Exhibit D

Mondell Declaration

Case:17-03283-LTS Doc#:2298-4 Filed:01/27/18 Entered:01/27/18 23:51:50 Desc:

Exhibit D - Mondell Declaration Page 1 of 10
Hearing Date: February 7, 2018 at 9:30 a.m. (Atlantic Standard Time)

Objection Deadline: February 1, 2018 at 5:00 p.m. (Eastern Standard Time)

UNITED STATES DISTRICT COURT

DISTRICT OF PUERTO RICO

-------------------------------------------------------------x

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

 as representative of 

THE COMMONWEALTH OF PUERTO RICO, et al.

 Debtors.1

-------------------------------------------------------------x

PROMESA

Title III

No. 17 BK 3283-LTS

(Jointly Administered)

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

 as representative of 

PUERTO RICO ELECTRIC POWER AUTHORITY 

(“PREPA”), 

 Debtor.

-------------------------------------------------------------x

PROMESA

Title III

No. 17 BK 4780-LTS

Court Filing Relates Only to PREPA 

and Shall Only be Filed in Case No. 

17-BK-4780 (LTS) and Main Case 

17-BK-3283 (LTS)

DECLARATION OF DUSTIN MONDELL IN SUPPORT OF 

URGENT JOINT MOTION OF THE FINANCIAL OVERSIGHT 

AND MANAGEMENT BOARD FOR PUERTO RICO AND THE PUERTO 

RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY FOR ENTRY 

OF INTERIM AND FINAL ORDERS (A) AUTHORIZING POSTPETITION SECURED 

FINANCING, (B) GRANTING PRIMING LIENS AND PROVIDING SUPERPRIORITY 

ADMINISTRATIVE EXPENSE CLAIMS, (C) MODIFYING THE AUTOMATIC STAY,

(D) SCHEDULING A FINAL HEARING, AND (E) GRANTING RELATED RELIEF

 1 The Debtors in these Title III Cases, along with each Debtor’s respective Title III case number 

listed as a bankruptcy case number due to software limitations and the last four (4) digits of 

each Debtor’s federal tax identification number, as applicable, are the (i) Commonwealth of 

Puerto Rico (Bankruptcy Case No. 17 BK 3283-LTS) (Last Four Digits of Federal Tax ID: 

3481); (ii) Puerto Rico Sales Tax Financing Corporation (“COFINA”) (Bankruptcy Case No. 

17 BK 3284-LTS) (Last Four Digits of Federal Tax ID: 8474); (iii) Employees Retirement 

System of the Government of the Commonwealth of Puerto Rico (“ERS”) (Bankruptcy Case 

No. 17 BK 3566-LTS) (Last Four Digits of Federal Tax ID: 9686); (iv) Puerto Rico Highways 

and Transportation Authority (“HTA”) (Bankruptcy Case No. 17 BK 3567-LTS) (Last Four 

Digits of Federal Tax ID: 3808); and (v) Puerto Rico Electric Power Authority (“PREPA”) 

(Bankruptcy Case No. 17 BK 4780 (LTS)) (Last Four Digits of Federal Tax ID: 3747).

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Pursuant to 28 U.S.C. § 1746, I, Dustin Mondell, hereby declare as follows under penalty 

of perjury under the laws of the United States of America:

1. I am a Director at Rothschild Inc. (“Rothschild”), the financial advisor to the 

Puerto Rico Fiscal Agency and Financial Advisory Authority (“AAFAF”) as fiscal agent for the 

Puerto Rico Electric Power Authority (“PREPA” or the “Debtor”). Rothschild is a leading 

international investment banking and financial advisory firm engaged in, among other things, 

reorganizations, restructurings, financings, spinoffs, workouts, exchange offers, mergers, 

divestitures and management-led buyouts. I have approximately 18 years of experience advising 

large government entities, companies, creditors, and other stakeholders regarding complex 

financial challenges in a variety of industries. I also earned an A.B. with High Honors in 

Economics from the University of Chicago. 

2. I submit this declaration (the “Declaration”) in support of the Urgent Joint Motion 

of the Financial Oversight and Management Board for Puerto Rico and the Puerto Rico Fiscal 

Agency and Financial Advisory Authority for Entry of Interim and Final Orders (A) Authorizing 

Postpetition Secured Financing, (B) Granting Priming Liens and Providing Superpriority 

Administrative Expense Claims, (C) Modifying the Automatic Stay, (D) Scheduling a Final 

Hearing, and (E) Granting Related Relief (the “Urgent Motion”)2 filed jointly by the Financial 

Oversight and Management Board for Puerto Rico (the “Oversight Board”), as the Debtor’s 

representative pursuant to section 315(b) of the Puerto Rico Oversight, Management, and 

Economic Stability Act (“PROMESA”),3 and AAFAF, as the entity authorized to act on behalf of 

PREPA under the Enabling Act of the Fiscal Agency and Financial Advisory Authority, Act 2-

 2 Defined terms used but not defined in this Declaration shall have the meanings given to them in 

the Urgent Motion.

3

 PROMESA is codified at 48 U.S.C. §§ 2101-2241.

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2017. I have reviewed and am familiar with the facts and circumstances as set forth in the 

Urgent Motion and the relief sought therein. 

3. Except as otherwise indicated, all facts and opinions set forth in this Declaration 

are based upon: (i) my personal knowledge; (ii) my review of relevant documents provided to 

me, including documents provided by AAFAF and the Debtor and their respective professionals 

and employees; and (iii) my views, based upon my experience and knowledge of the Debtor and 

its financial condition.

PREPA’S NEED FOR FINANCING

4. As described in greater detail in the Declaration of Todd W. Filsinger in support

of the Urgent Motion (the “Filsinger Declaration”), PREPA is facing an imminent liquidity 

crisis. 

5. To address this liquidity crisis and avoid disrupting electric services to the people 

of Puerto Rico, PREPA is seeking approval for financing in the form of a revolving credit 

facility (the “Facility”) to be provided by the Commonwealth of Puerto Rico (“Puerto Rico” or 

the “Government of Puerto Rico” and, in its capacity as lender, the “Lender”) to PREPA. As set 

forth in the Urgent Motion, if approved, the Facility would provide PREPA with immediate 

access to revolving loans in the aggregate of up to $550 million at any one time outstanding after 

entry of an interim order approving the Facility (which commitment can be increased by 

increments of $250 million at the discretion of the Lender and the Oversight Board, and may be 

increased to up to $1.3 billion after entry of a final order approving the Facility, subject to the 

Lender’s discretion, with necessary governmental action, and with the consent of the Oversight 

Board for each incremental increase).4

 4 The specific terms of the Facility are provided in the Urgent Motion.

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6. PREPA needs the Facility to continue to operate without interruption so as to 

generate the maximum amount of revenue. Without an additional source of liquidity, it is my 

understanding that PREPA will likely shut down its operations in whole or in part in the nearterm. It is my belief that the impact of any shutdown would be devastating to Puerto Rico, which 

would once again see its residents living without power, businesses shuttering, and restoration 

and recovery efforts slowing. PREPA’s creditors would also be damaged by a shutdown as the 

negative economic impact of such an event would jeopardize PREPA’s continued operations, 

hamper the progress of restoration, and boost out-migration which would further reduce demand.

OTHER FINANCING OPTIONS AND THE MARKETING PROCESS

7. Despite PREPA’s publicly-disclosed liquidity crisis, no financing of the 

magnitude required is readily available and committed other than the attractive financing offered 

by Puerto Rico. Shortly after Hurricanes Irma and Maria, PREPA received an unsolicited, 

publicly announced offer for financing from a group of holders of its Power Revenue Bonds. 

That offer was for $1 billion of financing, but was tied to a roll-up of $1 billion in existing bonds 

into an additional $850 million of post-petition financing (which would have resulted in a senior 

credit facility of $1.85 billion, out of which $1 billion of cash would have been available for 

advancement to the Debtor). The offer carried a stated per annum interest rate of LIBOR plus 

4.5% and a two-year maturity date. In addition, the interest rate would have increased to LIBOR 

plus 6.5% upon the one year anniversary of initial borrowing. The roll-up feature also provided 

investors in the loan facility with enhanced security provisions on a portion of their pre-petition 

claims. The proposal also required the appointment of a receiver and had the potential to limit 

the future transformation of the electric grid. For reasons that were publicly-disclosed at the 

time, the proposal therefore was turned down.

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8. Following Hurricane Maria, PREPA and AAFAF have engaged the United States 

Department of the Treasury (the “Treasury Department”) and the Federal Emergency 

Management Agency (“FEMA”) in discussions to secure for PREPA loans from the federal 

government. On October 26, 2017, the Additional Supplemental Appropriations for Disaster 

Relief Requirements Act of 2017 (the “Act”) was signed into law, authorizing $36.5 billion of 

disaster relief funds for recovery efforts in the aftermath of Hurricanes Harvey, Irma, and Maria, 

including approximately $4.9 billion in loans under the community disaster loan (“CDL”) 

program for Puerto Rico, the US Virgin Islands, and local governments of Florida and Texas. 

Included in the Act are provisions that permit borrowings under the CDL to be forgiven in the 

future.

9. For several months, AAFAF and PREPA have actively engaged in discussions 

with the Treasury Department and FEMA about PREPA’s need for a CDL and the potential 

terms and structure of such a loan. Those discussions are ongoing, and no definitive terms have 

been reached. Moreover, the Treasury Department and FEMA have informed Puerto Rico that 

the federal government does not currently intend to issue a CDL directly to PREPA. Rather, any 

CDL would be advanced to Puerto Rico, and Puerto Rico in turn could lend certain of those 

funds to PREPA. Relatedly, the federal government announced its intention to establish a cash 

balance policy in connection with disbursement of any CDL funding that would require the 

balance of Puerto Rico’s Treasury Single Account to drop below a certain threshold before 

Puerto Rico may access a CDL. Under the current circumstances, no CDL is guaranteed. Even 

if a CDL becomes available to Puerto Rico for it to make a subsequent loan to PREPA, the 

proceeds would not arrive quickly enough to provide PREPA the funding it urgently needs to 

address its current funding crisis.

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10. In light of the delay and uncertainty surrounding the CDL process and the lack of 

other current viable proposals, PREPA negotiated the terms of the Facility with Puerto Rico as 

the Lender, with the consent of the Oversight Board. The Facility is the only source of funds 

currently available on the favorable terms and flexibility described below to provide PREPA 

with critical liquidity in the short term. The Facility carries zero percent interest for the first six 

months, may be prepaid by PREPA at any time and allows for, and in fact requires, PREPA to 

solicit alternative financing proposals and evaluate any such alternatives in good faith in 

consultation with the Oversight Board. 

11. Beginning on January 21, 2018, professionals from Rothschild initiated a 

marketing effort to obtain alternative financing. As part of that process, Rothschild, with the 

assistance of advisors for PREPA and AAFAF, prepared marketing materials and assembled a 

data room populated with relevant diligence information. In consultation with the advisors to the 

Oversight Board, professionals from Rothschild have been in contact with ten potential funding 

providers, which consisted of four existing PREPA, Commonwealth, and COFINA bondholders 

and bondholder groups, and six third parties capable of providing financing of this magnitude.

12. To my knowledge, the contacted parties include all parties that had previously 

expressed to either Rothschild or the Oversight Board’s financial advisor an interest in providing 

such financing to PREPA. To date, seven of these prospective lenders have signed nondisclosure agreements (“NDAs”) (or are operating under existing NDAs) and have been provided 

access to the data room maintained by Rothschild containing relevant information on the current 

financial conditions of PREPA. Rothschild has requested interested parties to submit initial 

indications of interest by February 2, 2018.

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13. Given the complexity and urgency of the situation, Rothschild does not expect to 

obtain a commitment for financing competitive to the Facility prior to the interim hearing on the 

Urgent Motion. However, the Debtor, through Rothschild, will continue the solicitation process 

until the final hearing in order to determine whether a superior financing proposal can be 

identified. Importantly, because the terms of the financing contemplated in the Urgent Motion 

include a zero percent interest rate for the first six months, no closing fees, and no prepayment 

penalty, the Debtor can refinance the Facility if desired (to the extent of available financing in 

the future), without PREPA having incurred costs on the Facility even following approval of the 

Urgent Motion.

THE TERMS OF THE FACILITY ARE REASONABLE AND SHOULD BE APPROVED

14. In my view, the terms of the Facility are reasonable. As noted above, the Facility 

includes a zero percent interest rate for six months, has no commitment or other closing fees, and 

is prepayable at any time without penalty. The Facility avoids any cost to refinance in the future 

whether with proceeds of CDL borrowings or from another source. The Facility is currently the 

only financing available to PREPA to provide desperately needed funds and avert a catastrophic 

interruption or discontinuation of electric services to Puerto Rico. In light of PREPA’s urgent 

liquidity needs as described in the Filsinger Declaration and the lack of immediately available 

alternatives (including CDLs, which are not currently available and, if available at some point, 

likely will require a loan to PREPA from Puerto Rico), PREPA has determined, after consulting 

with its advisors, that in its judgment and discretion the Facility represents the best interim 

financing presently available. Moreover, Puerto Rico has agreed that there will be no provisions 

in the loan documents that restrict the transformation of Puerto Rico’s energy sector or the 

transfer of PREPA’s assets.

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15. Without access to the Facility, I believe PREPA would suffer immediate and 

irreparable harm. Based on the market response to date, PREPA has not been able to obtain 

committed financing on an unsecured basis pursuant to section 503(b)(1) of the Bankruptcy 

Code, applicable in the Title III Case pursuant to section 301(a) of PROMESA, or even on a 

superpriority basis under section 364(c)(1) of the Bankruptcy Code, on terms more favorable 

than those of the Facility.

16. In my view, the terms of the Facility are fair, reasonable, and appropriate under 

the circumstances of this case. Moreover, the interim financing will allow PREPA to continue 

its operations without interruption and prevent immediate damage to potential recoveries that 

may be available to its bondholders and other stakeholders.

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