Hearing Date: February 7, 2018 at 9:30 a.m. (AST)

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

as representative of

THE COMMONWEALTH OF PUERTO RICO, et al.,

Debtors.1

PROMESA

Title III

Case 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,

Debtor.

PROMESA

Title III

Case No. 17 BK 4780-LTS

OBJECTION OF NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION TO 

URGENT JOINT MOTION OF THE FINANCIAL OVERSIGHT AND MANAGEMENT 

BOARD OF PUERTO RICO AND THE PUERTO RICO FISCAL AGENCY &

FINANCIAL ADVISORY BOARD 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 the jointly-administered Title III cases, along with each Debtor’s respective Title III case number 

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 4780­LTS) (Last Four Digits of Federal Tax ID: 3747). (Title III case numbers are 

listed as Bankruptcy Case numbers due to software limitations).

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I. INTRODUCTION...........................................................................................................1

II. JURISDICTION AND VENUE.......................................................................................2

III. BACKGROUND.............................................................................................................3

IV. ARGUMENT ..................................................................................................................7

A. Approval of the Facility is Not Subject to Business Judgment Review .................7

B. PREPA Has Not Satisfied the Bankruptcy Code’s Requirements for 

Receiving Financing on a Superpriority Basis ......................................................8

(1) PREPA Has Not Demonstrated it is Unable to Obtain Unsecured 

Credit .......................................................................................................9

(2) PREPA Has Not Demonstrated that the Financing is Necessary to 

Preserve the Assets of the Estate...............................................................9

(3) The Facility Is Not Fair and Reasonable and Should be Reduced by 

Government Receivables........................................................................11

C. PREPA has Not Satisfied the Bankruptcy Code’s Requirements for 

Obtaining Priming Liens....................................................................................15

(1) The Commonwealth Has Not Demonstrated that it was Unable to 

Obtain Financing Without Priming Liens................................................15

(2) PREPA’s Bondholders Are Not Adequately Protected............................16

D. The Facility Should be More Favorable to PREPA and its Creditors ..................18

E. The Commonwealth is Not Entitled to the Protections of Section 364(e) 

Because the Commonwealth Has Not Presented Evidence of Good Faith 

and Arms’ Length Negotiations..........................................................................19

V. RESERVATION OF RIGHTS ......................................................................................21

VI. CONCLUSION .............................................................................................................22

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TABLE OF AUTHORITIES

Page(s)

Cases

In re 495 Cent. Park Ave. Corp.,

136 B.R. 626 (Bankr. S.D.N.Y. 1992) .................................................................................18

In re Ames Dep’t Stores, Inc.,

115 B.R. 34 (Bankr. S.D.N.Y. 1990) ...............................................................................8, 11

In re Aqua Associates,

123 B.R. 192 (Bankr. E.D. Pa.1991)......................................................................................8

In re Barbara K. Enterprises, Inc.,

No. 08-11474 (MG), 2008 WL 2439649 (Bankr. S.D.N.Y. June 16, 2008)............................8

In re Chevy Devco,

78 B.R. 585 (Bankr. C.D. Cal. 1987)...................................................................................13

In re City of Stockton, California,

486 B.R. 194 (Bankr. E.D. Cal. 2013) ...................................................................................9

In re Crouse Group, Inc.,

71 B.R. 544 (Bankr. E.D. Pa. 1987).......................................................................................8

In re Farmland Industries, Inc.,

294 B.R. 855 (Bankr. W.D. Mo. 2003).......................................................................... 19, 20

In re Fontainebleau Las Vegas Holdings LLC,

434 B.R. 716 (S.D. Fla. 2010) .............................................................................................17

In re L.A. Dodgers LLC,

457 B.R. 308 (Bankr. D. Del. 2011) ............................................................................ 7, 8, 11

In re Lehman Bros. Holdings, Inc.,

433 B.R. 101 (Bankr. S.D.N.Y. 2010) .................................................................................11

In re Mid-State Raceway, Inc.,

323 B.R. 40 (Bankr. N.D.N.Y. 2005)...................................................................................19

In re Mosello,

195 B.R. 277 (Bankr. S.D.N.Y. 1996) .................................................................................17

Norris Square Civic Ass’n v. Saint Mary Hosp.,

86 B.R. 393 (Bankr. E.D. Pa. 1988).....................................................................................14

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In re Olde Prairie Block Owner, LLC,

448 B.R. 482 (Bankr. N.D. Ill.), aff’d, 460 B.R. 500 (N.D. Ill. 2011)...................................10

In re: Puerto Rico Electric Power Authority Rate Review,

CEPR-AP-2015-0001, Final Resolution and Order (P.R. Energy Comm’n Jan. 10, 2017)......4

In re Residential Capital, LLC,

No. 12-12020, 2013 Bankr. LEXIS 2601 (Bankr. S.D.N.Y. June 27, 2013) ...........................7

In re Roblin Indus.,

52 B.R. 241 (Bankr. W.D.N.Y. 1985)....................................................................................8

In re Strug-Division LLC,

380 B.R. 505 (Bankr. N.D. Ill. 2008)...................................................................................17

Suntrust Bank v. Den-Mark Const., Inc.,

406 B.R. 683 (E.D.N.C. 2009).............................................................................................17

In re Swedeland Development Group, Inc.,

16 F.3d 552 (3d Cir. 1994) ..................................................................................................17

In re Tamarack Resort, LLC,

No. 09-03911-TLM, 2010 Bankr. LEXIS 3680 (Bankr. D. Idaho Oct. 19, 2010) ...................9

In re Tenney Village Co., Inc.,

104 B.R. 562 (Bankr. D.N.H. 1989) ....................................................................................13

In re WorldCom, Inc.,

No. 02-13533, 2002 WL 1732646 (Bankr. S.D.N.Y. July 22, 2002) ....................................19

In re YL West 87th Holdings I LLC,

423 B.R. 421 (Bankr. S.D.N.Y. 2010) .................................................................................17

Statutes & Rules

11 U.S.C. § 364.................................................................................................................passim

11 U.S.C. § 503....................................................................................................................6, 12

11 U.S.C. § 507........................................................................................................................12

48 U.S.C. §§ 2101-2241..............................................................................................................2

48 U.S.C. § 2166.........................................................................................................................2

48 U.S.C. § 2167.........................................................................................................................2

PROMESA § 301........................................................................................................................6

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PROMESA § 314................................................................................................................ 12, 13

31 L.P.R.A. § 3221 ...................................................................................................................12

P.R. Laws Ann. Tit. 22 §§ 191, et seq. ........................................................................................3

Fed. R. Bankr. P. 4001 ..............................................................................................................10

D.P.R. Bankr. R. 4001-2 ...........................................................................................................11

Other Authorities

Joint Resolution No. 16 of January 26, 2018 .............................................................................12

Armed Federal Agents Enter Warehouse in Puerto Rico to Seize Hoarded Electric Equipment, 

THE INTERCEPT, January 10, 2018..........................................................................................5

Governor Rosselló Refers to the Puerto Rico Department of Justice Issue of PREPA Materials 

Found in a Warehouse, LA FORTALEZA, January 11, 2018.....................................................5

Pepino Power Authority restaura el servicio eléctrico a 2,000 casas, www.elnuevodia.com, 

December 28, 2017 ...............................................................................................................5

Puerto Rico Electric Power Authority Amended & Restated Fiscal Plan, AAFAF.PR.GOV,

January 24, 2018 ...................................................................................................................4

Puerto Rico Energy Authority Investigates Dozens of Post-Maria Bribery Cases,

PBS NEWS HOUR,January 14, 2018.......................................................................................5

Puerto Rico power utility’s insurance claim for hurricane damage yet to be filed, governor says, 

CARIBBEAN NEWS, Jan. 27, 2018 ...........................................................................................5

¿Qué hacer si recibe una facture estimaa de la AEE?, SinComillas.com, Oct. 18, 2017..............4

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National Public Finance Guarantee Corporation (“National”) respectfully submits this 

objection (the “Objection”) to the Financing Motion,

2

dated January 27, 2018. 

I. INTRODUCTION 

1. It is beyond dispute that PREPA is in the midst of a financial crisis. 

Mismanagement, hurricane damage and lack of collections have taken their toll. While PREPA 

may need a capital infusion to get back on its feet, it should be a capital infusion that is 

negotiated at arms’ length with terms that do not harm PREPA’s existing secured creditors. The 

Facility is not the solution. 

2. PREPA has failed to demonstrate that the Facility meets the entire fairness 

standard for insider transactions and the Bankruptcy Code’s and PROMESA’s requirements for 

postpetition financing, or that the Commonwealth should be entitled to the good faith protections 

for a postpetition lender under the Bankruptcy Code. First, PREPA has not shown it was unable 

to obtain financing on an unsecured basis. The Commonwealth could easily have provided 

PREPA with ample liquidity simply by paying—or causing its instrumentalities to pay—some or 

all of the outstanding electricity bills owed to PREPA. Second, PREPA has not demonstrated 

that the $550 million requested on an interim basis and $1.3 billion requested on a final basis are 

commensurate with PREPA’s actual needs. In fact, given the unpaid electric bills that the 

Commonwealth has accrued, there is little doubt that any immediate and irreparable harm could 

be avoided by payment of even some of these outstanding amounts. Third, the Facility is not 

fair and reasonable because the payment obligations are not offset or reduced by the 

Commonwealth’s unpaid bills. In addition, granting an administrative expense claim to the 

 

2 Urgent Joint Motion of the Financial Oversight and Management Board of Puerto Rico and the Puerto Rico Fiscal 

Agency & Financial Advisory Board 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 [Docket No. 2298]. 

Capitalized terms not defined herein shall have the meaning ascribed to them in the Financing Motion.

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2

Commonwealth would effectively permit the Commonwealth to exercise control over PREPA’s 

plan of adjustment process, to the further detriment of PREPA’s creditors. Fourth, to grant 

priming liens to the Commonwealth, PREPA must ensure that bondholders’ liens are adequately 

protected. The FOMB’s insistence that bondholders are adequately protected because proceeds 

of the Loans will be utilized to preserve PREPA’s assets is entirely speculative and therefore 

wholly insufficient to provide adequate protection.

3. Finally, given the role of the FOMB and AAFAF in negotiating the Facility for 

both borrower and lender, and the Commonwealth’s overreaching in requesting a superpriority 

claim and priming lien, PREPA has not shown that the Facility was negotiated at arms’ length 

and in good faith. Instead, the Financing Motion leaves open many questions regarding the 

circumstances and process followed to develop the proposed Facility.

4. For these reasons and the reasons stated herein, PREPA has failed to demonstrate 

that its proposed postpetition financing is necessary, reasonable, or fair under the circumstances 

and it should not be approved under its proposed terms. Accordingly, the Financing Motion

should be denied.

II. JURISDICTION AND VENUE

5. The United States District Court for the District of Puerto Rico has jurisdiction to 

consider this matter pursuant to Section 306 of the Puerto Rico Oversight, Management, and 

Economic Stability Act (“PROMESA”).3 48 U.S.C. § 2166. Venue is proper pursuant to 

Section 307 of PROMESA. 48 U.S.C. § 2167. 

 

3

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

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III. BACKGROUND

6. The Puerto Rico Electric Power Authority (“PREPA”) is a public corporation 

established under the Puerto Rico Electric Power Authority Act, Act No. 83 of May 2, 1941, P.R. 

Laws Ann. Tit. 22 § 191, et seq. (as amended, the “Authority Act”), to provide electricity to 

customers in Puerto Rico. PREPA functions as a utility company and is obligated to charge and 

collect specified rates for providing electrical service to its customers.

7. On July 2, 2017, the Federal Oversight and Management Board for Puerto Rico 

(“FOMB”) filed a Title III petition on behalf of PREPA. National insures approximately $1.15 

billion, and owns approximately $139 million (exclusive of accrued and accreted interest), of 

revenue bonds issued by PREPA. The revenue bonds are secured by the receipts and income 

that PREPA receives through the sale of electricity to customers and by virtue of PREPA’s 

operation of its system, including receipts to be collected from various governmental entities.

8. As a Title III debtor, PREPA acts at the direction of the FOMB, as well as the 

Puerto Rico Fiscal Agency & Financial Advisory Board (“AAFAF”). Both FOMB and AAFAF, 

however, simultaneously act as representatives on behalf of other Title III debtors, including the 

Commonwealth. Therefore, the same entities that represent PREPA as borrower under the 

Facility act as representatives of the Commonwealth, as lender under the Facility.

9. Various governmental entities are delinquent in paying PREPA for electric power. 

See Case No. 17-03567, Dkt. No. 1 (May 22, 2017), Schedule B. For example, HTA listed 

PREPA as its largest unsecured creditor, holding a $46 million claim. See id. at Schedule B. 

PREPA’s liquidity issues stem, at least in part, from the ongoing nonpayment of bills by various

Commonwealth governmental entities, including HTA, and municipalities.4 This has resulted in 

 

4

PREPA’s regulator, the Puerto Rico Energy Commission, has issued an order requiring PREPA to “provide to the 

Commission a report describing its efforts to bill and collect from municipalities in regard to the consumption of 

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PREPA effectively providing free power to HTA and other delinquent governmental entities. 

Providing free power, in turn, has resulted in decreased revenues for PREPA, which has 

exacerbated its liquidity position and continues to prejudice its stakeholders, including revenue 

bondholders.

10. PREPA’s lack of postpetition billing and collections has also reduced its revenues 

and adversely impacted its liquidity, to its own detriment and that of revenue bondholders. 

Although PREPA continues to repair and restore the System after the damage wrought by 

Hurricanes Irma and María, power has been restored to over 60% of its active customers. See

Financing Motion ¶ 17; Filsinger Declaration ¶ 8. Where PREPA has restored power, it largely 

has failed to bill and collect the payments for electricity service it has provided to active 

customers—in fact, the Financing Motion states that “PREPA has restored the capability of 

billing approximately 35–40% of its customers.” Filsinger Declaration ¶ 10 (emphasis added). It 

is unclear from this statement in the Financing Motion whether PREPA is actually billing 

commensurate with its current capabilities.

11. In addition, Governor Rosselló’s administration has impeded PREPA’s efforts to 

collect revenues for electricity services that PREPA has provided post-hurricane to its customers. 

For example, PREPA’s revised Fiscal Plan states Governor Rosselló has requested that PREPA 

not issue estimated bills.

5

 On October 18, the director of Puerto Rico’s Consumer Protection 

Agency followed suit and suggested that customers not pay PREPA for estimated bills.6 

 

electricity at for-profit businesses affiliated with such municipalities”, as to which PREPA has failed to comply. In 

re: Puerto Rico Electric Power Authority Rate Review, CEPR-AP-2015-0001, Final Resolution and Order (Jan. 10, 

2017) at 176.

5 Puerto Rico Electric Power Authority Amended & Restated Fiscal Plan, AAFAF.PR.GOV, January 24, 2018, 

available at http://www.aafaf.pr.gov/assets/prepa-revisedfiscalplan-01-24-18.pdf.

6

¿Qué hacer si recibe una facture estimaa de la AEE?, SinComillas.com, Oct. 18, 2017, available at 

http://sincomillas.com/que-hacer-si-recibe-una-factura-estimada-de-la-aee/.

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Moreover, the Governor recently reported that PREPA has not yet submitted insurance claims 

for property damage as a result of the hurricanes.7 

12. PREPA’s mismanagement of recovery efforts also undoubtedly has impacted its 

liquidity position and contributed to its request for postpetition financing from the 

Commonwealth. Recovery efforts have not progressed as quickly as they should have. The pace 

of recovery is so slow that municipalities have begun recruiting volunteer repair crews to take 

over the repair of local grids from PREPA.8 Moreover, federal government agents recently 

seized a PREPA warehouse housing materials critical to restoration of the power grid.9 

Governor Rosselló called for an investigation into wrongdoing, tacitly acknowledging the lack of 

accountability and oversight at the utility.10 Though ultimately cleared of wrongdoing, the 

incident raised public outcry and called PREPA’s credibility into question.

11

 Along similar lines, 

PREPA has initiated investigations into at least twenty five cases of potential bribery in the wake 

of Hurricane Maria.12 

13. Against this backdrop of mismanagement and attempts to frustrate liquidity at 

PREPA, the FOMB and AAFAF have filed the Financing Motion. The Financing Motion seeks 

 

7 Puerto Rico power utility’s insurance claim for hurricane damage yet to be filed, governor says, CARIBBEAN

NEWS, Jan. 27, 2018, available at http://caribbeanbusiness.com/puerto-rico-power-utilitys-insurance-claim-forhurricane-damage-yet-to-be-filed-governor-says/.

8 Pepino Power Authority restaura el servicio eléctrico a 2,000 casas, www.elnuevodia.com, December 28, 2017, 

available at 

https://www.elnuevodia.com/noticias/locales/nota/pepinopowerauthorityrestauraelservicioelectricoa2000casas2385897/.

9 Armed Federal Agents Enter Warehouse in Puerto Rico to Seize Hoarded Electric Equipment, THE INTERCEPT, 

January 10, 2018, available at https://theintercept.com/2018/01/10/puerto-rico-electricity-prepa-hurricane-maria/.

10 Governor Rosselló Refers to the Puerto Rico Department of Justice Issue of PREPA Materials Found in a 

Warehouse, LA FORTALEZA, January 11, 2018, available at http://www.fortaleza.pr.gov/content/governor-rossellrefers-puerto-rico-department-justice-issue-prepa-materials-found-warehouse.

11 See id.

12 Puerto Rico Energy Authority Investigates Dozens of Post-Maria Bribery Cases, PBS NEWS HOUR, January 14, 

2018, available at https://www.pbs.org/newshour/nation/puerto-rico-energy-authority-investigates-dozens-of-postmaria-bribery-cases.

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authorization for PREPA to obtain a $1.3 billion senior secured priming superpriority revolving 

credit facility (the “Facility”) from the Commonwealth of Puerto Rico (the “Commonwealth”)

with authority to borrow up to $550 million on an urgent interim basis. 

14. PREPA claims that the Facility is the only viable financing option available to 

provide it with the necessary liquidity to cover operational expenses during the Title III case and 

that PREPA could not obtain a financing commitment from the Commonwealth on an unsecured 

basis, on a junior lien basis, or on a pari passu lien basis. Financing Motion ¶¶ 30-35, 63; see

also Mondell Declaration ¶ 15 (“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.”).

15. While it would be expected that PREPA would encounter difficulty in procuring 

postpetition financing from third-party lenders given its history of mismanagement, lack of 

progress repairing and restoring the power grid, and inadequate billing and collections, the 

Financing Motion reveals that PREPA did not make a meaningful attempt to do so. PREPA’s 

“marketing” process commenced on January 21, 2018, a mere six (6) days before it filed the 

Financing Motion. See Financing Motion ¶ 33; Mondell Declaration ¶ 9 Yet PREPA knew for 

months that it was in need of funding, and, at least as of January 9, 2018, that such funding was 

unlikely to come from the U.S. government. Financing Motion ¶ 23; Ex. F. Furthermore, the 

marketing process, controlled by Rothschild, which is also financial advisor to the 

Commonwealth, is still ongoing and third parties may still submit superior financing proposals.

Financing Motion ¶¶ 33-35; Mondell Declaration ¶¶ 11-13.

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16. Notably, the Financing Motion excludes adequate information regarding the 

negotiations around the terms of the Facility, including who negotiated on behalf of each entity. 

In particular, PREPA alleges, based on the Mondell Declaration, that the terms of the Facility are 

fair and reasonable; however, the Financing Motion fails to describe why the Commonwealth 

cannot otherwise provide funding to PREPA without the strings of postpetition financing. For 

example, the Motion does not explain why the Commonwealth cannot fund PREPA by simply 

requiring governmental entities to pay their past due bills to PREPA and ensuring all steps are 

taken to pay any bills that have been or have yet to be issued for post-hurricane electricity 

service, including estimated bills. Instead, the Financing Motion contains only a vague reference 

to Facility negotiations between the Commonwealth and PREPA “with the assistance of its 

advisors and the Oversight Board.” Financing Motion ¶ 44. At the same time, the FOMB

portrays PREPA as an entity run by—and for the benefit of—the Commonwealth, strongly 

suggesting a lack of separateness between the two. Id. ¶ 5. If indeed this is the view of the 

FOMB, it has utterly failed to explain why it needs a priming lien and superpriority claim on a 

loan for the Commonwealth’s benefit.

IV. ARGUMENT

A. Approval of the Facility is Not Subject to Business Judgment Review 

17. Undeterred, PREPA insists that its decision to obtain the Facility is a sound 

exercise of its business judgment. The applicable standard of review, however, is not business 

judgment. In analyzing transactions that involve interested parties, courts apply the more 

stringent “entire fairness” standard. See In re Residential Capital, LLC, No. 12-12020, 2013 

Bankr. LEXIS 2601, at *64 (Bankr. S.D.N.Y. June 27, 2013) (“[I]n interested party transactions, 

an entire fairness/heightened scrutiny analysis applies”). The entire fairness test requires proof 

of fair dealing and fair price and terms. See In re L.A. Dodgers LLC, 457 B.R. 308, 313 (Bankr. 

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D. Del. 2011). Here, the Commonwealth readily admits that PREPA and the Commonwealth are 

“integral components of one economy” and the government of Puerto Rico created PREPA for 

the Commonwealth’s benefit. Financing Motion ¶ 5. The same financial advisor—Rothschild—

negotiated the Facility on behalf of both PREPA and the Commonwealth. Financing Motion ¶ 

33; Mondell Declaration ¶ 11. Accordingly, the Facility is a transaction among interested parties 

and should be reviewed under the more stringent “entire fairness” standard. As set forth more 

fully below, the transaction does not meet this more stringent entire fairness standard and the 

Financing Motion should be denied.

B. PREPA Has Not Satisfied the Bankruptcy Code’s Requirements for 

Receiving Financing on a Superpriority Basis 

18. Section 364(c) of the Bankruptcy Code provides that a debtor may only obtain 

financing on a superpriority basis if: (i) it was unable to obtain unsecured credit only as an 

administrative expense claim; (ii) the financing is necessary to preserve the assets of its estate; 

and (iii) the terms of the transaction are fair, reasonable, and adequate under the circumstances. 

See In re L.A. Dodgers LLC, 457 B.R. at 312; see also In re Ames Dep’t Stores, Inc., 115 B.R. 

34, 37 (Bankr. S.D.N.Y. 1990) (court should focus on terms of proposed financing to ascertain 

whether they are reasonable); In re Aqua Assocs., 123 B.R. 192, 196 (Bankr. E.D. Pa.1991) 

(citing In re Crouse Group, Inc., 71 B.R. 544, 549 (Bankr. E.D. Pa. 1987) (debtors must show 

“terms of the transaction are fair, reasonable, and adequate, given the circumstances of the 

debtor-borrower and the proposed lender”)). A court may approve postpetition financing only to 

the extent its terms are “in the best interests of the general creditor body.” In re Roblin Indus., 

52 B.R. 241, 244 (Bankr. W.D.N.Y. 1985) (citations omitted); In re Barbara K. Enters., Inc., 

No. 08-11474 (MG), 2008 WL 2439649, at *13 (Bankr. S.D.N.Y. June 16, 2008) (denying 

debtor’s motion for postpetition financing due to imposing undue risk on creditors). 

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19. PREPA bears the burden of showing that the requirements of section 364(c) have 

been met. See In re Tamarack Resort, LLC, No. 09-03911-TLM, 2010 Bankr. LEXIS 3680, at 

*35 (Bankr. D. Idaho Oct. 19, 2010) (“The [debtor-in-possession] has the burden of showing that 

it was unable to obtain financing other than on a superpriority or priming basis.”). As discussed 

further below, PREPA has not carried its burden and the Facility should not be approved. 

(1) PREPA Has Not Demonstrated it is Unable to Obtain Unsecured Credit 

20. The most evident source of unsecured financing for PREPA is its outstanding 

receivables owed it by the Commonwealth and other governmental entities. Instead of extending 

a loan that would result in a superpriority claim and primes all of PREPA’s creditors, the 

Commonwealth should provide liquidity to PREPA by paying—and causing its instrumentalities 

to pay—hundreds of millions of dollars of unpaid prepetition and postpetition electric bills.

13

 

Unlike chapter 11 of the Bankruptcy Code, there is no provision in chapter 9 or PROMESA that 

prohibits the Commonwealth or other government instrumentalities that are Title III debtors from 

paying prepetition obligations, such as electricity bills. See, e.g., In re City of Stockton, Cal., 486 

B.R. 194, 199 (Bankr. E.D. Cal. 2013). PREPA has not explained why, in light of the immense 

benefits the Commonwealth is receiving from maintaining electricity services on the island, and 

the large amount of unpaid bills from Commonwealth customers, the Commonwealth is only 

willing to fund PREPA with the incentives of sections 364(c) and (d). 

(2) PREPA Has Not Demonstrated that the Financing is Necessary to Preserve 

the Assets of the Estate 

21. PREPA seeks approval of a $1.3 billion Facility, including access to $550 million 

of loans on an emergency, interim basis. It has failed to demonstrate, however, that the 

 

13 On January 25, 2017, during a session of the Senate of Puerto Rico, Thomas Rivera-Schatz, the President of the 

Senate, stated that ten Commonwealth agencies themselves owe in excess of $200 million to PREPA. A partial 

transcript of the Senate session, along with a non-certified translation, are annexed hereto as Exhibit A. 

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requested financing amount corresponds to PREPA’s actual needs. The FOMB provides no 

support for its projection of a funding gap of approximately $1 billion by April 2018, or why the 

projected loss of revenues leading up to that time period cannot be remedied by collections 

efforts. Moreover, PREPA’s purported urgent need for such a large Facility is called into 

question by its request for authorization to utilize Revenues to maintain a $300 million operating 

reserve (the “Operating Reserve”). See Financing Motion at 5. PREPA will have broad 

discretion over how to use the funds in the Operating Reserve—including for Ineligible Uses—

but the Financing Motion offers little insight in to how PREPA actually intends to utilize the 

Revenues set aside in the Operating Reserve. PREPA’s assertion that it needs funds on an urgent 

basis to keep customers’ lights on is plainly inconsistent with the notion that it needs $300 

million to deposit into a slush fund for unspecified uses. The Revenues that PREPA proposes to 

deposit into the Operating Reserve should instead be used to pay Current Expenses and, in turn, 

reduce the borrowing amount under the Facility. 

22. PREPA also seeks $550 million as an “interim, stop-gap funding measure.” 

Financing Motion ¶ 22. Courts typically approve interim DIP financing to fund a debtor’s urgent 

liquidity needs for a few weeks until a final hearing. PREPA has not presented any evidence that 

it needs such a large sum to reach a final hearing, or why it requires funds on an emergency basis 

to pay past amounts expended for Current Expenses—especially without identifying what those 

expenses are or what entities are actually being reimbursed. Financing Motion at 3; see In re 

Olde Prairie Block Owner, LLC, 448 B.R. 482 (Bankr. N.D. Ill.), aff’d, 460 B.R. 500 (N.D. Ill. 

2011) (holding debtor could not obtain credit from postpetition lender in exchange for priming 

lien on its property to pay past due expenses). To approve the interim Facility, the Court must 

determine how much cash PREPA actually needs to operate during the interim period and 

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approve only the amount necessary to avoid immediate and irreparable harm. Fed. R. Bankr. P. 

4001(c) (stating the court may authorize the obtaining of credit only to the extent necessary to 

avoid immediate and irreparable harm to the estate pending a final hearing); Local Bankr. R. 

4001-2(d).

23. The Financing Motion should be denied unless PREPA demonstrates that the 

amount of financing sought on both an interim and final basis is commensurate with PREPA’s

urgent liquidity needs. At a minimum, any interim borrowing should be reduced to match 

PREPA’s short-term operating needs. 

(3) The Facility Is Not Fair and Reasonable and Should be Reduced by 

Government Receivables 

24. Pursuant to section 364(c) of the Bankruptcy Code, a debtor may only obtain 

financing on a superpriority basis if the terms of the transaction are fair, reasonable, and 

adequate under the circumstances. See In re L.A. Dodgers LLC, 457 B.R. at 312; see also In re 

Ames Dep’t Stores, Inc., 115 B.R. at 39. Based on the record before the Court, the terms of the 

proposed Facility are not fair or reasonable. 

a. The Size of the Proposed Facility is Unreasonable and Should be 

Reduced by PREPA’s Outstanding Receivables from the 

Commonwealth 

25. As discussed above, because the Commonwealth and its instrumentalities have 

failed to pay their electricity bills, and PREPA has failed to collect such bills, PREPA maintains 

it is now in a financial crisis. It is only fair that PREPA’s obligations under the Facility should 

be offset and reduced by PREPA’s outstanding receivables on account of the unpaid electricity 

bills of the Commonwealth and its instrumentalities.

26. The proposed Interim Financing Order includes a finding that the Facility is not 

subject to setoff. Interim Financing Order ¶ 4. The Bankruptcy Code explicitly preserves setoff 

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rights available to creditors under Puerto Rico law. See In re Lehman Bros. Holdings, Inc., 433 

B.R. 101, 107 (Bankr. S.D.N.Y. 2010) (“The Bankruptcy Code does not establish an independent 

right of setoff, but section 553 does preserve any right of setoff that may exist under applicable 

non-bankruptcy law.”); see also 31 LPRA § 3221 (setting forth requirements for setoff under 

Puerto Rico law). Moreover, the legislative measure authorizing the Commonwealth to extend 

financing to PREPA specifically preserves PREPA’s right of “compensation,” or setoff, against 

loan repayment obligations. Joint Resolution No. 16 of January 26, 2018. There is no reason the 

Commonwealth should withhold money to PREPA as payment for its outstanding bills.

27. Additionally, the utilities order entered in the Commonwealth’s Title III case 

granted PREPA an allowed administrative expense claim under Bankruptcy Code sections 

503(b) and 507(a)(2) for postpetition unpaid services as adequate assurance (an “Adequate 

Assurance Claim”), which PREPA can (and should) require to be paid in full in cash under any 

plan of adjustment pursuant to section 314(b)(4) of PROMESA. See Case No. 17 BK 3283-LTS, 

Dkt. No. 1016 ¶ 5. The utilities order also provides that PREPA can make an additional 

adequate assurance request if it is not satisfied with the Adequate Assurance Claim, which could 

include cash deposits, prepayments, letters of creditor or other forms of security. Id. ¶¶ 6, 8. If a 

Commonwealth debtor defaults on its obligations to PREPA, then PREPA can seek by motion 

the enforcement of any contractual or state law remedies, including immediate payment of an 

Adequate Assurance Claim. Id. ¶ 14. Consequently, under the utilities order, PREPA has the 

ability to demand payment in full of unpaid postpetition electricity services provided to other 

Commonwealth Title III debtors. Given PREPA’s liquidity needs, PREPA should aggressively 

pursue these rights. 

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28. Accordingly, as a condition to approval of the Facility, the Court should require 

PREPA to provide a full accounting of all outstanding receivables for the Commonwealth and its 

instrumentalities, and explain the amounts it expects to receive from the Commonwealth and its 

instrumentalities when PREPA resumes billing and collections at pre-hurricane levels. At a 

minimum, PREPA and the Commonwealth should agree that any amounts owed by 

governmental entities will be credited against the outstanding amount of any Facility payment 

obligations. 

b. The Facility Gives the Commonwealth Excessive Control Over 

PREPA’s Title III Case and is Not Fair and Reasonable

29. Courts have held that postpetition financing should not be approved where it gives 

a single creditor the ability to dictate plan confirmation. See, e.g., In re Tenney Village Co., Inc., 

104 B.R. 562, 567 – 68 (Bankr. D.N.H. 1989) (denying DIP financing that gave lender right to 

unilaterally prevent confirmation of a plan because the DIP “[ran] roughshod over numerous 

sections of the Bankruptcy Code,” including section 1129); In re Chevy Devco, 78 B.R. 585, 589 

– 90 (Bankr. C.D. Cal. 1987) (denying DIP financing where the DIP proposal was “equivalent to 

[the debtor’s] plan of reorganization”). As the court explained in Tenney Village, DIP financing 

should not enable the debtor to “pervert the reorganizational process from one designed to 

accommodate all classes of creditors and equity interests to one specially crafted for the benefit 

of [specific creditors].” In re Tenney Village, 104 B.R. at 568. 

30. The proposed Facility would result in precisely the type of perversion of the 

reorganization process that this Court is tasked with preventing. The proposed postpetition 

financing upends the purpose of chapter 11 by giving the Commonwealth unnecessary 

protections and excessive control over a plan of adjustment. Granting the Financing Motion will 

give the Commonwealth an up to $1.3 billion superpriority administrative expense. Pursuant to 

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section 314 of PROMESA, a plan can be confirmed only if, among other things, “the plan 

provides that on the effective date of the plan each holder of a [administrative expense claim] 

will receive on account of such claim cash equal to the allowed amount of such claim.” 

PROMESA § 314(b)(4). Given that the Commonwealth would have to consent to a settlement of 

its superpriority claim, it would effectively control the plan confirmation process. Such a 

unilateral grant of power to a DIP lender to dictate the ultimate path of PREPA’s Title III case is 

not fair and reasonable. 

31. Plainly, therefore, PREPA cannot meet the standard under section 364(c) of the 

Bankruptcy Code unless it resolves this concern. A potential resolution could be to disregard 

any claim for administrative expense of the Commonwealth for purposes of voting on a plan of 

adjustment only, so that the Commonwealth does not exercise undue control over the plan 

process.

c. PREPA’s Creditors Have Provided Substantial Benefit to the 

Commonwealth 

32. As discussed above, the Commonwealth has received—and continues to 

receive—millions of dollars in free electricity service from PREPA, to the detriment of PREPA’s 

bondholders. All revenues forgone by PREPA through neglecting its statutory and contractual 

obligations to collect electricity bills prepetition and postpetition, including from governmental 

entities, should have properly flowed to PREPA’s bondholders. It is both unfair and 

unreasonable for the Commonwealth to obtain the protections of section 364(c) while it receives 

such a significant benefit at the expense of PREPA’s current creditors. See, e.g., Norris Square 

Civic Ass’n v. Saint Mary Hosp., 86 B.R. 393, 402 (Bankr. E.D. Pa. 1988) (denying proposed 

DIP financing as not fair, reasonable, and adequate, holding that “[w]e believe that we can and 

should look beyond the Debtor’s immediate financial circumstances to determine who is 

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responsible for creating those circumstances. Here, we are compelled to conclude that the 

immediate crisis was largely created by [the DIP lender].”). 

C. PREPA has Not Satisfied the Bankruptcy Code’s Requirements for 

Obtaining Priming Liens

33. Section 364(d) of the Bankruptcy Code provides that to prime existing creditors’ 

liens through debtor-in-in possession financing, a debtor must establish that (i) it was unable to 

obtain similar financing without priming existing liens, and (ii) the holders of the primed lien are

adequately protected. 11 U.S.C. § 364(d). 

(1) The Commonwealth Has Not Demonstrated that it was Unable to Obtain 

Financing Without Priming Liens 

34. PREPA has not demonstrated that it was unable to secure financing without 

priming liens. Financing Motion ¶¶ 32, 59 – 63. PREPA’s “marketing” process commenced a 

mere six (6) days before it filed the Financing Motion despite having known for months that it 

was in need of substantial liquidity. See id. ¶ 33; Mondell Declaration ¶ 9. Additionally, while 

PREPA may have discussed financing with certain parties in interest, it did not engage its largest 

creditors—for example, the monoline insurers—in discussions over potential financing. Thus, 

PREPA’s eleventh-hour “marketing” process lacked meaningful engagement with creditors and 

is still ongoing. PREPA’s conclusion that it must grant priming liens to obtain financing is, at 

best, premature, and, at worst, an overt attempt to subvert PREPA’s bondholders’ liens. 

35. Moreover, as discussed above, the simplest method by which PREPA can obtain 

liquidity to pay Current Expenses is by collecting electricity bills from customers. PREPA has 

neglected—and continues to neglect—its statutory and contractual obligations to collect 

electricity bills from its customers, including from the Commonwealth and its instrumentalities, 

and the Commonwealth and its instrumentalities continue to withhold payment from PREPA. 

Now that PREPA finds itself in financial distress because of its own irresponsibility and the 

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Commonwealth’s conduct, the Court should not authorize PREPA to grant a lien to the 

Commonwealth that primes bondholders who have been subsidizing the Commonwealth and its 

instrumentalities to the tune of millions of dollars in electricity service. 

36. The FOMB candidly acknowledges that, from its viewpoint, the Commonwealth 

created PREPA for the Commonwealth’s benefit, and it asserts that there is little to no 

separateness between the two. See Financing Motion ¶ 5. The Commonwealth and PREPA 

share the common goal of turning the lights back on in Puerto Rico. With that aligned incentive, 

it is wholly illogical why the Commonwealth will not extend credit to PREPA without a priming 

lien. Rather, to continue to obtain the benefits that PREPA provides to the Commonwealth, the 

Commonwealth should be incentivized to fund PREPA, even on an equity or subordinated basis, 

as a parent would fund a subsidiary where there is a corporate benefit to doing so, or, at most, 

with the protection of a junior lien. 

37. Despite its label as a credit financing, the Facility is more properly characterized 

as a contribution or support from the Commonwealth to PREPA to provide a benefit to the entire 

island of Puerto Rico until the federal government can extend CDL financing to PREPA and/or 

the Commonwealth. Accordingly, any liens or claims granted as part of the financing should be 

junior to those of PREPA’s existing bondholders.14 

(2) PREPA’s Bondholders Are Not Adequately Protected 

38. The FOMB contends that PREPA may secure the Facility with priming liens 

because the PREPA bondholders’ claims will be adequately protected. The FOMB’s rationale is 

that absent material improvements in PREPA’s current operations, PREPA’s revenues would be 

insufficient to cover operating expenses in the long term due to expected outmigration. Financing 

 

14 At the very least, if the Court is not inclined to address this issue at this juncture, the Interim Financing Order and 

the Final Financing Order should provide that creditors’ rights are reserved to seek recharacterization of the Facility

at a later date. 

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Motion ¶ 20, Wolfe Declaration ¶¶ 21-26. The FOMB argues that the Facility will enable 

PREPA to maintain its infrastructure and assets to generate future revenues. See Financing 

Motion ¶ 52. This argument fails. 

39. First, the preservation and enhancement of a Debtor’s assets does not in and of 

itself prove adequate protection to creditors. See In re Swedeland Development Group, Inc., 16 

F.3d 552, 556-57 (3d Cir. 1994) (holding that future potential value was not sufficient to afford 

adequate protection); In re Fontainebleau Las Vegas Holdings LLC, 434 B.R. 716, 751 (S.D. 

Fla. 2010) (denying a debtor-in-possession financing in part because the fact that “DIP financing 

was necessary to preserve, and possibly even enhance, the value of the Debtors’ assets” did not 

provide adequate protection to existing creditors). 

40. Second, the benefits that the FOMB claims will be achieved through the Facility

are entirely speculative in nature and do not provide adequate protection. See In re Mosello, 195 

B.R. 277, 288-290 (Bankr. S.D.N.Y. 1996) (holding that use of proposed DIP to develop 

property did not provide adequate protection where the “future of the debtors’ development 

scheme is beset by uncertainty and risk, and the ultimate outcome of the project is a matter of 

speculation based upon assumptions which cannot be quantified or verified by objective 

evidence”). There is no guarantee that PREPA will actually use the Loans for the purposes that 

it says it will, especially in light of PREPA’s history of gross mismanagement and politicization. 

Given the uncertainty surrounding the Commonwealth, it cannot be said with any degree of 

confidence that investment in PREPA’s infrastructure will curb outmigration and result in 

increased revenues for PREPA’s bondholders. See also In re Strug-Division LLC, 380 B.R. 505, 

514-15 (Bankr. N.D. Ill. 2008) (holding debtor had failed to provide adequate protection based 

on increase in value that would result from applying DIP loan to rehabilitation work because the 

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risk of being primed would be shifted entirely to secured creditor); In re YL West 87th Holdings I 

LLC, 423 B.R. 421, 442-43 (Bankr. S.D.N.Y. 2010) (denying DIP loan because future value of 

completing construction was too speculative and did not provide adequate protection); Suntrust 

Bank v. Den-Mark Const., Inc., 406 B.R. 683, 697-702 (E.D.N.C. 2009) (reversing bankruptcy 

court’s finding of adequate protection because future value was speculative); In re 495 Cent. 

Park Ave. Corp., 136 B.R. 626, 629-31 (Bankr. S.D.N.Y. 1992) (approving adequate protection 

based on future value only because all parties agreed that property would increase in value based 

on borrower having already obtained lessee for the improved premises).

41. Accordingly, because PREPA has not provided adequate protection to its 

bondholders, it has failed to satisfy the requirements of section 364(d) of the Bankruptcy Code 

and the Court should deny PREPA’s request to grant priming liens to secure the Facility. 

D. The Facility Should be More Favorable to PREPA and its Creditors

42. In addition to the superpriority claim and priming lien, the Facility contains 

numerous terms that should be revised or eliminated to be more favorable to PREPA and its 

creditors in these circumstances, such as:

 the interim financing of $550 million is not subject to forgiveness if the 

Commonwealth secures a CDL from the federal government in respect of that 

amount, even if such federal loan is forgiven, Financing Motion ¶ 29;

 the terms of the Facility can be modified based on unknown terms that may be 

agreed upon in the future between the Commonwealth and PREPA (again, 

represented on both sides by the FOMB and AAFAF) without notice and a 

hearing and the Court’s approval, Financing Motion at 4-5 (limiting uses of 

Facility only to budget requiring approval only from AAFAF and the FOMB

every 13 weeks); 

 the automatic stay would be modified without further order of the Court to permit 

the Commonwealth to accelerate its loans upon an event of default and have its 

loan proceeds repaid out of Revenues ahead of bondholders, Financing Motion at 

7; and 

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 PREPA would provide a copy of its reporting package—which notably omits 

access to PREPA’s 13-Week Budget and contains no detailed information 

regarding billing and collection efforts—only to creditors party to the Mediation 

Agreement, effectively denying the protections of a secured creditor to any party 

that does not engage in mediation, Financing Motion ¶ 57.

43. In addition, PREPA’s bondholders should be provided with other protections that 

are typically granted to secured creditors as adequate protection in connection with postpetition 

financing:

 Bondholders should receive a more robust reporting package that includes copies 

of PREPA’s 13-Week Budget when submitted to AAFAF and FOMB and

detailed reports of PREPA’s billing and collections efforts;

 Bondholders should have weekly cash flow calls with PREPA’s advisors;

 Bondholders should, with reasonable notice, have access to PREPA’s facilities

and premises and the ability to periodically inspect PREPA’s books and records;

 Milestones should be incorporated into the Interim and Final DIP Orders for 

PREPA to complete restoration and repair of the power grid and send bills to 

100% of its active customer base; and

 An independent monitor should ensure that the loan proceeds are spent in 

accordance with the 13-Week Budget.

44. Absent the modifications described herein, the Facility is neither fair nor 

reasonable and it should not be approved under its proposed terms.

E. The Commonwealth is Not Entitled to the Protections of Section 364(e)

Because the Commonwealth Has Not Presented Evidence of Good Faith and 

Arms’ Length Negotiations

45. Courts have regularly held that good faith and arm’s length negotiations are 

important factors to be considered in granting or denying postpetition financing under sections 

364(c) and (d) of the Bankruptcy Code. See, e.g., In re WorldCom, Inc., No. 02-13533, 2002 WL 

1732646 at *3 (Bankr. S.D.N.Y. July 22, 2002) (approving DIP financing only after finding of 

good faith and arm’s length negotiations between debtors and lenders); In re Farmland 

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Industries, Inc., 294 B.R. 855, 881 (Bankr. W.D. Mo. 2003) (listing factors courts should

consider in connection with DIP financing, including “that the financing agreement was 

negotiated in good faith and at arm’s length”); In re Mid-State Raceway, Inc., 323 B.R. 40, 60

(Bankr. N.D.N.Y. 2005) (citing Farmland DIP financing factors, including good faith and arm’s 

length negotiations). Moreover, section 364(e) of the Bankruptcy Code only provides a DIP 

lender protection against reversal on appeal if it negotiated the original loan in good faith. § 11 

U.S.C. 364(e).

46. As discussed above, movants have failed to present evidence indicating that the 

Facility was negotiated in good faith and at arms’ length. The only sentence addressing this 

point in the Financing Motion states, “the Debtor negotiated the Credit Documents with the 

Commonwealth in good faith and with the assistance of its advisors and the Oversight Board, 

and the Debtor believes it has obtained the best financing available.” Financing Motion ¶ 44. 

There is no factual support for this statement in the Financing Motion or in the attached 

declarations. 

47. Accordingly, there is little basis to support a finding in the Interim Financing

Order that the Facility was negotiated in good faith and at arm’s length. Instead, the Financing 

Motion raises numerous questions: What were the alternatives considered? Why does the 

Commonwealth require a superpriority administrative claim and priming lien on Revenues, 

effectively subordinating existing bondholders? What are the sources of funds in the 

Commonwealth’s treasury account that will be loaned to PREPA under the Facility? Did 

PREPA seek payment of overdue receivables from governmental entities to reduce the size of the 

Facility? Why should the Commonwealth be making a secured priming loan to PREPA when 

the same funds could be used to pay or cause to be paid overdue electric bills owed to PREPA by 

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the Commonwealth or its instrumentalities? Is there meaningful separateness between PREPA 

and the Commonwealth given the Oversight Board’s representation that PREPA is run for the 

Commonwealth’s benefit? Movants should produce adequate evidence of PREPA’s negotiations 

on the Facility terms before the Court can determine whether there were arms’ length 

negotiations and if they were made in good faith. 

48. The lack of evidence of good faith and arm’s length negotiations weighs heavily 

against the Court approving the Facility even on an interim basis. To be certain, it makes it 

nearly impossible to make a section 364(e) finding of good faith at the interim hearing. Without 

proof of actual negotiations, there is nothing but the lender’s conclusory statement to support 

such a finding. At a minimum, the Court should defer granting the Commonwealth section 

364(e) protection until the final hearing on the Financing Motion, after the parties have had an 

opportunity to conduct discovery and the Court can assess whether there is evidence to support 

AAFAF’s and the FOMB’s good faith assertion.

V. RESERVATION OF RIGHTS

49. As of the date of this Objection, National has not received documentation from 

movants and their professionals regarding the Facility. National, along with other creditors, has 

served certain document requests on PREPA, which remain outstanding, and are taking 

depositions that will not all conclude before the objection deadline. Accordingly, National

expressly reserves all rights, claims, defenses, and remedies, including, without limitation, to 

supplement this Objection, to raise further and other objections to the Financing Motion and the

form of Interim and Final DIP Orders, and to introduce evidence prior to or at any hearing 

regarding the Financing Motion in the event the National’s Objection is not resolved prior to 

such hearing.

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VI. CONCLUSION

50. The Facility, as currently proposed by the FOMB and AAFAF in the Financing 

Motion, benefits the Commonwealth at the expense of PREPA and its existing creditors. Any 

Facility must include appropriate protections for PREPA’s bondholders, such as sizing the 

Facility to account for alternative sources of revenue, decreasing the amount of any DIP 

repayment obligations for the amount of any unpaid receivables for Commonwealth entities as 

and when such receivables mature, denying a priming lien to the Commonwealth, and ensuring 

that the Facility does not create a situation where the Commonwealth by virtue of a large 

superpriority administrative expense obtains a veto right over any proposed plan of adjustment. 

Therefore, National respectfully requests that the Court deny the Financing Motion unless the 

Interim and Final Financing Orders remedy the numerous issues outlined in National’s 

Objection.

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RESPECTFULLY SUBMITTED, in San Juan, Puerto Rico, this 1st day of February, 

2018. 

WE HEREBY CERTIFY that on this same date a true and exact copy of this objection

was filed with the Clerk of Court using the CM/ECF system, which will notify a copy to counsel 

of record. Also, copy of this document will be notified via electronic mail to all case participants. 

Dated: February 1, 2018 

San Juan, Puerto Rico

ADSUAR MUÑIZ GOYCO

SEDA & PÉREZ-OCHOA, P.S.C.

208 Ponce de León Avenue, Suite 1600

San Juan, PR 00936

Telephone: 787.756.9000

Facsimile: 787.756.9010

Email: epo@amgprlaw.com

acasellas@amgprlaw.com

 larroyo@amgprlaw.com

By: /s/ Eric Pérez-Ochoa

Eric Pérez-Ochoa

USDC-PR No. 206314

/s/ Alexandra Casellas-Cabrera

Alexandra Casellas-Cabrera

USDC-PR No. 301010

/s/ Lourdes Arroyo Portela

Lourdes Arroyo Portela

USDC-PR No. 226501

WEIL, GOTSHAL & MANGES LLP

/s/ Marcia Goldstein

Marcia Goldstein*

Jonathan Polkes*

Gregory Silbert*

Robert Berezin**

767 Fifth Avenue

New York, New York 10153

Tel.: (212) 310-8000

Fax: (212) 310-8007

Stephen A. Youngman*

200 Crescent Court, Suite 300

Dallas, Texas 75201-6950

Tel.: (214) 746-7700

Fax: (214) 746-7777

Email: marcia.goldstein@weil.com

jonathan.polkes@weil.com

gregory.silbert@weil.com

robert.berezin@weil.com

stephen.youngman@weil.com

*admitted pro hac vice

**pro hac vice pending

Counsel for National Public Finance 

Guarantee Corp.

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