

The FOMB’s public disclosure of a two-paragraph mediation proposal to pay less than a quarter of the accreted bond claim is the most recent example of an approach that does not provide a constructive path toward resolution. The FOMB made the disclosure despite knowing that the proposal would not engender constructive engagement because it—

(a) lacked any relationship to PREPA’s income-generating capacity or the legal rights of PREPA’s bondholders as previously determined by the United States Court of Appeals for the First Circuit,

(b) ignored the most recent data regarding Puerto Rico’s financial performance, and

(c) did not account for recent rulings of PREPA’s regulator, PREB, including the importance of a reasonable estimate of expenditures and the impropriety of funding capital expenses from current revenues.

Despite the fact that the FOMB’s proposal was dead on arrival, certain of PREPA’s bondholders’ advisors nevertheless posed questions regarding its basis to try to gain some understanding of the FOMB’s perspective. Rather than responding, the FOMB instead chose to publish the proposal. As such, the public disclosure appears designed to create the misimpression with the Court overseeing PREPA’s bankruptcy case and the President of the United States (who appoints and has the power to remove and replace members of the FOMB) that the FOMB is engaging constructively to resolve PREPA’s bankruptcy case, which it is not.

PREPA’s bondholders remain prepared to support a prompt resolution of PREPA’s nine-year bankruptcy case, which has already taken longer to resolve than any municipal bankruptcy in history. This is not new. Over the past several years, PREPA’s bondholders have made multiple proposals to resolve PREPA’s bankruptcy, including two separate comprehensive restructuring proposals that the FOMB accepted but later terminated to pursue meritless litigation claims. Despite the FOMB’s bad-faith course, PREPA’s bondholders remain willing to resolve PREPA’s bankruptcy on a consensual basis and provide, among other things, $2.5 billion of immediately available funding to pay the claims of all other creditors and to begin funding the long overdue capital expenditures required to restore PREPA’s reliability.

A prompt conclusion to PREPA’s bankruptcy case as proposed by PREPA’s bondholders would restore PREPA’s access to the capital markets and facilitate PREPA’s ability to access the billions of dollars of U.S. federal government aid previously promised.

The FOMB has adopted the false narrative that PREPA cannot both pay the bonds that funded the buildout of PREPA’s power grid while also funding future maintenance and upgrades. This is simply wrong. A consensual resolution of PREPA’s bankruptcy remains the only path to securing the funding required to improve PREPA’s power grid and achieve the associated economic benefits for the island within any relevant timeframe.

Rather than continuing a strategy that will result in further delay and adverse consequences for the island, the FOMB should engage constructively with PREPA’s bondholders toward a consensual resolution that benefits PREPA, its creditors, and the people of Puerto Rico.

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