1

THIS NOTICE IS NOT AN OFFER WITH RESPECT TO ANY 

SECURITIES OR

A SOLICITATION OF ACCEPTANCE OR REJECTION OF A TITLE III PLAN WITHIN THE 

MEANING OF SECTION 1125 OF THE BANKRUPTCY CODE INCORPORATED INTO PROMESA

TITLE III BY SECTION 301.

ANY SUCH FUTURE OFFER OR SOLICITATION WILL COMPLY WITH ALL APPLICABLE 

SECURITIES LAWS AND/OR PROMESA.

--------------------------------------------------------------------------------

NOTICE TO HOLDERS OF UNINSURED BONDS

of

PUERTO RICO ELECTRIC POWER AUTHORITY

(Formerly Puerto Rico Water Resources Authority)

POWER REVENUE BONDS and 

POWER REVENUE REFUNDING 

BONDS

(List of CUSIPS Attached as Exhibit A hereto)

Regarding

Opportunity for Uninsured Bondholders to Become Party to 

Settlement Agreement

“Participation Date”: 5:00 p.m. ET on February 24, 2023

This notice contains important information of interest to beneficial owners of the subject securities. To 

the extent applicable, all depositories, custodians, and other intermediaries receiving this notice are 

requested to expedite re-transmittal to such beneficial owners in a timely manner. AS MORE FULLY 

DESCRIBED HEREIN, FAILURE TO SIGN THE SETTLEMENT AGREEMENT (AS 

DEFINED BELOW) AND TO TENDER YOUR BONDS FOR ASSIGNMENT OF A NEW CUSIP

BY THE PARTICIPATION DATE WILL RESULT IN LOSS OF THIS OPPORTUNITY TO 

SETTLE.

This notice is addressed solely to holders of Bonds (as defined below) issued by the Puerto Rico 

Electric Power Authority (“PREPA”) that are not insured under a primary insurance policy or 

secondary insurance policy (the “Uninsured Bonds”). Bonds insured under a primary insurance 

policy or secondary insurance policy (“Insured Bonds”) are not eligible for the opportunity 

described herein and their respective monoline insurer will be provided with a similar proposal 

separately. Accordingly, beneficial owners of such Insured Bonds and any custodian holding such 

Insured Bonds and a related secondary insurance policy are not eligible to sign the Settlement 

Agreement, should not tender such Insured Bonds, and should not sign the Settlement Agreement

in respect of such Insured Bonds. 

Capitalized terms used but not defined in this notice shall have the respective meanings given to them in 

the Settlement Agreement.

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Exhibit 1 Page 1 of 38
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Settlement Agreement

NOTICE IS HEREBY GIVEN by the Financial Oversight and Management Board for Puerto Rico, as 

the Title III representative of PREPA (“Oversight Board”) to each beneficial and registered owner of 

uninsured Puerto Rico Electric Power Authority Power Revenue Bonds and Power Revenue Refunding 

Bonds (the “Bonds”), issued and outstanding pursuant to that certain Trust Agreement, dated as of 

January 1, 1974, as amended and restated, supplemented, or otherwise modified from time to time, 

between PREPA and U.S. Bank National Association as successor trustee (the “Trustee”), to become a 

party to a Settlement Agreement (together with the annexes, exhibits, and schedules attached thereto, 

and as it may be amended, restated, supplemented, or otherwise modified from time to time in accordance 

with its terms, each a “Settlement Agreement”) among (a) Oversight Board and (b) such beneficial or 

registered owner of Uninsured Bonds (together with all other beneficial or registered owners that become 

parties to a Settlement Agreement, the “Settling Bondholders”). Beneficial or registered owners of 

Uninsured Bonds who do not become a party to the Settlement Agreement are defined as “Non-Settling 

Bondholders”. 

Each Settling Bondholder will be party to an individual Settlement Agreement that will contain the same 

terms and conditions as the Settlement Agreements applicable to other Settling Bondholders. A copy of 

the terms of the Settlement Agreement is attached hereto as Exhibit B. A copy of the Settlement 

Agreement will also be available at: https://cases.ra.kroll.com/puertorico, the case site for the Title III 

Case of PREPA. Once on the case site, click the link named “PREPA Settlement Materials” on the left 

hand side of the site under “Quick Links” to obtain a copy of the Settlement Agreement. The Settlement 

Agreement will also be posted on the Electronic Municipal Market Access (EMMA) website of the 

Municipal Securities Rulemaking Board, currently located at http://emma.msrb.org, using the CUSIP

numbers of the Uninsured Bonds eligible to participate in the settlement and agreements as described 

herein and in the Settlement Agreement.

This notice contains summaries of the Settlement Agreement and is qualified in its entirety by reference

to the Settlement Agreement. All registered and beneficial owners of the Uninsured Bonds are urged 

to review the Settlement Agreement in its entirety and to consult with their legal and financial

advisors concerning any questions they have concerning the terms of the Settlement Agreement.

The PREPA Title III Case

On July 2, 2017 (the “Petition Date”), the Oversight Board filed a petition for relief for PREPA pursuant 

to section 304(a) of PROMESA1 with the United States District Court for the District of Puerto Rico (the 

“Title III Court”), commencing a debt adjustment case under Title III of PROMESA, Case No. 17-bk4780-LTS (the “Title III Case”). Pursuant to section 315(b) of PROMESA, the Oversight Board is the 

Title III representative of PREPA in PREPA’s Title III Case.

The Amended Lien & Recourse Challenge

Challenging the Validity of the Bonds

This settlement offer applies to you if you are a beneficial holder of Uninsured Bonds issued by PREPA. 

As explained in more detail below, the validity of your Bonds and entitlement to payment have been 

challenged on two grounds: (1) the Oversight Board contends your Bonds are secured only by moneys 

in certain accounts that only amount to less than one percent (1.0%) of your claim; and (2) the Oversight 

Board contends your Bonds are not allowable claims against PREPA, but are only allowable claims 

against those certain accounts. If the Oversight Board prevails on both those contentions, your recovery 

1

“PROMESA” is codified at Pub. L. No. 114–187, 130 Stat. 549 (2016), 48 U.S.C. 2101 et. seq.

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3

will be less than one percent (1.0%) of your allowable Bond claims. If the Oversight Board prevails on 

its contention that the collateral securing your bonds is limited to what is in those certain accounts, but 

does not prevail on its contention that your bonds are not allowable claims against PREPA, your recovery 

will equal the recovery received by other general unsecured claimholders which may range from 

approximately forty percent (40.0%) to fifty percent (50.0)% of your allowable Bond Claims. If the 

Oversight Board does not prevail on its contention that the collateral securing your bonds is limited to 

what is in those certain accounts, but is rather secured by PREPA’s revenues, your allowable Bond 

Claims will likely be paid more than fifty percent (50.0%) on the dollar and could possibly be paid in 

full, depending on the Title III Court’s determination including as to PREPA’s responsibility to raise 

electricity prices and PREPA’s ability to collect more revenues as its customers are charged more for 

power. 

Rather than risking nearly no recovery on your Bond Claims, this settlement offer allows you to settle 

for payment in the form of new bonds of approximately half your claims with the possibility of receiving 

more depending on how many bondholders settle and the outcome of the litigation over the two 

contentions described above. Your allowable Bond claims for settlement purposes include all unpaid 

principal and interest accrued as of PREPA’s commencement of its Title III case on July 2, 2017, but 

excludes all interest accrued after that date. In exchange for eliminating the risk of nearly no recovery, 

your acceptance of the offer means that you also materially diminish the probability you will be paid in 

full or even more than the settlement offer if both the Oversight Board’s contentions are rejected and the 

Bondholders’ representatives prevail in the litigation.

On July 1, 2019, the Oversight Board commenced an adversary proceeding against the Trustee (the 

“Amended Lien & Recourse Challenge”), by filing a complaint (subsequently amended), styled The 

Financial Oversight and Management Board for Puerto Rico v. U.S. Bank National Association, Adv. 

Proc. No. 19-00391-LTS, currently pending with the Title III Court, in which the Oversight Board asserts 

that the Trustee’s lien and security interest is limited to funds in certain deposit accounts held by the 

Trustee (the “Lien Scope Counts”) and that the Trustee’s claims with respect to the PREPA Revenue 

Bonds are recourse solely to such deposit accounts and are non-recourse (meaning they are not valid 

claims) against PREPA (the “Recourse Counts”). All filings with respect to the Amended Lien & 

Recourse Challenge can be found at https://cases.ra.kroll.com/puertorico/HomeDocketInfo?DocAttribute=4451&DocAttrName=ADVCASENO.19-00391.

As of the date hereof, the various parties to the Amended Lien & Recourse Challenge, including the 

Oversight Board and the Trustee, have concluded briefing with respect to some of the most determinative

claims, counterclaims, and defenses asserted in the Amended Lien & Recourse Challenge. The Title III 

Court has not issued any rulings with respect to the Amended Lien & Recourse Challenge, including 

with respect to the Lien Scope Counts or the Recourse Counts. The Title III Court has scheduled oral 

argument to be heard in connection with the Amended Lien & Recourse Challenge on February 1, 2023.

The PREPA Plan

On December 16, 2022, the Oversight Board filed its proposed plan of adjustment for PREPA in 

connection with PREPA’s Title III Case (as it may be further amended, modified, or supplemented from 

time to time as permitted by the Settlement Agreement, the “PREPA Plan”)

2

and a corresponding 

2 The PREPA Plan can be accessed at this link: 

https://document.epiq11.com/document/getdocumentsbydocket/?docketId=977702&projectCode=PR1&docketNum

ber=3110&source=DM. In the event of any inconsistency between this Notice and the PREPA Plan, the PREPA 

Plan shall control. All filed documents related to the Title III Case can be located at 

https://dm.epiq11.com/case/pr1/dockets.

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Exhibit 1 Page 3 of 38
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proposed disclosure statement (the “Disclosure Statement”). As of the date hereof, the Disclosure

Statement has not been approved and the PREPA Plan has not been confirmed by the Title III Court.

The PREPA Plan provides holders of Bonds the option to be classified in one of two classes of claims. 

The first class is the class of holders of Uninsured Bonds3that desire to settle their claims against PREPA 

for the treatment described in the PREPA Plan for such class (the “Settling Class”). The second class 

is the class of holders or insurers of Bonds desiring to have their distributions depend largely on the 

outcome of the litigation described above (the “Non-Settling Class”). The scope of the security interest 

and the allowance of the claims of the Non-Settling Class will be determined in the Amended Lien & 

Recourse Challenge through, among other things, resolution by the Title III Court (or other court with 

appropriate jurisdiction, including any applicable appellate court) of the Lien Scope Counts and 

Recourse Counts. A ruling adverse to the Trustee in the Amended Lien & Recourse Challenge could 

eliminate the vast majority of the claims in the Non-Settling Class, resulting in such holders of claims in 

the Non-Settling Class receiving treatment on their claims substantially less than the treatment provided

to the claims of Settling Class. Conversely, if the Trustee is successful in the Amended Lien & Recourse 

Challenge, the treatment provided to the claims of the Non-Settling Class could be substantially more

than the treatment provided to the claims of the Settling Class.

The Oversight Board, pursuant to the Settlement Agreement, as the Title III representative of PREPA, 

is offering holders of Bonds the opportunity to choose between joining the Settling Class and becoming

a Settling Bondholder or remaining in the Non-Settling Class. A Settling Bondholder will, consistent 

with the Settlement Agreement, receive—subject to confirmation of the PREPA Plan— the treatment 

provided to the claims of the Settling Class in the PREPA Plan in exchange for the settlement of the 

Oversight Board’s claims in the Amended Lien & Recourse Challenge against the Trustee, as applied to 

the Uninsured Bonds held by the Settling Bondholders, including the Lien Scope Counts and the 

Recourse Counts. By opting into the Settling Class Settling Bondholders waive their right to object 

to confirmation and to participate in the Amended Lien & Recourse Challenge; however, they 

retain the right to vote to accept or reject the Plan, after approval of the Disclosure Statement.

Overview of Certain Terms of Settlement Agreement

As described in greater detail in the Settlement Agreement, by signing the Settlement Agreement, a 

Settling Bondholder agrees (i) to become a member of the Settling Class and receive the treatment 

provided to holders of claims in such class in the PREPA Plan, as described in the Settlement Agreement,

and (ii) to the settlements embodied in the Settlement Agreement, and to various covenants related

thereto. Settling Bondholdersshall also be entitled to certain rights, claims, and protections, in each case, 

subject to the terms of the Settlement Agreement. The following is a brief overview of certain terms of 

the Settlement Agreement relevant to the treatment given to the Settling Bondholders.

• Settling Claims: Pursuant to the PREPA Plan, Settling Bondholders shall have their claims allowed 

in an amount equal to the accrued and unpaid principal and interest on their Uninsured Bonds as of 

the Petition Date. On account of that claim, Settling Bondholders shall be entitled to receive from 

PREPA a minimum recovery of fifty percent (50.0%) of their allowed claims, consisting of: 

(a) their pro rata share of the cash in the deposit account(s) held by the Trustee which are 

subject to a perfected security interest in favor of the Trustee (collectively, the “Sinking 

Fund”); and 

(b) a distribution of Series B Bonds (as defined in the Term Sheet (as defined in the 

Settlement Agreement)), such that the cash (received under subsection (a) above) and 

3

If PREPA reaches a settlement with any insurers of bonds, the claims of such parties may be classified separately 

from the Uninsured Bonds.

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the face amount of the Series B Bonds received by each Settling Bondholder equals 50% 

of the amount of the allowed claim.4

• Settling Bondholders may receive additional distributions on their allowed claims depending on the 

result of the Amended Lien & Recourse Challenge. If the Oversight Board prevails on the Lien 

Scope Counts and/or Recourse Counts, such that New Bonds (as defined in the Term Sheet and

Settlement Agreement) remain available for distribution after making the minimum distributions of 

New Bonds to Settling Bondholders and Non-Settling Bondholders, then the Settling Bondholders’

will receive, after (i) the trust established for holders of general unsecured claims against PREPA

receives the next distribution of New Bonds in a face amount sufficient to provide general unsecured 

claims fifty percent (50.0%) of the estimated value of their claims, and (ii) the trust established 

pursuant to the PREPA Plan to make payments to the PREPA pension system (for the benefit of 

PREPA pension beneficiaries) receives twenty percent (20.0%) of the Series B Bonds remaining 

after the distributions of Series B Bonds in (i), (A) forty percent (40.0%) of their pro rata share of 

remaining Series B Bonds available, and (B) if and only if the holders of general unsecured claims 

against PREPA and Fuel Line Lenders receive New Bonds in a face amount sufficient to pay them 

in full, up to the remaining sixty percent (60.0%) of their pro rata share of New Bonds.

• The Settling Bondholders will receive a contingent value instrument in an amount equal to their 

remaining portions of their allowed claims. The total recovery to be received by Settling Bondholders

under the PREPA Plan is referred to herein as the “Settling Claims Recovery.”

• Non-settling Claims: Non-Settling Bondholders’ recovery is dependent on the outcome of the 

Amended Lien & Recourse Challenge. 

• If the Oversight Board prevails on the Lien Scope Counts and Recourse Counts, then NonSettling Bondholders’ Claims receive only their pro rata share of the cash in the Sinking 

Fund (less than one percent (1.0%) of such claims), and have no deficiency claim against 

PREPA. If the class of Non-Settling Bondholders votes to accept the PREPA Plan, however, 

they will receive a contingent value instrument that could pay up to the difference between 

the unpaid principal and accrued interest on their claims as of the Petition Date and the 

distributions made to them from the Sinking Fund, depending on future results. The 

prospects of the contingent value instrument paying material amounts is very speculative.

• If the Oversight Board prevails on the Lien Scope Counts, but loses on the Recourse Counts, 

then the Non-Settling Bondholders’ claims will receive a pro rata share of the Sinking Fund. 

Any potential unsecured deficiency claim will share, pro rata, with all other non-settled 

unsecured claims, in the recovery made available to holders of general unsecured claims. 

• If the Oversight Board loses the Lien Scope Counts, but prevails on the Recourse Counts, 

then the Non-Settling Bondholders’ claims will receive their pro rata share of remaining 

New Bonds issued under the PREPA Plan in an amount equal to the value of PREPA’s assets 

that are subject to a valid, perfected, and enforceable prepetition security interest in favor of 

the Bond Trustee as determined pursuant to the Amended Lien & Recourse Challenge (the 

“Bond Collateral”) after payment of the (i) Settling Bondholders’ allowed claims, (ii) the 

Fuel Line Lenders’ (as defined in the Term Sheet and Settlement Agreement) allowed 

claims, and (iii) National’s (as defined in the Term Sheet and Settlement Agreement) 

allowed claims. Non-Settling Bondholders will have no unsecured deficiency claims against 

4 Based upon the limited amount of cash currently held in such deposit accounts, the Oversight Board believes that 

the vast majority of the treatment provided to Settling Bondholders will be in the form of Series B Bonds.

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PREPA. 

• If the Non-Settling Bondholders prevail on both the Lien Scope Counts and the Recourse 

Counts, then the Non-Settling Bondholders’ claims will receive their pro rata share of 

remaining New Bonds issued under the PREPA Plan in an amount equal to the value of the 

Bond Collateral after payment of the (i) Settling Bondholders’ allowed claims, (ii) the Fuel 

Line Lenders’ (as defined in the Term Sheet (as defined in the Settlement Agreement)) 

allowed claims, and (iii) National’s (as defined in the Term Sheet (as defined in the 

Settlement Agreement)) allowed claims. They will also receive a pro rata share of the 

recovery made available to holders of general unsecured claims on account of their 

deficiency claim.

• Transfer Covenants: By signing the Settlement Agreement, a Settling Bondholder agrees that it will 

transfer Uninsured Bonds solely in accordance with the terms of Section 6 of the Settlement 

Agreement, as follows: to a transferee (i) that is a Settling Bondholder; or (ii) who becomes a Settling 

Bondholder by executing the joinder contained in Appendix B to the Settlement Agreement. 

• Termination of the Settlement Agreement: If any Settlement Agreement terminates, the parties to 

that Settlement Agreement will be restored totheir original rights (including regarding the potential 

claims and proofs of claim and potential objections thereto), subject to, and as more fully set forth

in, the Settlement Agreement.

The below graphic depicts the projected recoveries for both Settling Bondholders and Non-Settling 

Bondholders based on various scenarios with respect to (i) the percentage of Bondholders that settle and 

do not settle and (ii) the outcome of the Lien Scope Counts and Recourse Counts in the Amended Lien 

& Recourse Challenge. The projections below are subject to material change.

FOMB wins on Lien Scope 

Counts and Recourse 

Counts

FOMB wins on Lien Scope 

Counts and Loses on 

Recourse Counts

FOMB loses on Lien Scope 

Counts and Recourse 

Counts

0% Bonds 

Settle

Settling Bonds N/A Settling Bonds N/A Settling Bonds N/A

Non-Settling 

Bonds

0.21% Non-Settling 

Bonds

46.42% Non-Settling 

Bonds

51.41%

25% Bonds 

Settle

Settling Bonds 100% Settling Bonds 50.00% Settling Bonds 50.00%

Non-Settling 

Bonds

0.28% Non-Settling 

Bonds

45.38% Non-Settling 

Bonds

51.88%

50% Bonds 

Settle

Settling Bonds 69.99% Settling Bonds 50.00% Settling Bonds 50.00%

Non-Settling 

Bonds

0.42% Non-Settling 

Bonds

43.48% Non-Settling 

Bonds

52.81%

75% Bonds 

Settle

Settling Bonds 56.26% Settling Bonds 50.00% Settling Bonds 50.00%

Non-Settling 

Bonds

0.84% Non-Settling 

Bonds

38.91% Non-Settling 

Bonds

52.81%

100% Bonds 

Settle

Settling Bonds 50.00% Settling Bonds N/A Settling Bonds N/A

Non-Settling 

Bonds

N/A Non-Settling 

Bonds

N/A Non-Settling 

Bonds

N/A

The foregoing is not a complete summary and is qualified in its entirety by reference to the Settlement 

Agreement. Beneficial owners and holders are encouraged to review the Settlement Agreement in its 

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entirety. Beneficial owners and holders should consult their bank, broker, or other financial or legal

advisor in deciding whether to agree to be bound by the terms of the Settlement Agreement.

Rationale for Assignment of Alternative Identifying CUSIPs

Settling Bondholders are,subject to the terms and conditions ofthe Settlement Agreement, entitled to their 

pro rata share of the Settling Claims Recovery. The rights to this Settling Claims Recovery and 

obligations of such Settling Bondholders “travel” with the Uninsured Bond if it is transferred to another

Settling Bondholder. Accordingly, in order to separately identify the Uninsured Bonds that fall into this 

category, the Settlement Agreement provides for the assignment of alternative identifying CUSIPs to 

track beneficial interests in Uninsured Bonds that become subject to the Settlement Agreement from time

to time, including on or prior to 5:00 p.m. ET on February 24, 2023. Although referred to in the below

procedures as an “exchange,” the assignment of such alternative identifying CUSIPs does not change or 

cause a reissuance of the Uninsured Bonds or change the prepetition nature of claims arising from the

Uninsured Bonds in any way. The terms of your Uninsured Bond remain the same regardless of your 

acceptance of the Settlement Agreement, but the beneficial owners thereof become subject to the terms,

conditions,settlements, covenants and agreements of the Settlement Agreement. The new CUSIP merely 

provides an administrative mechanism for tracking the beneficial interests of existing Uninsured Bonds 

that became subject to the Settlement Agreement prior to 5:00 p.m. ET on February 24, 2023. There are 

no tax consequences resulting from the administrative change of CUSIP in respect of your Uninsured 

Bond.

A beneficial owner of an Uninsured Bond that chooses not to join the Settlement Agreement will 

continue to hold its Uninsured Bonds unchanged from its current form and under its original CUSIP. 

Beneficial owners are encouraged to monitor the Kroll Restructuring Administration LLC (“Kroll” or 

the “Information and Tabulation Agent”) and EMMA websites for future information concerning their 

Uninsured Bonds.

In the event that there is a termination of a Settlement Agreement pursuant to Section 10 thereof prior to 

the commencement of distributions contemplated by the Settlement Agreement, then, unless otherwise 

agreed to by the parties to the Settlement Agreement, the Oversight Board shall employ its reasonable 

efforts to cause the reassignment of the original CUSIPs of Uninsured Bonds that had been subject to 

that Settlement Agreement.

The procedures for receiving such alternative identifying CUSIPs are set forth below.

Procedures for Entering into the

Settlement Agreement and Assignment of Replacement CUSIPs

Holders of Uninsured Bonds who enter into the Settlement Agreement do so with their understanding

and their consent that their beneficial interests in Uninsured Bonds will be assigned a new replacement 

CUSIP to identify their beneficial interests in the Uninsured Bonds and their agreement to the terms of 

the Settlement Agreement. The assignment of such replacement CUSIP is referred to herein as an

“exchange” for these limited administrative purposes only. The exchange will be a one-for-one 

exchange. It is anticipated that the Bonds identified by their new CUSIP will be delivered at the 

direction of PREPA on or before March 6, 2023 (the “Exchange Effective Date”).

For those beneficial owners of Uninsured Bonds entering into the Settlement Agreement, in addition to 

providing the beneficial owners’ agreement by executing the Settlement Agreement through the delivery 

of a signature page in the form of Exhibit D hereto, Depository Trust Corporation (“DTC”) participants 

should make book-entry delivery of the consenting Uninsured Bonds by causing DTC to transfer such

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8

Uninsured Bonds into the ATOP account established by the Information and Tabulation Agent, on behalf 

of and as agent for PREPA in accordance with DTC’s procedures for such transfer. Such book-entry 

delivery must be made on or prior to 5:00 p.m. ET on the Participation Date. Please note that transferring 

Uninsured Bonds into the Information and Tabulation Agent’s ATOP account alone is not sufficient to 

process the consent and exchange of a beneficial owner’s Uninsured Bonds; the signature page to the 

Settlement Agreement Consent Form (defined below) and the Settlement Agreement, in the form of 

Exhibit C and Exhibit D hereto, respectively, must also be delivered to the Information and Tabulation 

Agent to effectively process such consent and exchange.

The Information and Tabulation Agent will establish an ATOP account with respect to all Uninsured

Bonds at DTC for purposes of joining holders to the Settlement Agreement. DTC Participants should 

make book-entry delivery of the Uninsured Bonds by causing DTC to transfersuch Uninsured Bondsinto

the Information and Tabulation Agent’s ATOP account in accordance with DTC’s procedures for such 

transfer. Concurrently with the delivery of the Uninsured Bonds through book-entry transfer into the 

Information and Tabulation Agent’s ATOP account at DTC, an Agent’s Message (as defined below) in

connection with such book-entry transfer must be transmitted to and received by the Information and 

Tabulation Agent on or prior to the Participation Date. The confirmation of a book-entry transfer into 

the Information and Tabulation Agent’s ATOP account at DTC as described above is referred to herein 

as a “Book-Entry Confirmation.”

“Agent’s Message” means a message transmitted by DTC to, and received by, the Information and 

Tabulation Agent’s ATOP account and forming a part of the Book-Entry Confirmation that states that 

DTC has received an express acknowledgment from the participants in DTC described in such Agent’s 

Message, stating the aggregate principal amount of the Uninsured Bonds that have been tendered by such 

participants pursuant to this notice and that such participants have received this notice, have reviewed the 

Settlement Agreement and agree to be bound by the Settlement Agreement’s terms and that PREPA may

enforce such agreement against such participants.

Unless the Uninsured Bonds being tendered are received in the Information and Tabulation Agent’s

ATOP account on or prior to 5:00 p.m. ET on the Participation Date (accompanied by a properly

transmitted Agent’s Message), the holders of such Uninsured Bonds will be deemed to have not joined the 

Settlement Agreement. Uninsured Bonds tendered into the ATOP account may be withdrawn until the 

Participation Date. 

Bulk tenders through ATOP are not permitted. Tenders must be submitted at the beneficial holder level 

into DTC’s ATOP system. Tenders through ATOP will be accepted in each Uninsured Bond’s minimum 

and multiple denominations. 

The form associated with consent to the Settlement Agreement (“Settlement Agreement Consent 

Form”), attached as Exhibit C hereto, must include all participating CUSIPs, principal amounts, and 

VOI (Voluntary Offering Instruction) IDs per beneficial owner. If there are any irregularities with what 

has been delivered via book entry into ATOP and what is provided on the Settlement Agreement Consent 

Form, consent to the Settlement Agreement will be considered ineffective until the irregularity is 

corrected. All Uninsured Bonds tendered through DTC’s ATOP will be restricted from further trading 

or transfer through the Exchange Effective Date for such participating Bonds in accordance with the 

terms of the Settlement Agreement.

A signature page to the Settlement Agreement, in the form of Exhibit D hereto, must be signed by the 

beneficial owner of the participating Uninsured Bonds or its nominee (if the nominee is permitted to act 

as a signatory for the beneficial owner) and must be returned to the Information and Tabulation Agent 

through Kroll’s E-Portal system. If a beneficial owner holds multiple CUSIPs, the beneficial owner is 

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Exhibit 1 Page 8 of 38
9

only required to sign one signature page to the Settlement Agreement for their entire principal amount 

of Uninsured Bonds consenting to the terms of the Settlement Agreement. Beneficial owners of 

Uninsured Bonds corresponding to two or more CUSIPs must tender all of their Uninsured Bonds 

through the execution of a single signature page of the Settlement Agreement according to the 

terms herein, in addition to tendering all of their bonds through DTC’s ATOP system. Once a 

beneficial owner has delivered a signature page to the Settlement Agreement, such signature page 

will be considered to have been delivered with respect to all of the Uninsured Bonds that beneficial 

owner holds. 

Beneficial owners of Insured Bonds are not individually eligible to become party to the Settlement 

Agreement and are not subject to the procedures set forth herein.

A beneficial owner or its DTC nominee (if the DTC nominee is permitted to act as signatory for the 

beneficial owner) should return a signed signature page to the Settlement Agreement to Kroll, in the form 

of Exhibit D hereto, no later than the Participation Date, 5:00 p.m. ET on February 24, 2023, via Kroll’s 

E-Portal system. The information provided on the signature page and through the Information and Tabulation 

Agent’s E-Portal system must be disclosed at the beneficial owner level. To access the E-Portal System visit 

https://cases.ra.kroll.com/puertorico, click on “Submit Settlement Agreement Signature Page” section of the 

website and follow the instructions to complete and submit your Settlement Agreement signature page and 

associated information. Unless the Settlement Agreement signature page is received by the Information and 

Tabulation Agent on or prior to the Participation Date of 5:00 p.m. ET on February 24, 2023, the holders of such 

Uninsured Bonds will be deemed to have not joined the Settlement Agreement. Please do not submit hard 

copies or emailed copies of the Settlement Agreement signature page. The E-Portal is the only valid method 

of submission. 

Questions or requests for additional information may be directed to the Information and Tabulation 

Agent at: 

Kroll Restructuring Administration LLC

Attn: Tiffany Archbell

Tel: +1 (646) 486-7944. E-Mail: 

puertoricoballots@ra.kroll.com

Dated: January 27, 2023

Case:17-03283-LTS Doc#:23434-1 Filed:01/30/23 Entered:01/30/23 17:26:40 Desc:

Exhibit 1 Page 9 of 38
EXHIBIT A

The table below lists the CUSIPS related to the uninsured bonds in which bondholders are able to participate 

through DTC’s ATOP program. 

Uninsured CUSIPs

74526QKK7 74526QZK1 74526QXW7 74526QYA4

74526QLH3 74526QAJ1 74526QYH9 74526QYM8

74526QZY1 74526QKN1 74526QYW6 74526QYS5

74526QUT7 74526QLP5 74526QZH8 74526QYY2

74526QWM0 74526QSX1 74526QZQ8 74526QVC3

74526QXS6 74526QPG1 74526QKS0 74526QWY4

74526QC67 74526QXT4 74526QVV1 74526QYB2

74526QD66 74526QUW0 74526QSW3 74526QYN6

74526QD74 74526QWQ1 74526QVU3 74526QYT3

74526QD33 74526QXD9 74526QVA7 74526QYZ9

74526QC83 74526QXK3 74526QWU2 74526QZB1

74526QD25 74526QZE5 74526QXP2 74526QYC0

74526QD82 74526QZL9 74526QXX5 74526QZX3

74526QC75 74526QKP6 74526QYJ5 74526QZZ8

74526QB92 74526QRN4 74526QYX4 74526QEX6

74526QB84 74526QSN3 74526QKT8 74526QYD8

74526QB76 74526QUX8 74526QLX8 74526QZR6

74526QB68 74526QWR9 74526QVW9 74526QA93

74526QC59 74526QXE7 74526QVB5 74526QLZ3

74526QC26 74526QXL1 74526QVY5 74526QYE6

74526QC42 74526QXU1 74526QWV0 74526QKW1

74526QC34 74526QYF3 74526QXQ0 74526QUH3

74526QD58 74526QYU0 74526QXY3 74526QZS4

74526QC91 74526QZF2 74526QYK2 74526QVD1

74526QD41 74526QZM7 74526QYQ9 74526QVL3

74526QD90 74526QKQ4 74526QUF7 74526QA77

74526QKL5 74526QSV5 74526QKU5 74526QWB4

74526QLL4 74526QUY6 74526QNS7 74526QWE8

74526QA51 74526QWS7 74526QSY9 74526QA69

74526QA28 74526QXF4 74526QVZ2 74526QKX9

74526QUU4 74526QXM9 74526QWC2 74526QVF6

74526QWN8 74526QXV9 74526QWW8 74526QVE9

74526QXB3 74526QYG1 74526QXR8 74526QVX7

74526QXJ6 74526QYV8 74526QXZ0

74526QKM3 74526QZG0 74526QYL0

74526QA85 74526QZN5 74526QYR7

74526QZT2 74526QKR2 74526QZA3

74526QUV2 74526QSU7 74526QKV3

74526QWP3 74526QVT6 74526QNT5

74526QXC1 74526QUZ3 74526QWA6

74526QXH0 74526QWT5 74526QWD0

74526QZD7 74526QXN7 74526QWX6

Case:17-03283-LTS Doc#:23434-1 Filed:01/30/23 Entered:01/30/23 17:26:40 Desc:

Exhibit 1 Page 10 of 38
11

The table below lists the CUSIPS that are insured by a primary insurance policy. Accordingly, beneficial 

owners of such Insured Bonds and any custodian holding such Insured Bonds and a related secondary 

insurance policy are not eligible to sign the Settlement Agreement, are not able to tender such Insured 

Bonds, and should not sign the Settlement Agreement in respect of such Insured Bonds. 

Insured CUSIPs

7452684W9 74526QEJ7 74526QLR1 74526QPJ5

7452686K3 74526QLM2 7452688G0 74526QDF6

7452688A3 74526QEK4 74526QAM4 74526QLV2

74526QCE0 7452688D7 74526QCL4 74526QPK2

74526QEE8 74526QCH3 74526QDC3 74526QDG4

74526QEF5 74526QEL2 74526QER9 74526QLW0

74526QFA5 74526QEM0 74526QLS9 74526QPL0

74526QCT7 74526QCZ3 74526QLT7 74526QDH2

7452684X7 74526QLN0 74526QZC9 74526QLY6

7452686L1 7452688E5 74526QZP0 74526QPM8

7452688B1 74526QAK8 74526QCM2 74526QEW8

74526QCF7 74526QCJ9 74526QDD1 74526QEY4

74526QEG3 74526QDA7 74526QES7 74526QPN6

74526QLJ9 74526QEN8 74526QET5 74526QPP1

74526QLK6 74526QLQ3 74526QPH9 74526QPQ9

74526QCU4 7452688F2 74526QLU4 74526QAR3

7452686M9 74526QAL6 74526QZJ4 74526QPR7

7452688C9 74526QCK6 74526QDE9 74526QPS5

74526QAH5 74526QDB5 74526QCN0 74526QPT3

74526QCG5 74526QEP3 74526QEU2

74526QEH1 74526QEQ1 74526QEV0

Case:17-03283-LTS Doc#:23434-1 Filed:01/30/23 Entered:01/30/23 17:26:40 Desc:

Exhibit 1 Page 11 of 38
EXHIBIT B

Settlement Agreement

Case:17-03283-LTS Doc#:23434-1 Filed:01/30/23 Entered:01/30/23 17:26:40 Desc:

Exhibit 1 Page 12 of 38
THIS SETTLEMENT AGREEMENT IS NOT AN OFFER WITH RESPECT TO ANY 

SECURITIES OR A SOLICITATION OF ACCEPTANCES OR REJECTIONS OF A PLAN 

OF ADJUSTMENT FOR PURPOSES OF PROMESA TITLE III’S INCORPORATION OF

SECTIONS 1125 AND 1126 OF THE BANKRUPTCY CODE, OR OTHERWISE. ANY 

SUCH OFFER OR SOLICITATION WILL COMPLY WITH ALL APPLICABLE 

SECURITIES LAWS AND/OR PROVISIONS OF PROMESA. NOTHING CONTAINED 

IN THIS AGREEMENT SHALL BE AN ADMISSION OF FACT OR LIABILITY OR, 

UNTIL THE OCCURRENCE OF THE AGREEMENT EFFECTIVE DATE ON THE 

TERMS DESCRIBED HEREIN, DEEMED BINDING ON ANY OF THE PARTIES 

HERETO.

THIS SETTLEMENT AGREEMENT DOES NOT PURPORT TO SUMMARIZE ALL 

TERMS, CONDITIONS, REPRESENTATIONS, WARRANTIES, AND OTHER 

PROVISIONS WITH RESPECT TO THE TRANSACTIONS DESCRIBED HEREIN, 

WHICH TRANSACTIONS WILL BE SUBJECT TO THE COMPLETION OF 

DEFINITIVE DOCUMENTS INCORPORATING THE TERMS SET FORTH HEREIN 

AND THE CLOSING OF ANY TRANSACTION SHALL BE SUBJECT TO THE TERMS 

AND CONDITIONS SET FORTH IN SUCH DEFINITIVE DOCUMENTS AND THE 

APPROVAL RIGHTS OF THE PARTIES SET FORTH HEREIN AND IN SUCH 

DEFINITIVE DOCUMENTS THIS SETTLEMENT AGREEMENT CONTEMPLATES 

TO FACILITATE THE IMPLEMENTATION OF THE SETTLEMENT AGREEMENT.

SETTLEMENT AGREEMENT

This Settlement Agreement (together with the exhibits attached hereto, which include, 

without limitation the Term Sheet (as defined herein) attached hereto as Appendix A, as each may 

be amended, restated, supplemented, or otherwise modified from time to time in accordance with 

the terms hereof, the “Agreement”) dated as of the date set forth below on the signature page of 

the Settling Bondholder is entered into by and among: (i) the Puerto Rico Electric Power Authority 

(“PREPA”) through the Financial Oversight and Management Board for Puerto Rico as PREPA’s 

Title III representative (“FOMB”); and (ii) any holder of Bonds (as defined herein) that are not 

insured under a primary insurance policy or secondary insurance policy (“Uninsured Bonds”) that 

determines to become party to this Agreement in accordance with the terms hereof (each such 

person, a “Settling Bondholder” and collectively, the “Settling Bondholders”). This Agreement 

collectively refers to the FOMB and each Settling Bondholder as the “Parties” and each 

individually as a “Party.”

RECITALS

WHEREAS, PREPA is the issuer of power revenue bonds and power revenue refunding 

bonds (together, the “Bonds”) issued and outstanding pursuant to that certain Trust Agreement, 

dated as of January 1, 1974, as amended, amended and restated, supplemented, or otherwise 

modified from time to time (the “Trust Agreement”), between PREPA and U.S. Bank National 

Association as successor trustee (the “Trustee”). 

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Exhibit 1 Page 13 of 38
2

WHEREAS, on June 30, 2016, the Puerto Rico Oversight, Management, and Economic 

Stability Act was signed into law by the President of the United States (P.L. 114-187, 

“PROMESA”).

WHEREAS, PROMESA created FOMB with certain powers over the finances and 

restructuring process with respect to the Commonwealth of Puerto Rico and its instrumentalities 

as provided for in PROMESA, and FOMB has designated PREPA as a Covered Territorial 

Instrumentality (as defined in PROMESA).

WHEREAS, on July 2, 2017 (the “Petition Date”), FOMB filed a Title III petition on 

behalf of PREPA (the “Title III Case”) in the United States District Court for the District of Puerto 

Rico (the “Title III Court”).

WHEREAS, the FOMB is the PROMESA Title III representative of PREPA in the Title 

III Case pursuant to PROMESA section 315(b).

WHEREAS, on July 1, 2019, the FOMB filed a complaint and adversary proceeding 

against the Trustee styled The Financial Oversight and Management Board for Puerto Rico v. U.S. 

Bank National Association, Adv. Proc. No. 19-00391-LTS (as amended), currently pending in the 

Title III Court (the “Amended Lien & Recourse Challenge”).

WHEREAS, on December 16, 2022, the FOMB filed the (i) proposed Title III Plan of 

Adjustment of the Puerto Rico Electric Power Authority [Case No. 17-bk-04780-LTS, ECF No. 

3110] (as amended from time to time, the “Plan”), pursuant to which the FOMB proposes to adjust 

the debts of PREPA, and (ii) the corresponding proposed Disclosure Statement for the Title III 

Plan of Adjustment of the Puerto Rico Electric Power Authority [Case No. 17-bk-04780-LTS, ECF 

No. 3111] (the “Disclosure Statement”).

WHEREAS, consistent with the Plan and Disclosure Statement and this Agreement, the 

FOMB is offering to each holder of Uninsured Bonds the opportunity to have its claim for 

Uninsured Bonds classified in the class of Settling Bondholders’ claims and receive for its 

Uninsured Bond claims the treatment provided to that class under the Plan. Settling Bondholders 

will have the opportunity to vote to accept or reject the Plan upon receipt of a court-approved 

Disclosure Statement and balloting materials. If the Plan is confirmed, Settling Bondholders will 

receive the treatment provided to the Settling Bondholder pursuant to the Plan, with respect to each 

Settling Bondholder’s Uninsured Bonds, to be implemented in the manner as set forth in this 

Agreement.

NOW, THEREFORE, in consideration of the covenants herein, each Party, intending to 

be legally bound hereby, agrees as follows:

Section 1. Agreement Effective Date. This Agreement shall become effective and binding 

upon each Party immediately following the execution and delivery of the Settling Bondholder’s

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Exhibit 1 Page 14 of 38
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signature to this Agreement, via The Depository Trust Company’s (“DTC”) Automatic Tender 

Offer Program (“ATOP”) (the date of such delivery, the “Agreement Effective Date”).

Section 2. Settlement. In settlement of (i) the Parties’ respective asserted rights and claims as 

set forth in the Amended Lien & Recourse Challenge, (ii) all claims arising from a Settling 

Bondholder’s Uninsured Bonds and the Trust Agreement, including without limitation any 

claimed security interest, right to receive current payments or interest, and/or right to receive 

adequate protection payments (if any), and (iii) any objection of the Settling Bondholder to 

confirmation of the Plan or assertion of rights under PROMESA Title III, the Parties covenant that

(a) the Uninsured Bond claim of the Settling Bondholder shall be classified in the class of claims 

of “Settling Bondholders” under the Plan (i.e., Class 1 under the Plan, as it may be redesignated 

from time to time), and (b) the Plan, and each amendment, amendment and restatement, 

restatement, supplement, or modification thereto filed by the FOMB after the date hereof, and that 

becomes effective, shall, in every case, incorporate the treatment of the Settling Bondholder’s 

claims with respect to its Uninsured Bonds set forth on the term sheet attached hereto as 

Appendix A (the “Term Sheet”). For the avoidance of doubt, the Settling Bondholder shall retain 

the right to accept or reject the Plan upon receipt of a court-approved Disclosure Statement. 

Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them

in the Term Sheet.

Section 3. Settlement Offer Termination Date. The deadline for a holder of Uninsured Bonds 

to return its signature to this Agreement in accordance with the terms hereof and bind the FOMB 

to this Agreement shall be 5:00 p.m. Eastern Standard Time on February 24, 2023 (the 

“Participation Date”); provided that the FOMB reserves the right to extend the Participation Date 

in its sole discretion. All signatures received by the FOMB after the Participation Date shall be 

void, and there shall be no Agreement Effective Date with respect to the Uninsured Bonds 

represented by such signature; provided the FOMB may accept such signatures received after the 

Participation Date in its sole discretion and shall notify you within ten (10) business days of receipt 

of your signature as to whether FOMB is accepting your signature page or not.

Section 4. Exhibits Incorporated by Reference. Each of the exhibits and schedules attached 

hereto is expressly incorporated herein and made a part of this Agreement, and all references to 

this Agreement shall include the exhibits. 

Section 5. Covenants of the Parties.

5.01. Covenants of the FOMB. From and after the date hereof, provided this Agreement 

has not been terminated, the FOMB shall take, and use its reasonable best efforts to cause PREPA 

to take, all actions necessary to obtain, and shall not encourage any other person to, take any action 

which would, or would reasonably be expected to, impede or preclude, the approval of the 

Disclosure Statement and the entry of a confirmation order with respect to the Plan (the 

“Confirmation Order”) and the consummation, implementation, and administration of the Plan, 

including the execution and delivery of all definitive documents required to implement the Plan, 

including an indenture governing the New Bonds (the “Definitive Documents”), provided that the 

Disclosure Statement, the Plan (and its consummation, implementation, and administration), and 

the other Definitive Documents are consistent with the terms herein. Such actions shall include, 

but not be limited to: (i) prosecuting, in a timely manner, the approval of the Disclosure Statement 

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Exhibit 1 Page 15 of 38
4

and proposed confirmation schedule contemplating a confirmation hearing in or around July 2023

(or any other date set by the Court), and confirmation of the Plan; (ii) proposing a Confirmation 

Order consistent with the terms herein and in the Term Sheet; (iii) causing the effective date of the 

Plan (the “Plan Effective Date”) to occur on or before June 30, 2024; and (iv) refraining from 

directly or indirectly commencing or supporting (or continuing to prosecute) any action or 

proceeding, or asserting any claim or objection, against any of the Settling Bondholders 

challenging their asserted security, priority, rights, and claims as set forth in the pleadings filed in 

the Amended Lien & Recourse Challenge, but solely as it relates to the Settling Bondholders; 

provided, however, the FOMB shall be entitled to prosecute the Amended Lien & Recourse 

Challenge against any party other than the Settling Bondholders, including, without limitation, the 

Trustee and any successor trustee for the Bonds, and any final judgment against any such party 

shall not adversely affect the Parties’ rights under this Agreement.

5.02. Covenants of the Settling Bondholder. From and after the date hereof, provided 

this Agreement has not been terminated, the Settling Bondholder: (A) shall support, and not 

otherwise object to, (I) approval of the Disclosure Statement in accordance with section 1125 of 

the Bankruptcy Code, and (II) confirmation of the Plan in accordance with section 1129 of the 

Bankruptcy Code to the extent incorporated into PROMESA Title III and section 314 of 

PROMESA; provided, that a Settling Bondholder may vote to accept or reject, after receipt of a 

court-approved Disclosure Statement, the Plan, or abstain from voting, without such act, by itself, 

contravening the terms of this Agreement; (B) shall not commence, support (or continue to 

prosecute) and shall withdraw all its subpoenae, deposition notices, requests for production of 

documents, complaints, motions, and other requests for relief against PREPA or the FOMB,

including, without limitation, any joinders relating to the Amended Lien & Recourse Challenge; 

and (C) shall support, and otherwise not, nor encourage any other person to, take any action which 

would, or would reasonably be expected to, breach or be inconsistent with the terms herein, or 

impede or preclude, the administration of the Title III Case, the confirmation of the Plan, the entry 

of the Confirmation Order, and the consummation, implementation, and administration of the Plan 

including the execution and delivery of the Definitive Documents provided that the Disclosure 

Statement, the Confirmation Order, the Plan (and their consummation, implementation and 

administration) and the PREPA Definitive Documents are materially consistent with the terms 

herein.

5.03. Mutual Covenants of the Parties. Each of the Parties, severally and jointly, 

covenants that:

(a) Subject to the terms and conditions hereof, such Party shall support, and 

otherwise not encourage any other person to take any action which would, or would reasonably be 

expected to, breach or be inconsistent with the terms herein or impede or preclude the filing of the 

Plan, including any amended Plan, the administration of the Title III Case, the approval of the 

Disclosure Statement, the entry of the Confirmation Order and the consummation, implementation, 

and administration of the Plan, including the execution and delivery of the Definitive Documents; 

provided that such Disclosure Statement, Confirmation Order, and Plan (and its consummation, 

implementation, and administration) and the other Definitive Documents are materially consistent 

with the terms herein and the Plan; and provided further, that the Settling Bondholder’s right to 

vote to accept or reject the Plan is reserved.

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Exhibit 1 Page 16 of 38
5

(b) Notwithstanding any other provision herein, this Agreement is not and 

shall not be deemed to be an offer with respect to any securities or solicitation of votes for the 

acceptance or rejection of a plan of adjustment for purposes of PROMESA and its incorporated 

sections 1125 and 1126 of the Bankruptcy Code, or otherwise.

(c) Any such offer or solicitation will be made only in compliance with all 

applicable securities laws and provisions of PROMESA and the Bankruptcy Code provisions it 

incorporates, and will not be solicited until the Title III Court has approved the Disclosure 

Statement and related solicitation materials, and such Disclosure Statement and solicitation 

materials have been transmitted to parties entitled to receive same.

Section 6. Transfer of Claims and Interests.

(a) For the period commencing as of the Agreement Effective Date until 

the termination of this Agreement as to any Settling Bondholder pursuant to the terms hereof, such 

Settling Bondholder shall not sell, assign, transfer, or otherwise pledge or dispose of (“Transfer”) 

any Uninsured Bonds beneficially owned or controlled by such Settling Bondholder, or any 

participation, voting, consent, or direction rights related to such Settling Bondholder, or any 

replacement thereof identifiable by a unique CUSIP in accordance with Section 8, except such 

Transfer may be made (i) if the transferee is a Settling Bondholder at the time of the Transfer or 

(ii) if the transferee is not a Settling Bondholder at the time of the Transfer, such transferee (a 

transferee pursuant to this clause (ii) or the immediately preceding clause (i), a “Qualified 

Transferee”) delivers to the Information and Tabulation Agent, at or prior to the consummation of 

the Transfer, the joinder agreement (the “Joinder Agreement”) attached hereto as Appendix B, 

pursuant to which such transferee shall assume all rights and obligations of such Settling 

Bondholder transferor hereunder (and such transferee if not already a Settling Bondholder, shall 

also be a “Settling Bondholder” hereunder). To the extent a Transfer violates the provisions of 

this section, the Transfer shall be void ab initio and the applicable Uninsured Bonds and the 

Settling Bondholder attempting the Transfer of the Uninsured Bonds shall continue to remain 

subject to the terms of this Agreement. This Agreement shall in no way be construed to preclude 

a Settling Bondholder from acquiring additional Uninsured Bonds; provided that such Settling 

Bondholder will be subject to Section 6 of this Agreement and shall comply with Section 5.03

hereof with respect to such additional Uninsured Bonds.

(b) Notwithstanding anything contained in this Agreement to the contrary: 

(i) a Settling Bondholder may Transfer any right, title, or interest in the Uninsured Bonds or any 

security identifiable by a unique CUSIP for which Uninsured Bonds are exchanged in accordance 

with Section 8 to a Qualified Marketmaker (as defined below), acting in its capacity as a Qualified 

Marketmaker, without the requirement that such Qualified Marketmaker be or become a Settling 

Bondholder; provided that such Qualified Marketmaker subsequently Transfers such right, title, 

or interest in the Uninsured Bonds to a Settling Bondholder or a Qualified Transferee within the 

date that is the earlier of (A) thirty (30) days after such Qualified Marketmaker’s acquisition of 

such right, title, or interest and (B) ten (10) business days prior to any voting deadline on the Plan 

(the “Marketmaker Holding Period”); and (ii) to the extent that a Settling Bondholder is acting in 

its capacity as a Qualified Marketmaker, it may Transfer any right, title, or interest in the Uninsured 

Bonds that the Qualified Marketmaker acquires from a holder of the Uninsured Bonds that is not 

a Settling Bondholder without the requirement that the transferee be or become a Settling 

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Exhibit 1 Page 17 of 38
6

Bondholder. For the avoidance of doubt, upon expiration of the Marketmaker Holding Period, if 

the Qualified Marketmaker has not Transferred such right, title, or interest in the Uninsured Bonds 

to a Settling Bondholder or a Qualified Transferee, the Qualified Marketmaker shall be required 

to sign the Joinder Agreement, which Joinder Agreement shall be binding with respect to any 

Uninsured Bonds subject to this Settlement Agreement that are held by such Qualified Market 

maker in its capacity as a Qualified Marketmarker. Whether the Qualified Marketmaker signs a 

Joinder Agreement or not, upon expiration of the Marketmaker Holding Period, the Qualified 

Marketmaker (by accepting or otherwise participating in the Transfer of Uninsured Bonds subject 

to this Settlement Agreement) will be deemed to agree to refrain from voting the Uninsured Bonds 

on the Plan. 

(c) “Qualified Marketmaker” means an entity that: (i) holds itself out to the 

market as standing ready in the ordinary course of its business to purchase from customers and sell 

to customers debt securities such as the Uninsured Bonds or any security identifiable by a unique 

CUSIP for which Uninsured Bonds are exchanged in accordance with Section 8 or enter with 

customers into long and short positions in debt securities such as the Uninsured Bonds, in its 

capacity as a dealer or market maker in such Uninsured Bonds; (ii) is in fact regularly in the 

business of making a market in debt securities; and (iii) is registered with the Securities and 

Exchange Commission and Financial Institutions Regulatory Authority. 

(d) Any disclosures by any Settling Bondholder to any other Party of its 

holdings of Uninsured Bonds shall be treated as confidential information by such other Party 

unless such other Party receives such information through other means not subject to a duty of 

confidentiality.

(e) In furtherance of the foregoing, the FOMB shall consent to assignments 

of the Uninsured Bonds in accordance with this Section 6, as applicable. 

Section 7. Representations and Warranties.

7.01. Mutual Representations and Warranties. Each Party hereby, severally and not 

jointly, represents and warrants to the other Party(ies) that the following statements are true and 

correct as of the date hereof (or in the case of a Qualified Transferee that is not a Settling 

Bondholder as of the date hereof, the date such Qualified Transferee becomes a Settling 

Bondholder):

(a) such Party has the legal right, power, and authority to enter into this 

Agreement;

(b) such Party, as applicable, is duly organized and validly existing and in 

good standing under the laws of the jurisdiction of its organization with full power and authority 

to execute and deliver, and to perform and observe the terms and provisions of, this Agreement; 

and

(c) the execution, delivery, performance, and observance of this Agreement 

by such Party (i) has been duly authorized by all necessary action on the part of such Party, does 

not and will not conflict with, or result in a violation of, any law applicable to it, and does not 

require it to obtain any permit, consent, approval, order or authorization of, or provide notice to or 

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Exhibit 1 Page 18 of 38
7

make a filing with, any court, governmental or regulatory agency or authority or other person or 

entity that has not been obtained, provided or made, as applicable, (ii) except to the extent 

modified, stayed, or otherwise excused by PROMESA, (A) with respect to the FOMB, does not 

contravene, or constitute a default under, any provision of applicable law or regulation or of any 

agreement, judgment, injunction, order, decree, or other instrument binding on the FOMB, as 

applicable and (B) with respect to each Party, do not and will not violate, conflict with, or result 

in the breach of any provision of its organizational or governance documents and (iii) does not and 

will not result in any breach of, constitute a default (or event which with the giving of notice or 

lapse of time, or both, would become a default) under, require any consent under or give to others 

any rights of termination, amendment, acceleration, suspension, revocation or cancellation of, any 

note, bond, mortgage, indenture, contract, agreement, lease, sublease, license, permit, franchise, 

or other instrument or arrangement to which it is a party, which would materially adversely affect 

its ability to carry out its obligations under and otherwise observe this Agreement or cause the 

occurrence of a Termination Event (defined below).

7.02. Additional Representations of the Settling Bondholder. Each Settling Bondholder

represents, warrants, and covenants to the FOMB that the following statements are true, correct, 

and complete as of the date of this Agreement (or in the case of a Qualified Transferee that is not 

a Settling Bondholder as of the date hereof, the date such Qualified Transferee becomes a Settling 

Bondholder) (each of which is a continuing representation, warranty, and covenant): that it 

beneficially owns, controls, has investment management responsibility for accounts that 

beneficially own or hold such Uninsured Bonds in the principal amounts set forth on its respective 

signature page hereto or Joinder Agreement (as applicable), which it would be entitled to vote in 

a plan solicitation as the holder of the claim with respect to such Bonds under section 1126 of the 

Bankruptcy Code, and that it has not sold, assigned, transferred, participated, or otherwise pledged 

such Uninsured Bonds, or any voting, consent, or direction rights related to such Uninsured Bonds, 

to any other person or entity, that would prevent or adversely affect in any way such Settling 

Bondholder’s performance of its obligations contained in this Agreement at the time such 

obligations are required to be performed, in each case, except as permitted by Section 6 of this 

Agreement.

Section 8. Assignment of Alternative Identifying CUSIPs. The FOMB covenants to employ 

its reasonable efforts to cause the assignment of alternative identifying CUSIPs to track beneficial 

interests in Uninsured Bonds that become subject to the Agreement. Uninsured Bonds with such 

alternative identifying CUSIPs shall remain Uninsured Bonds for all purposes of this Agreement 

and any holder thereof shall be bound by all applicable provisions of this Agreement. If this 

Agreement terminates under Section 10 prior to the Plan Effective Date, the FOMB covenants to 

employ its reasonable efforts to cause the reassignment of the original CUSIPs of Uninsured Bonds 

that had been subject to the Agreement.

Section 9. Amendments and Waivers. The terms and conditions of this Agreement, including 

any exhibits, annexes, or schedules to this Agreement, may not be waived, modified, amended, or 

supplemented without the written consents of (a) the FOMB and (b) the Settling Bondholder.

Section 10. Termination.

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Exhibit 1 Page 19 of 38
8

10.01. Mutual Consent. This Agreement may be terminated by the mutual written consent 

of (a) the FOMB and (b) the Settling Bondholder.

10.02. Termination Events.

(a) This Agreement may be terminated by (x) the FOMB or (y) the Settling 

Bondholder, in each case upon five (5) business days’ prior written notice delivered to the other 

aforementioned Parties after the occurrence of any of the following events (each, a “Termination 

Event”); provided, however, that this Agreement may be terminated (I) solely by the Settling 

Bondholder (and not the FOMB) upon the occurrence of a Termination Event set forth in clauses 

(ii) and (iii), below, (II) solely by the FOMB (and not the Settling Bondholder) upon the occurrence 

of a Termination Event set forth in clauses, (iv), (v), (vi), (vii), (viii), (ix), (x), and (xi) below, and 

(III) solely by a non-breaching Party with respect to a breaching Party or Parties upon the 

occurrence of the Termination Event set forth in clause (i) below:

(i) following the delivery of written notice 

thereof by a non-breaching Party, the continuation of a material breach by any 

of the Parties of any of its obligations, representations, warranties, covenants, 

or commitments set forth in this Agreement that is either unable to be cured or 

is not cured within five (5) business days following the delivery of such notice; 

(ii) the FOMB enters into, or formally supports, 

a proposed transaction, disclosure statement, plan of adjustment, legislation, 

confirmation order, or definitive documentation in connection therewith (by 

amendment or otherwise) that would prevent or materially impair the Settling 

Bondholder’s treatment on account of its claim consistent with the terms of this 

Agreement; 

(iii) the formal determination by the FOMB 

(A) not to proceed with the transactions materially consistent with the economic 

treatment to be provided to the Settling Bondholder contemplated by this 

Agreement or (B) to proceed with a transaction that would be materially 

inconsistent with the economic treatment to be provided to the Settling 

Bondholder contemplated by this Agreement;

(iv) the Plan Effective Date does not occur (or 

cannot occur) on or before June 30, 2024; 

(v) the Puerto Rico Energy Bureau (“PREB”) 

fails or refuses to provide any required regulatory approval of the Legacy 

Charge and the Title III Court or court of competent jurisdiction does not 

require or deem PREB to provide such approval within sufficient time to allow 

the Plan Effective Date to occur on or before June 30, 2024;

(vi) the Confirmation Order is reversed, 

dismissed, or vacated and the Title III Court does not within one hundred and 

eighty (180) days enter a revised order confirming the Plan reasonably 

acceptable to the FOMB;

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9

(vii) the Title III Court or other court of competent 

jurisdiction determines (A) the Oversight Board cannot separately classify the 

claims of the Settling Bondholders from one or more other classes of Bond 

claims in the Plan, (B) the Oversight Board must provide the Settling 

Bondholders treatment materially and adversely different than the treatment 

provided for in the Plan and consistent with this Agreement, or (C) the 

Oversight Board must provide substantially the same consideration to the NonSettling Bondholders as provided to the Settling Bondholders pursuant to the 

terms of the Plan and consistent with this Agreement;

(viii) a Settling Bondholder objects to confirmation 

of a plan of adjustment that complies with the Agreement;

(ix) confirmation of a plan of adjustment that 

complies with this Agreement is denied, or to confirm the Plan the Court 

requires the Oversight Board to further amend the Plan with respect to any 

provision set forth in the Settlement Summary, and the Oversight Board 

determines, in its sole and absolute discretion, not to make such amendment;

(x) the Settling Bondholder (a) directly or 

indirectly, supports, continues, or attempts to continue, claims, causes of action, 

and counterclaims of the Trustee and other co-defendants in the Amended Lien 

& Recourse Challenge against the FOMB or PREPA, or any related action or 

appeal thereto, (b) seeks relief from the automatic stay to pursue any rights or 

remedies under the Trust Agreement or Uninsured Bonds, (c) moves to dismiss 

the Title III Case, or (d) seeks any other relief materially adverse to PREPA or 

the FOMB; 

(xi) FOMB determines the Agreement will 

impede or have an adverse impact on PREPA’s operational restructuring of its 

generation assets;

(xii) appointment of a receiver for PREPA;

(xiii) the Title III Court enters an order 

(A) granting any relief that would impair the Parties’ ability to perform their 

respective obligations under this Agreement in any material respect, including, 

without limitation, denying confirmation of the Plan or (B) that is materially 

inconsistent with the Term Sheet; or 

(xiv) the Title III Court grants either (A) the 

Motion of the Ad Hoc Group of PREPA Bondholders, Assured Guaranty Corp., 

Assured Guaranty Municipal Corp., National Public Finance Guarantee 

Corporation, and Syncora Guarantee, Inc. to Dismiss PREPA’s Title III Case, 

or for Relief from the Automatic Stay to Enforce Their Right to a Receiver 

(Docket Entry No. 22291 in Case No. 17-3283 and Docket Entry No. 2973 in 

Case No. 17-4780) or (B) the Motion of the Ad Hoc Group of PREPA 

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Bondholders, Assured Guaranty Corp., Assured Guaranty Municipal Corp., 

National Public Finance Guarantee Corporation, and Syncora Guarantee, Inc. 

for Authorization to File a Combined Motion to Dismiss PREPA’s Title III Case 

and Alternative Request for Relief from the Automatic Stay (Docket Entry No. 

2971 in Case No. 17-4780).

(b) This Agreement shall automatically terminate on the Plan Effective 

Date.

(c) The date on which this Agreement is terminated in accordance with the 

provisions of Section 10.01, Section 10.02(a), and Section 1.01(b), shall be referred to as the 

“Termination Date”. On the Termination Date, all provisions of this Agreement shall terminate, 

except as otherwise provided in Section 10.03 of this Agreement, unless the FOMB and the 

Settling Bondholder waive, in writing, the occurrence of the Termination Event giving rise to the 

occurrence of such Termination Date. 

(d) If at any time a Settling Bondholder is no longer the beneficial owner of 

any Uninsured Bonds subject to this Agreement as a result of a Transfer that complies with 

Section 6 hereof, then this Agreement shall terminate solely as to such Settling Bondholder (but 

shall remain in effect with respect to the applicable Qualified Transferee), and such Settling 

Bondholder shall no longer be a Party hereto (i) unless such Settling Bondholder reacquires

Uninsured Bonds and (ii) until such Settling Bondholder subsequently becomes a beneficial owner 

of any Uninsured Bonds whereupon it will automatically be deemed to be a Settling Bondholder

under this Agreement. 

(e) No Party may terminate this Agreement upon a Termination Event if 

such Termination Event is the result of such Party unreasonably failing to perform or comply in 

any material respect with the terms and conditions of this Agreement; provided, however, that 

nothing in this Section 10 shall relieve any Party of liability for any breach or non-performance of 

this Agreement occurring prior to the Termination Date.

10.03. Obligations of the FOMB Surviving Termination. From and after the Termination 

Date, the FOMB covenants to employ its reasonable efforts to cause the reassignment of the 

original CUSIPs of Uninsured Bonds that had been subject to this Agreement.

Section 11. Miscellaneous.

11.01. Entire Agreement. This Agreement constitutes the entire agreement among the 

Parties with respect to the settlement restructuring process contemplated herein and supersedes all 

prior acts and agreements, oral, or written, among the Parties with respect thereto.

11.02. Headings. The headings of all sections of this Agreement are inserted solely for 

the convenience of reference and are not a part of and are not intended to govern, limit, or aid in 

the construction or interpretation of any term or provision hereof.

11.03. GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF 

FORUM. THIS AGREEMENT IS TO BE GOVERNED BY AND CONSTRUED IN 

ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO 

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CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE, WITHOUT GIVING 

EFFECT TO ANY CONFLICT OF LAWS PRINCIPLES THEREOF THAT WOULD RESULT 

IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION. Each Party shall 

bring any action or proceeding in respect of any claim arising out of or related to this Agreement 

in the Title III Court (or court of proper appellate jurisdiction) (the “Chosen Court”), and solely in 

connection with claims arising under this Agreement: (a) irrevocably submits to the personal 

jurisdiction of the Chosen Court; (b) waives any objection to laying venue in any such action or 

proceeding in the Chosen Court; and (c) waives any objection that the Chosen Court is an 

inconvenient forum or does not have jurisdiction over any Party hereto. If the Title III Court 

determines it lacks subject matter jurisdiction and the determination becomes final and no longer 

subject to appeal, the action shall be brought in the United States District Court for the Southern 

District of New York if it has subject matter jurisdiction, and otherwise brought in the New York 

Supreme Court in Manhattan. 

11.04. Trial by Jury Waiver. EACH PARTY HERETO IRREVOCABLY WAIVES ANY 

AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF 

OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED 

HEREBY.

11.05. Execution of Agreement. This Agreement may be executed and delivered in any 

number of counterparts and by way of electronic signature and delivery, each such counterpart, 

when executed and delivered, shall be deemed an original, and all of which together shall constitute 

the same agreement. Except as expressly provided in this Agreement, each individual executing 

this Agreement on behalf of a Party represents by his or her signature that he or she has been duly 

authorized and empowered to execute and deliver this Agreement on behalf of said Party.

11.06. Rules of Construction. When a reference is made in this Agreement to a section or 

exhibit, such reference shall be to a section or exhibit, respectively, of or attached to this 

Agreement unless otherwise indicated. Unless the context of this Agreement otherwise requires, 

(a) words using the singular or plural number also include the plural or singular number, 

respectively, (b) the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to 

this entire Agreement, (c) the words “include,” “includes” and “including” when used herein shall 

be deemed in each case to be followed by the words “without limitation,” and (d) the word “or” 

shall not be exclusive and shall be read to mean “and/or.” “Writing,” “written” and comparable 

terms refer to printing, typing and other means of reproducing words (including electronic media) 

in a visible form, and any requirement that any notice, consent or other information shall be 

provided “in writing” shall include email. Any reference to “business day” means any day, other 

than a Saturday, a Sunday or any other day on which banks located in New York, New York are 

closed for business as a result of federal, state or local holiday and any other reference to day 

means a calendar day. 

11.07. Successors and Assigns; No Third Party Beneficiaries. This Agreement is intended 

to bind and inure to the benefit of the Parties and their respective successors and permitted actual 

assigns, as applicable. There are no third party beneficiaries under this Agreement, and the rights 

or obligations of any Party under this Agreement may not be assigned, delegated, or transferred to 

any other person or entity, except as permitted herein.

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11.08. Notices. All notices hereunder shall be deemed given if in writing and delivered 

by electronic mail, courier, or registered or certified mail (return receipt requested) (and if by any 

method other than electronic mail, then with a copy by electronic mail) to the following addresses 

(or at such other addresses as shall be specified by like notice):

if to the FOMB, to:

Proskauer Rose LLP

11 Times Square 

New York, NY 10036

Attention: Martin J. Bienenstock, Paul V. Possinger, Ehud Barak, 

and Joshua A. Esses

Email: mbienenstock@proskauer.com;

ppossinger@proskauer.com; ebarak@proskauer.com; 

jesses@prosakuer.com

if to the Settling Bondholder(s) set forth on the signature pages below, to the 

notice addresses set forth on such pages:

or such other address as may have been furnished by a Party to each of the other Parties by notice 

given in accordance with the requirements set forth above. Any notice given by delivery, mail 

(electronic or otherwise), or courier shall be effective when received. 

11.09. Independent Analysis. Each Party hereby confirms that its decision to execute this 

Agreement has been based upon its independent assessment of documents and information 

available to it, as it has deemed appropriate.

11.10. Waiver. No Party shall be deemed to have waived any rights as a result of its entry 

into this Agreement, and, if this Agreement is terminated for any reason, the Parties fully reserve 

any and all of their rights.

11.11. Relationship Among Parties. Notwithstanding anything herein to the contrary: 

(a) the agreements, representations, warranties, liabilities, duties, and obligations of the Parties 

under this Agreement are, in all respects, several and not joint and several; (b) no Party shall have 

any responsibility by virtue of this Agreement for any trading by any other unaffiliated entity; 

(c) no prior history, pattern, or practice of sharing confidences among or between the Parties shall 

in any way affect or negate this Agreement; (d) the Parties hereto acknowledge this Agreement 

does not constitute an agreement, arrangement or understanding with respect to acting together for 

the purpose of acquiring, holding, voting, or disposing of any securities of PREPA and the Parties 

do not constitute a “group” within the meaning of Rule 13d-5 under the Securities Exchange Act 

of 1934, as amended; (e) none of the Parties shall have any fiduciary duty, any duty of trust or 

confidence in any form, or other duties or responsibilities in any kind or form to each other; and 

(f) no action taken by any Party pursuant to this Agreement shall be deemed to constitute or to 

create a presumption by any of the Parties that the Parties are in any way acting in concert or as 

such a “group.” 

11.12. Specific Performance. Each of the Parties acknowledges that money damages are 

an insufficient remedy for any breach of this Agreement by any Party and each non-breaching 

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Party shall be entitled to seek specific performance and injunctive or other equitable relief as a 

remedy of any such breach of this Agreement, including, without limitation, an order of the Title 

III Court or such other court of competent jurisdiction requiring, in accordance with applicable 

law, any Party to comply promptly with any of its obligations hereunder. Notwithstanding 

anything contained in this Agreement to the contrary, specific performance and injunctive or other 

similar relief and the right to terminate this Agreement in accordance with the terms and provisions 

hereof shall be the sole and exclusive remedies for any breach of this Agreement by any Party (or 

any other person) and no Party (or any other person) shall be entitled to monetary damages for any 

breach of any provision of this Agreement.

11.13. Severability and Construction. If any provision of this Agreement shall be held by 

a court of competent jurisdiction to be illegal, invalid, or unenforceable, in whole or in part, the 

Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of 

the Parties as closely as possible in a reasonably acceptable manner in order that the transactions 

contemplated hereby are consummated as originally contemplated to the greatest extent possible 

if the new agreement provides each Party with an economic outcome not materially adverse to its 

original economic outcome. If the same economics are not reconstructed without material change, 

this Agreement shall terminate with each Party restored to its rights upon entering into this 

Agreement. 

11.14. Public Disclosure. Any public filing of this Agreement, with the Title III Court or 

otherwise, that includes executed signature pages to this Agreement shall include such signature 

pages only in redacted form with respect to the Uninsured Bonds held by the Settling Bondholder, 

unless otherwise required by the Title III Court or applicable law. 

[Remainder of page intentionally left blank.]

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Appendix A to Settlement Agreement

Term Sheet

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TERM SHEET

This Term Sheet does not address all material terms that would be required in definitive documents 

and in order to consummate the transactions set forth in this Term Sheet. Such definitive 

documents, including the New Master Indenture (as defined in the Plan) shall be consistent with 

the Settlement Agreement, this Term Sheet, and the Plan. Nothing in this Term Sheet shall 

constitute an admission or representation of any fact or circumstance or an admission of any 

liability or waiver of any right or claim.

Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in 

the Plan Support and Settlement Agreement to which this Term Sheet is annexed (the 

“Agreement”). 

CLAIM 

ALLOWANCE AND 

CLASSIFICATION

▪ Each claim of a Settling Bondholder shall be deemed allowed (not 

subject to challenge, objection, or revocation) in the aggregate 

amount equal to the principal amount of the Bonds held by such 

holder plus interest accrued and unpaid on such Bonds through the 

Petition Date (collectively, the “Settling Bondholder Prepetition 

Claim Amount”) and will collectively be treated as one class of 

claims, distinct from all other classes of claims, including the classes 

of Bonds held by holders that are not Settling Bondholders.

CONSIDERATION 

TO BE RECEIVED 

BY SETTLING 

BONDHOLDERS IF 

THE DISCLOSURE 

STATEMENT IS 

APPROVED AND 

PLAN IS 

CONFIRMED

▪ By signing the Agreement, the Settling Bondholder elects and agrees 

to be classified in the class of “Settling Bondholders” under the Plan.

▪ On behalf of its allowed Uninsured Bond claim, each Settling 

Bondholder shall receive:

- Such Settling Bondholder’s pro rata share of funds 

deposited in the Sinking Fund,1 with respect to such 

Settling Bondholder’s Uninsured Bonds;

- Series B Bonds (defined below), including Series B-1 

Bonds and/or Series B-2 Bonds (each defined below) in the 

Oversight Board’s sole discretion, in the face amount equal 

to fifty percent (50.0%) times the amount of such Settling 

Bondholder’s allowed claim minus the amount distributed 

to such Settling Bondholder from the Sinking Fund;

- If the FOMB and PREPA prevail in, or agree to a settlement 

of, the Amended Lien & Recourse Challenge, and as a 

result there exist Series B Bonds to be issued under the Plan 

available for distribution in excess of Series B Bonds 

allocated for initial treatment of claims, the Settling 

Bondholder will receive, after (i) the trust established for 

holders of general unsecured claims against PREPA 

receives the next distribution of New Bonds in a face 

1

“Sinking Fund” means the deposit account(s) held by the Trustee which are subject to a perfected security interest 

in favor of the Trustee, for the benefit of the holders of the Bonds.

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2

amount sufficient to provide general unsecured claims 50% 

of the estimated value of their claims, and (ii) the trust 

established pursuant to the PREPA Plan to make payments 

to the PREPA pension system (for the benefit of PREPA 

pension beneficiaries) receives 20% of the Series B Bonds 

remaining after the distributions of Series B Bonds in (i), 

(A) 40% of their pro rata share of remaining Series B 

Bonds available, and (B) if and only if the holders of 

general unsecured claims against PREPA and Fuel Line 

Lenders2receive New Bonds in a face amount sufficient to 

pay them in full, up to the remaining 60% of their pro rata 

share of New Bonds, but not more New Bonds than would 

cause their allowed Uninsured Bond claim to be paid in 

full.

- Such Settling Bondholder’s pro rata share of CVI3along 

with all other creditors of PREPA entitled to receive CVI

pursuant to the Plan, with the Settling Bondholder’s pro 

rata share being computed based on the amount of its 

allowed claim not satisfied by the foregoing consideration.

NEW BONDS ▪ Other than cash consideration paid on the Plan Effective Date, 

reorganized PREPA (“Reorganized PREPA”) shall issue on the Plan 

Effective Date to PREPA’s creditors only Series A Bonds (defined 

below) and Series B Bonds (defined below). 

LEGACY CHARGE ▪ “Legacy Charge” means a hybrid connection charge and volumetric 

charge to be added to PREPA’s rate to fund payment of the New 

Bonds.

REMAINING 

LEGACY CHARGE

▪ “Remaining Legacy Charge” means the Legacy Charge, from and after 

the date on which the New Bonds are defeased and until the CVI 

maturity date.

SERIES ABONDS ▪ “Series A Bonds”, which will be issued only to the Fuel Line Lenders, 

will have first priority of principal repayment following payment of 

accrued interest on all outstanding New Bonds.

▪ If unpaid at the Series A Bonds’ final maturity, the Series A Bonds will 

remain outstanding until paid in full in cash, but will cease accruing 

interest as of the Series A Bonds’ final maturity.

2

“Fuel Lien Lenders” means the lenders of the principal amount of loans and other financial accommodations 

(including interest accrued and unpaid through the Petition Date) pursuant to (i) the Credit Agreement dated May 4, 

2012, by and among PREPA, Scotiabank de Puerto Rico, and certain lenders (as amended, amended and restated, 

supplemented or otherwise modified from time to time) and (ii) the Trade Finance Facility Agreement, dated July 20, 

2012, by and between PREPA and Citibank, N.A. (as amended, amended and restated, supplemented or otherwise 

modified from time to time), and the loans and advances issued under each).

3

“CVI” means a contingent value instrument to be issued by Reorganized PREPA with a maturity date of thirty-five 

(35) years after the Plan Effective Date, payable from the revenues attributable to the Remaining Legacy Charge from 

and after the date on which all Series B Bonds have been indefeasibly paid in full in cash.

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SERIES B BONDS ▪ “Series B Bonds,” consisting of the “Series B-1 Bonds” and the 

“Series B-2 Bonds”, the primary terms of which are described below

(and, together with the Series A Bonds, the “New Bonds”), shall be 

distributed to (a) Settling Bondholders as described in the section of 

this Term Sheet titled “Consideration to Be Received by Settling 

Bondholders” and (b) other creditors of PREPA.

▪ No principal shall be paid on the Series B Bonds until the Series A 

Bonds have been paid in full in cash. Thereafter, Series B Bonds shall 

receive 100% of the Legacy Charge revenues, in accordance with the 

Payment Waterfall, which shall be applied first to interest due and 

owing, and second to principal. 

▪ If unpaid at the Series B Bonds’ final maturity, the Series B Bonds will 

remain outstanding until paid in full in cash, but will cease accruing 

interest as of the Series B Bonds’ final maturity.

FINAL MATURITY ▪ Series A Bonds: fifteen (15) year stated final maturity4(five (5) year 

expected repayment; three (3) year expected weighted average life).

▪ Series B-1 Bonds: fifty (50) year stated final maturity (thirty-four (34) 

year expected repayment); (21.81 year expected weighted average 

life).

▪ Series B-2 Bonds: fifty (50) year stated final maturity (thirty-four (35) 

year expected repayment); (34.51 year expected weighted average 

life).

Expected repayment periods are based on PREPA fiscal plan demand, 

customer data, and proposed rates, subject to the Payment Waterfall 

(defined below). 

COUPON ▪ Series A Bonds: 6.00% cash interest; senior to Series B Bonds

▪ Series B-1 Bonds: 6.00% cash interest; senior to Series B-2 Bonds

▪ Series B-2 Bonds: convertible capital appreciation bonds, bearing 

interest at a rate of six and seventy-five one-hundredths percent 

(6.75%) per annum, accreting annually until July 1, 2028, at which 

point the Series B-2 Bonds shall convert to paying interest semiannually

CALL 

PROTECTION

▪ Series A Bonds: Callable after ten (10) years at par

▪ Series B Bonds: Callable after ten (10) years at par plus accreted 

value, if any

SECURITY ▪ The New Bonds shall be secured by, and paid solely from, 

Reorganized PREPA’s Net Revenues,5and the right to receive such Net 

4 Subject to modification based on agreed upon covenants and Legacy Charge, to be negotiated among the FOMB and 

the Fuel Line Lenders (defined below). 

5

“Net Revenues” means Revenues (defined below) minus Operating Expenses.

“Revenues” means all moneys received by Reorganized PREPA, including the income derived by Reorganized 

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4

Revenues, up to the amount of the Legacy Charge revenues, in 

accordance with the Payment Waterfall.

ACCOUNTS AND 

PAYMENT 

WATERFALL

▪ All Revenues shall be deposited in the general fund held by 

Reorganized PREPA.

▪ Reorganized PREPA shall apply or transfer, as applicable, Revenues in 

the amounts and in the order of priority set forth in the New Master 

Indenture (the “Payment Waterfall”); provided that the Payment 

Waterfall set forth in the New Master Indenture shall provide that 

Revenues will be (i) first, applied by Reorganized PREPA to the 

payment of Operating Expenses, (ii) second, transferred by 

Reorganized PREPA to the New Master Trustee for the payment of the 

New Master Trustee’s fees and expenses not to exceed one hundred 

thousand dollars ($100,000) per year, and (iii) third, transferred to the 

New Master Trustee for deposit to the credit of the Debt Service Fund 

in an amount sufficient to pay debt service on all outstanding New 

Bonds, up to the amount of the Legacy Charge revenues and, from and 

after the New Bond are defeased and until the CVI maturity date, up to 

the amount of the Remaining Legacy Charge revenues. 

DEBT SERVICE 

FUND 

▪ From and after the Plan Effective Date, until the New Bonds, 

refunding Bonds, and/or CVI have been paid or satisfied in full in 

accordance with their terms, Reorganized PREPA shall deposit, in 

accordance with the Payment Waterfall, Net Revenues up to the 

amount of the Legacy Charge revenues with respect to the New Bonds 

and up to the amount of the Remaining Legacy Charge revenues with 

respect to the CVI to the credit of the Debt Service Fund.

6

 

▪ Such monies deposited in the Debt Service Fund shall be applied, to 

the extent available, as follows:

- New Bonds

o First, to the payment of stated interest due and 

payable on the New Bonds;

o Second, to the payment of principal on the Series A 

Bonds and any refunding Bonds issued to refund the 

Series A Bonds until repaid indefeasibly in full in 

cash or otherwise deemed not to be outstanding in 

accordance with the terms of the New Master 

Indenture; and 

PREPA from the sale of electricity generated or distributed, including, but not limited to, the Legacy Charge, any 

proceeds of use and occupancy insurance or any part thereof, and income from investments made by Reorganized 

PREPA; provided, however, that all funds from any federal or Commonwealth government grants, governmental 

appropriations, or government loans shall be deemed to not be Revenues for purposes of this definition and the New 

Master Indenture (as defined in the Plan).

6

“Debt Service Fund” means the fund held by the New Master Trustee into which Reorganized PREPA shall deposit 

Net Revenues in accordance with the Payment Waterfall.

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o Third, to the payment of principal on the Series B 

Bonds and any refunding Bonds (other than the 

refunding bonds described in Second above) until 

repaid indefeasibly in full in cash or otherwise 

deemed not to be outstanding in accordance with 

the terms of the New Master Indenture.

- CVI

o Then, to the payment of the CVI.

NO RATE 

COVENANT

▪ After the Series A Bonds have been paid in full, the Series B Bonds 

shall not have the benefit of any interest rate covenant or ability to 

initiate a rate case before PREB or any other proceeding to compel 

PREB to implement an increase in the Legacy Charge sufficient to 

repay interest due and payable on the New Bonds in the succeeding 

fiscal year, including, if, in any given year, the Legacy Charge 

revenues deposited in the Debt Service Fund for the New Bonds are 

insufficient to satisfy the interest due and owing on the New Bonds 

that fiscal year.

PAYMENT 

DEFAULT

▪ There shall be no event of default on the New Bonds for failure to pay 

scheduled debt service prior to the final maturity, as applicable, so long 

as Reorganized PREPA charges and employs its reasonable best efforts 

to collect revenues generated by the Legacy Charge, and the full 

amount collected under the Legacy Charge is deposited into the Debt 

Service Fund for the New Bonds in accordance with the Payment 

Waterfall.

REMEDIES ▪ Upon the occurrence of an event of default, the New Bond trustee’s 

sole remedies shall be to seek enforcement of Reorganized PREPA’s 

obligation to take reasonable measures to collect revenues generated 

by the Legacy Charge and deposit such monies received into the Debt 

Service Fund for the new Bonds in accordance with the Payment 

Waterfall. 

▪ The Plan and indenture for the New Bonds shall provide the “Right to 

Receivership Upon Default,” codified at 22 L.P.R.A. § 207, are 

preempted as inconsistent with PROMESA. There shall be no right of 

acceleration under the New Bonds other than an acceleration in 

connection with an insolvency proceeding (including under Title III of 

PROMESA).

FEDERALLYDECLARED 

DISASTERS 

▪ In the event of a federally-declared disaster as a result of a storm or 

other catastrophic event that disrupts Reorganized PREPA’s operations 

such that Reorganized PREPA cannot collect Legacy Charge revenue 

necessary to cover Operating Expenses and the debt service payable on 

the New Bonds for a given fiscal year, Reorganized PREPA may elect, 

in its sole discretion, to defer debt service on up to two (2) consecutive 

semi-annual debt service payments.

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6

▪ For the avoidance of doubt, if Reorganized PREPA exercises such 

election, interest on the New Bonds will continue to accrete until paid. 

All deferred principal and interest related to such New Bonds impacted 

by such election shall be paid on or before the earlier of the respective 

New Bonds’ final maturity or five (5) years after the end of such debt 

service deferral period.

DEFINITIVE 

DOCUMENTATION

▪ The New Bonds shall be documented under an indenture or trust 

agreement on the terms set forth in this Term Sheet and otherwise on 

terms customary for transactions of this type.

RELEASE ▪ The Parties shall release each other to the maximum extent permitted 

by law. At the request of the FOMB, the Settling Bondholder shall 

release any other party in interest that may be liable on account of the 

Uninsured Bonds.

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Exhibit 1 Page 32 of 38
Appendix B to Settlement Agreement

Form of Joinder

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FORM OF JOINDER AGREEMENT

(TO BE EXECUTED BY THE TRANSFEREE PRIOR TO ANY TRANSFER IN 

CONNECTION WITH THE UNINSURED BONDS ALTERNATIVE IDENTIFYING 

CUSIPS FOLLOWING THE AGREEMENT EFFECTIVE DATE)1

This Joinder Agreement (this “Joinder Agreement”) to the Settlement Agreement (as 

amended, supplemented, or otherwise modified from time to time, the “Agreement”), dated as of 

the Agreement Effective Date by and among: (i) the Financial Oversight and Management Board 

for Puerto Rico (“FOMB”), as Title III representative of the Puerto Rico Electric Power Authority 

(“PREPA”), and (ii) the Settling Bondholder, is executed and delivered by 

[____________________________________________] (the “Joining Settling Bondholder”) as 

of _________, 202_. Each capitalized term used herein but not defined herein shall have the 

meaning set forth in the Agreement. 

1. Agreement to be Bound. The Joining Settling Bondholder hereby agrees to 

be bound by all of the terms of the Agreement, including that the Joining Settling Bondholder shall 

assume all rights and obligations of a Settling Bondholder under the Agreement. The Joining 

Settling Bondholder shall hereafter be deemed to be a “Settling Bondholder” and a Party for all 

purposes under the Agreement, including for the avoidance of doubt with respect to any Uninsured 

Bonds held by the Joining Settling Bondholder and subject to a separate plan support agreement 

with the FOMB as of the date of this Joinder Agreement.

2. Representations and Warranties. With respect to the aggregate principal 

amount of Uninsured Bonds held by the Settling Bondholder, including upon consummation of 

Transfer of Uninsured Bonds to the Joining Settling Bondholder, the Joining Settling Bondholder

hereby makes, as of the date hereof, the representations and warranties of the Settling Bondholder

set forth in Section 7.01 and Section 7.02 of the Agreement to each of the other Parties to the 

Agreement.

3. Nominees/custodians. If this Joinder Agreement is executed by a 

nominee/custodian on behalf of a Settling Bondholder, the nominee/custodian hereby certifies that 

(i) this Joinder Agreement is executed and delivered by the entity detailed below on behalf of its 

client, the beneficial owner of the Uninsured Bonds listed below, (ii) this signature page delivered 

to Kroll Restructuring Administration LLC (acting as Information and Tabulation Agent) by the 

entity detailed below contains a true and accurate schedule of the Uninsured Bonds that are the 

property of beneficial owners who have delivered their instruction to join the Agreement to the 

undersigned nominee/custodian, (iii) the undersigned nominee/custodian is the holder, through a 

position held at a securities depository, or in street name, of the Uninsured Bonds set forth in such 

signature page, and (iv) the undersigned has the authority to act on behalf of such beneficial owners 

of Uninsured Bonds.

1 For the avoidance of doubt, if carrying out a Transfer, a holder of Uninsured Bonds must ensure the transferee is 

already a Settling Bondholder or must provide an executed joinder to the Information and Tabulation Agent in 

accordance with the instructions provided in this Appendix B. 

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4. Governing Law. Section 11.03 of the Agreement is incorporated by 

reference as if set forth fully herein, except that any references to “Agreement” shall be replaced 

with references to Joinder Agreement. 

* * * * *

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the Joining Settling Bondholder has caused this Joinder 

Agreement to be executed as of the date set forth above. 

[NAME OF JOINING SETTLING 

BONDHOLDER (TRANSFEREE)]

By: 

Name: 

Title: 

Address:

Attention:

Email: 

Please list the principal amount of Uninsured Bonds (Alternative Identifying CUSIPs) 

beneficially owned by the Joining Settling Bondholder, or beneficially owned by accounts for 

which the Joining Settling Bondholder has investment management responsibility, which it 

asserts it would be entitled to vote on in a plan solicitation: $___________ (total)

Alternative 

Identifying 

CUSIPs 

Principal

Amount 

Participating 

in the 

Joinder

DTC 

Nominee 

Name of 

Transferee

DTC 

Nominee 

Number of 

Transferee

Email 

Address for 

DTC 

Nominee 

Contact

DELIVERY

Please deliver a copy of the Joinder Agreement along with this signature page to the 

Information and Tabulation Agent via their E-Portal system. In order to facilitate this 

delivery, please coordinate with the Settling Bondholder and contact the Information and 

Tabulation Agent by e-mail at puertoricoballots@ra.kroll.com to request revisions to the 

electronic submission of the Settlement Agreement associate with such Settling 

Bondholder indicating where to upload its Joinder Agreement to complete the transfer..

Please note: Delivery of this Joinder Agreement in a way other than as set out above will not 

constitute valid consent to the Agreement. Delivery of this Joinder Agreement to PREPA or 

any other person other than the Information and Tabulation Agent, whether or not such person 

is party to the Agreement, does not constitute delivery to the Information and Tabulation Agent.

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EXHIBIT C

[Settlement Agreement Consent Form to be submitted via Kroll’s E-Portal]

Beneficial 

Holder 

Name

CUSIP Principal 

Amount 

Participating 

in the Joinder

DTC ATOP 

Confirmation 

Number (one 

DTC ATOP 

Confirmation 

Number -VOI 

- per CUSIP)

DTC 

Nominee 

Name

DTC 

Nominee 

Number

Email 

Address 

for DTC 

Nominee 

Contact

In addition to completing the above form via Kroll’s E-Portal System, beneficial owners or 

their nominee (if permitted to sign on behalf of the beneficial owner) must provide a signature 

page to the Agreement, in the form of Exhibit D. The signature page must be attached to the 

holder’s submission through Kroll’s E-Portal System. If a signature page to the Agreement is 

not provided by the beneficial owner or its nominee (if authorized to do so), consent to the 

Agreement will not be deemed effective.

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EXHIBIT D

[Form of Signature Page to Settlement Agreement]

EXECUTION BY AUTHORIZED SIGNATORY

This signature page is delivered under the terms of the notice provided to holders of uninsured Bonds 

issued by PREPA (the “Notice”), dated January 27, 2023, regarding an opportunity for to become a 

Settling Bondholder party to a certain Settlement Agreement (the “Settlement Agreement”) distributed 

to such holder pursuant to the Notice.

Capitalized terms used but not defined herein shall have the respective meanings given to them in the 

Settlement Agreement or Notice, as applicable.

By signing below, the beneficial owner or its nominee/custodian (as authorized signatory for the 

beneficial owner) hereby certifies that (i) the Settlement Agreement is executed and delivered by the 

person or entity detailed below, as the beneficial owner (or authorized signatory) of the Bonds listed in 

Exhibit C to the Notice, (ii) this signature page delivered to Kroll Restructuring Administration LLC 

(the “Information and Tabulation Agent”) by the person or entity detailed below contains a true and 

accurate schedule of the Bonds that are the property of beneficial owners who have delivered their 

instruction to join the Settlement Agreement to their nominee/custodian or directly to the Information 

and Tabulation Agent, (iii) the undersigned is the beneficial owner or the nominee/custodian, through a 

position held at a securities depository, or in street name, of the Bonds set forth in such signature page, 

and (iv) the undersigned is or has the authority to act on behalf of such beneficial owners of Bonds.

Date Submitted: ________ 

Beneficial Owner Name:____________________

Signature of Beneficial Owner (or Authorized Signatory):

Print Name of Signatory:

Beneficial Owner contact information:

Tel. No:

E-Mail:

Address Line 1:

Address Line 2:

DELIVERY

Please deliver this signature page to the Information and Tabulation Agent as instructed in the 

Notice. No other methods will be accepted.

Please note: Delivery of this signature page in a way other than as set out above will not constitute valid 

consent to the Settlement Agreement. Delivery of this signature page to PREPA or any other person 

other than the Information and Tabulation Agent, whether or not such person is party to the Settlement 

Agreement, does not constitute delivery to the Information and Tabulation Agent. 

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