Puerto Rico Utility Bankruptcy Restarts as Board Members Return

(Bloomberg) -- The bankruptcy of Puerto Rico’s power utility is moving forward again following the Trump administration’s attempt to fire all but one member of an oversight board that manages the utility’s debt workout.

US District Court Judge Laura Taylor Swain Wednesday told Puerto Rico’s Electric Power Authority, called Prepa, and its creditors to craft a schedule to share information and documents on the utility’s revenue collections. The oversight board earlier this month regained three members when a separate court granted their preliminary injunction to allow them back on the panel, saying the representatives were fired without proper cause.

Swain directed the parties to draft a timetable for the discovery process during a court hearing on Wednesday.

Swain’s decision is a reversal from August, when she effectively put Prepa’s bankruptcy on hold after the Trump administration fired most of the board members. Swain that month suspended deadlines for the parties to exchange documents detailing the amount of revenue that Prepa has collected and spent since it entered bankruptcy in 2017. She ordered the parties on Wednesday to begin that process again. It’s a central issue that can help determine how best to restructure nearly $9 billion of bonds and other loans.

G. Eric Brunstad, a partner at Dechert, which is representing an ad hoc group of bondholders that includes Invesco Advisers Inc., Goldman Sachs Asset Management LP and Mackay Shields LLC, urged Swain during Wednesday’s court hearing to restart the discovery process and litigate the revenue issue. Some creditors are claiming that Prepa failed to allocate about $3 billion of net revenue over several years to reserve accounts for debt repayment.

“Prepa continues to spend the bondholders’ collateral without adequate protection,” Brunstad said during the court hearing.

Thomas Lauria, a partner at White & Case, which is representing GoldenTree Asset Management LP, tried to persuade Swain to continue the pause. GoldenTree would rather the parties strike a debt-cutting deal without litigating how much revenue Prepa failed to set aside for bondholders during its bankruptcy. Lauria called Prepa — which has frequent outages and aging infrastructure — the worst-performing utility in the US.

He also highlighted the current composition of the oversight board. There are three empty seats that the Trump administration has yet to fill and the lawsuit regarding the three members that returned to the board is still ongoing.

“The board’s views and stance on the issues before the court could materially change,” Lauria said.

Luc Despins, a parter at Paul Hastings, which is representing a committee of unsecured creditors, said GoldenTree is hoping for new board members that would benefit that firm’s recoveries. There’s been speculation that Trump would appoint members that would favor bondholders rather than Puerto Rico residents.

“They think that’s going to help them in getting what they want,” Despins said.

More stories like this are available on bloomberg.com

©2025 Bloomberg L.P.