THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF PUERTO RICO 

REPLY AND STATEMENT OF NATIONAL PUBLIC FINANCE GUARANTEE 

CORPORATION IN SUPPORT OF THE PREPA DISCLOSURE STATEMENT 

1

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

last four (4) digits of each Debtor’s federal tax identification number, as applicable, are the 

(i) Commonwealth of Puerto Rico (the “Commonwealth”) (Bankruptcy Case No. 17 BK 3283-LTS) (Last 

Four Digits of Federal Tax ID: 3481); (ii) Puerto Rico Sales Tax Financing Corporation (“COFINA”) 

(Bankruptcy Case No. 17 BK 3284-LTS) (Last Four Digits of Federal Tax ID: 8474); (iii) Puerto Rico 

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

Digits of Federal Tax ID: 3808); (iv) Employees Retirement System of the Government of the 

Commonwealth of Puerto Rico (“ERS”) (Bankruptcy Case No. 17 BK 3566-LTS) (Last Four Digits of 

Federal Tax ID: 9686); (v) Puerto Rico Electric Power Authority (“PREPA”) (Bankruptcy Case No. 17 BK 

4780-LTS) (Last Four Digits of Federal Tax ID: 3747); and (vi) Puerto Rico Public Buildings Authority 

(“PBA”) (Bankruptcy Case No. 19-BK-5523-LTS) (Last Four Digits of Federal Tax ID: 3801) (Title III 

case numbers are listed as Bankruptcy Case numbers due to software limitations).

In re: 

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO, 

as representative of 

THE COMMONWEALTH OF PUERTO RICO, et al., 

Debtors.1

PROMESA Title III 

Case No. 17-03283 (LTS) 

(Jointly Administered)

In re: 

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO, 

as representative of 

PUERTO RICO ELECTRIC POWER AUTHORITY, 

Debtor.

PROMESA Title III 

Case No. 17-4780-LTS 

Case:17-03283-LTS Doc#:23585 Filed:02/21/23 Entered:02/21/23 15:02:04 Desc: Main

Document Page 1 of 15
i 

TABLE OF CONTENTS 

PAGE 

PRELIMINARY STATEMENT................................................................................................................... 1 

ARGUMENT ................................................................................................................................................ 3 

I. Objectors’ Arguments against the National PSA Are Premature at the Disclosure Statement Stage

 ......................................................................................................................................................... 3 

II. Arguments against the National PSA and Its Embodiment in the First Amended Plan Will Prove 

Unmeritorious at Confirmation ........................................................................................................ 5 

III. The National Reimbursement Claim Is Adequately Disclosed 

 and Permissible under PROMESA ................................................................................................. 9 

RESERVATION OF RIGHTS ................................................................................................................... 11 

Case:17-03283-LTS Doc#:23585 Filed:02/21/23 Entered:02/21/23 15:02:04 Desc: Main

Document Page 2 of 15
ii 

TABLE OF AUTHORITIES 

 Page(s) 

Cases 

In re Allied Owners’ Corp, 

74 F.2d 201 (2d Cir. 1934) ..................................................................................................................... 8 

In re Cent. Valley Processing, Inc., 

2007 WL 840500 (Bankr. E.D. Cal. Mar. 16, 2007) .............................................................................. 9 

In re Comandante Mgmt. Co., 

359 B.R. 410 (Bankr. D.P.R. 2006) ........................................................................................................ 4 

In re Corcoran Hosp. Dist., 

233 B.R. 449 (Bankr. E.D. Cal. 1999) ................................................................................................... 5 

Durrett v. Housing Auth. of City of Providence, 

896 F.2d 600 (1st Cir. 1990) .................................................................................................................. 9 

In re Fin. Oversight and Mgmt. Bd. for Puerto Rico, 

637 B.R. 223 (D.P.R. 2022) ................................................................................................................... 4 

In re Hibbard Brown & Co., 

217 B.R. 41 (Bankr. S.D.N.Y. 1998) ..................................................................................................... 9 

In re Jefferson, 

144 B.R. 620 (Bankr. D.R.I. 1992) ........................................................................................................ 9 

Lex Claims, LLC v. Garcia-Padilla, 

236 F. Supp. 3d 504 (D.P.R. 2017) ........................................................................................................ 8 

Statutes 

11 U.S.C. § 509(c) ................................................................................................................................ 10, 11 

11 U.S.C. § 1122(a) ...................................................................................................................................... 5 

PROMESA § 301(a) ........................................................................................................................5 

PROMESA § 301(c)(3)....................................................................................................................8 

Other Authorities 

Fed. R. Bankr. P. 3003(c)(5) ......................................................................................................................... 7 

Fed. R. Bankr. P. 3007, 1983 ........................................................................................................................ 7 

Fed. R. Bankr. P. 9014, 1983 ........................................................................................................................ 7

Case:17-03283-LTS Doc#:23585 Filed:02/21/23 Entered:02/21/23 15:02:04 Desc: Main

Document Page 3 of 15
1 

National Public Finance Guarantee Corporation (“National”) hereby submits this reply 

and statement in support of (i) the Disclosure Statement for First Amended Title III Plan of 

Adjustment of the Puerto Rico Electric Power Authority (ECF No. 3201) (as may be further 

amended, the “Disclosure Statement”);2 (ii) the Urgent Motion of Puerto Rico Electric Power 

Authority for Order (I) Scheduling a Hearing to Consider the Adequacy of Information Contained 

in the Disclosure Statement, (II) Establishing the Deadline for Filing Objections to the Disclosure 

Statement and Replies Thereto, (III) Approving Form of Notice Thereof, (IV) Establishing 

Document Depository Procedures in Connection Therewith, and (V) Granting Related Relief (ECF 

No. 3112) (as may be further amended, the “Disclosure Statement Motion”); (iii) the Motion of 

Puerto Rico Electric Power Authority for Order Establishing, Among Other Things, Procedures 

and Deadlines Concerning Objections to Confirmation and Discovery in Connection Therewith

(ECF No. 3114) (the “Procedures Motion”); and (iv) all related documents, and respectfully states 

as follows: 

PRELIMINARY STATEMENT 

1. On December 16, 2022, the Oversight Board announced that it had reached an 

agreement in principle with National. ECF No. 3115. That settlement was documented in a 

PREPA Plan Support Agreement, executed on February 2, 2023 (the “National PSA”). On 

February 9, 2023, the Oversight Board filed the Disclosure Statement for the First Amended 

Title III Plan of Adjustment of the Puerto Rico Electric Power Authority, ECF No. 3200 

(the “First Amended Plan”), which reflects terms of the National PSA. The First Amended Plan 

places the National Insured Bond Claims in Class 5 and the National Reimbursement Claim in 

Class 6. 

2. Certain parties, including the PREPA Bond Trustee (ECF No. 3224) (the 

2

 Unless otherwise indicated, ECF numbers referenced in this statement refer to the docket in Case Number 

17-04780-LTS. 

Case:17-03283-LTS Doc#:23585 Filed:02/21/23 Entered:02/21/23 15:02:04 Desc: Main

Document Page 4 of 15
2 

“Trustee Obj.”), the Ad Hoc Group of PREPA Bondholders (ECF No. 3225) (the “AHG Obj.”), 

the Official Committee of Unsecured Creditors (ECF No. 3226) (the “UCC Obj.”), Syncora 

Guarantee, Inc. (ECF No. 3223) (the “Syncora Obj.”), the Ad Hoc Committee of National Claim 

Assignees (ECF No. 3222) (the “Assignee Obj.”), and AHIMSA (ECF No. 3228) (the 

“AHIMSA Obj.”), have filed supplemental objections to the Disclosure Statement, some of 

which include arguments against implementation of the settlement embodied in the National 

PSA. The objecting parties that address the National PSA contend that the First Amended Plan 

unfairly discriminates between National and other PREPA Bondholders (see, e.g., AHG Obj. ¶¶ 

5-12), and improperly classifies National’s claims separately in Classes 5 and 6 from other 

PREPA Bond claims in Classes 1 and 2 (see, e.g., Trustee Obj. at pp. 3-6, Assignee Obj. at pp. 

11-12). The PREPA Bond Trustee further claims that “the individual PREPA Bondholders 

solicited by the Oversight Board do not have the right to split off and settle ‘their portion’ of the 

PREPA Bond Trustee’s rights.” Trustee Obj. at p. 3. 

3. National disagrees with the objecting parties’ contentions and will address them 

at the appropriate time, but such arguments are premature and irrelevant to the issue presently 

before the Court: Whether the Disclosure Statement contains adequate information and should 

be approved. This Court should therefore reserve consideration of these arguments for the 

confirmation stage. 

4. In any event, the arguments against the National PSA and its embodiment within 

the First Amended Plan are substantively unfounded. To start, National’s separate classification 

under the First Amended Plan appropriately reflects National’s status as a settling party and 

allows it to implement settlement provisions for insured bondholders and recognizes National’s 

separate contractual reimbursement claims. The separate classification of settling monoline 

insurers has already been approved by this Court in three other Title III cases. And National’s 

treatment is justified. National not only agreed to support the First Amended Plan before the 

Case:17-03283-LTS Doc#:23585 Filed:02/21/23 Entered:02/21/23 15:02:04 Desc: Main

Document Page 5 of 15
3 

Court issued rulings in connection with the competing summary judgment motions filed in the 

lien and recourse litigation—National also reached a settlement in principle with the Oversight 

Board before, and voluntarily did not participate in, oral argument on the summary judgment 

motions. Indeed, National was the first bondholder to agree to compromise its bond claims, 

settle numerous active disputes with PREPA, and support the First Amended Plan. Further, 

nothing in the Trust Agreement impairs the right of a bondholder to settle its individual 

bankruptcy claims. While the no-action clause prohibits individual bondholders from instituting 

actions or proceedings asserting remedies under the Trust Agreement, it does not prevent a 

bondholder from filing a proof of claim in bankruptcy or from settling its claim pursuant to a 

plan support agreement. It is therefore no impediment to a consensual resolution of bondholder 

claims in bankruptcy. 

5. National reached an agreement in principle with the Oversight Board in the midst 

of hotly contested litigation because a consensual resolution is far better for bondholders, 

PREPA, and its ratepayers. In doing so, National cleared a path for others to follow suit such 

that a largely consensual plan is achievable today, and in the coming weeks. The Disclosure 

Statement Motion should be granted. 

ARGUMENT 

I. Objectors’ Arguments against the National PSA Are Premature at the 

Disclosure Statement Stage 

6. At this stage, the issue before the Court is whether the Disclosure Statement 

contains adequate information. This Court has repeatedly recognized that objections concerning 

classification or plan treatment must be reserved for plan confirmation. See July 14, 2021 Hr’g 

Tr. at 80-81, Case No. 17-3283, ECF No. 17379 (approving disclosure statement and reserving 

for confirmation issues concerning classification and treatment of claims that did not “pose[] a 

pure question of law that would render a confirmation futile or unfeasible at this stage”); June 

17, 2022 Hr’g Tr. at 27, Case No. 17-3283, ECF. No. 21274 (overruling disclosure statement 

Case:17-03283-LTS Doc#:23585 Filed:02/21/23 Entered:02/21/23 15:02:04 Desc: Main

Document Page 6 of 15
4 

objection and explaining that objector “may litigate in connection with confirmation, if 

necessary, whether the proposed classification and treatment of the claims may differ from those 

of other general unsecured claims”). This Court has also held that unfair discrimination 

objections should not be heard at the disclosure statement stage because they “require factual 

development” as to the reason for the discrimination. July 14, 2021, Hr’g Tr. at 84:13-17, Case 

No. 17-3283, ECF No. 17379 (overruling unfair discrimination objection because “[s]uch 

arguments are properly raised in connection with plan confirmation”). 

7. Only if a plan is patently unconfirmable may the court “consider issues 

pertaining to the plan” and “rule upon such issues.” In re Comandante Mgmt. Co., 359 B.R. 410, 

415 (Bankr. D.P.R. 2006) (citing In re Mahoney Hawkes, LLP, 289 B.R. 285, 294 (Bankr. D. 

Mass. 2002)). The “patently unconfirmable” standard, however, is an exceedingly high bar to 

clear: The objecting party must show that the plan is “so fatally, and obviously flawed that 

confirmation is impossible.” Id. As this Court has explained, the alleged defect rendering a plan 

unconfirmable must appear on the face of the plan and in a manner by which the plan “could 

never be legal.” June 17, 2022 Hr’g Tr. at 26:22-27:4; Apr. 28, 2021 Hr’g Tr. at 145:13-22, Case 

No. 17-3283, ECF No. 16662 (emphasis added). 

8. The objecting parties do not and cannot meet this heavy burden. The First 

Amended Plan proposes four impaired accepting classes, and it therefore has four avenues 

through which PREPA may obtain an impaired accepting class required for confirmation. 

Although the Ad Hoc Group of PREPA Bondholders asserts that the First Amended Plan is 

patently unconfirmable because it unfairly discriminates between National and other PREPA 

Bondholders, the Ad Hoc Group fails to acknowledge that PROMESA permits disparate 

treatment between National and other PREPA Bondholders if the difference in treatment is 

justified. See, e.g., In re Fin. Oversight and Mgmt. Bd. for Puerto Rico, 637 B.R. 223, 283 

(D.P.R. 2022). The Ad Hoc Group’s assertion that National’s treatment “can be understood only 

Case:17-03283-LTS Doc#:23585 Filed:02/21/23 Entered:02/21/23 15:02:04 Desc: Main

Document Page 7 of 15
5 

as an attempt to manufacture the illusion of meaningful creditor support for the plan,” AHG 

Obj. at ¶ 9, is at best conclusory. Of course, a justification for National’s different treatment 

could (and does) exist. The Court should accordingly reserve for confirmation consideration of 

such arguments. 

II. Arguments against the National PSA and Its Embodiment in the First 

Amended Plan Will Prove Unmeritorious at Confirmation 

9. Moreover, at plan confirmation these objections will prove to be unfounded. A 

creditor’s settlement of its claims, for example, is ample justification for the separate 

classification of those claims. See In re Corcoran Hosp. Dist., 233 B.R. 449, 455 (Bankr. E.D. 

Cal. 1999) (holding that settlement provided business and economic justification for separately 

classifying claims). Consistent with this principle, the plans of adjustment that this Court has 

confirmed in the COFINA, Commonwealth, and HTA Title III cases have all separately 

classified the claims of monoline insurers that settled their claims. See Case No. 17-3284, ECF 

No. 436 (COFINA); Case No. 17-3283, ECF No. 19813 (Commonwealth); Case No. 17-3567, 

ECF No. 1415 (HTA). Indeed, the PREPA Bond Trustee also acknowledges that National’s 

separate classification is justified based on National’s status as a bond insurer: separate 

classification is needed to “solve[] custodial trust issues associated with combining plan and 

insurance policy distributions for insured PREPA Bondholders.” Bond Trustee Obj. at pp. 5-6. 

10. The Ad Hoc Committee of National Claim Assignees also mistakenly argues that 

the Assigned National Claims are entitled to be classified with National. Assignee Obj. at pp. 9-

12. As an initial matter, creditors have no right to be included in a particular class; PROMESA 

incorporates section 1122 of the Bankruptcy Code, which permits, but does not require, similar 

creditors to be placed in the same class. See PROMESA § 301(a); 11 U.S.C. § 1122(a) (“[A] 

plan may place a claim or an interest in a particular class only if such claim or interest is 

substantially similar to the other claims or interests of such class.”) (emphasis added). Further, 

Case:17-03283-LTS Doc#:23585 Filed:02/21/23 Entered:02/21/23 15:02:04 Desc: Main

Document Page 8 of 15
6 

the First Amended Plan appropriately does not include the Assigned National Claims in Classes 

5 and 6 because the claims are not similar. National is a settling monoline insurer with remaining 

obligations to insured bondholders, whereas the holders of Assigned National Claims are nonsettling bondholders who purchased certain claims from National after National had already 

paid the insured bondholders in full. The National Claim Assignees are therefore on 

fundamentally different footing because they are not settling bondholders, they have never paid 

any claims to insured bondholders that may be reimbursed, and they do not have ongoing insured 

obligations to insured bondholders. These differences justify separate classification of 

National’s claims from the Assigned National Claims. 

11. The difference in treatment between National Insured Bond Claims and the 

claims of other PREPA Bondholders in the proposed Amended Plan is also justified. National 

has worked tirelessly with the Oversight Board over an extended period of time to reach a 

consensual resolution of its claims. It reached an agreement in principle in the midst of hotly 

contested litigation over the bondholders’ claims, and before the Court heard oral argument on 

the Oversight Board’s and bondholders’ motions for summary judgment in the lien and recourse 

litigation. And National executed its settlement well before any informal or formal rulings issued 

in the adversary proceeding to determine the scope of liens and recourse rights under the Trust 

Agreement. For decades, National has supported PREPA, and it will continue to do so consistent 

with the National PSA. For these and other reasons, no unfair discrimination will be found to 

exist at confirmation. 

12. In addition, the PREPA Bond Trustee incorrectly suggests that National cannot 

independently settle its bankruptcy claims and rights under the National PSA. In its initial 

objection, the PREPA Bond Trustee conflates a proof of claim and settlement thereof with an 

action or proceeding to enforce the Trust Agreement and mistakenly relies on this Court’s 

decision denying Pan American Grain Co.’s motion for relief from the automatic stay to set off 

Case:17-03283-LTS Doc#:23585 Filed:02/21/23 Entered:02/21/23 15:02:04 Desc: Main

Document Page 9 of 15
7 

its bond claim against its prepetition obligation to PREPA. Trustee’s Initial Disclosure 

Statement Objection at 3-4, ECF No. 3187. Pan American held PREPA bonds but also owed 

PREPA a prepetition debt of over $2 million for electrical services, and it sought to set off its 

liability by the amount of the outstanding principal and interest PREPA owed it. The Court 

concluded that the Trust Agreement’s no-action clause precluded this individual creditor from 

pursuing a setoff action seeking “individual relief as against the issuer.” See id. at 4 (quoting 

Nov. 7, 2018 Hr’g Tr. at 48:8-50:9, Case No. 17-3283, ECF No. 4198). The no-action clause 

provides that bondholders shall have no “right to institute any suit, action or proceeding in equity 

or at law on any bond ... or for any other remedy hereunder [i.e., the Trust Agreement]” unless 

the requisite percentage of bondholders consent. Trust Agreement § 808. And Pan American 

unquestionably instituted an action where, via setoff, it effectively sought to recover outstanding 

principal and interest on its bonds, i.e., an action to recover under the Trust Agreement. Pan 

American could not and did not contend that the no-action clause was inapplicable, but rather 

argued that the Court should “use its equitable powers and just eliminate Pan American from 

that no-action clause.” Nov. 7, 2018 Hr’g Tr. at 36:24-37:1. The Court declined to do so. 

13. Here, instead, the no-action clause does not apply. In the first instance, no 

provision in the Trust Agreement states that the Trustee may file a proof of claim, or that 

bondholders may not do so. Bankruptcy Rule 3003(c)(5)—not any express provision of the 

Trust Agreement—permitted, but did not require, the Bond Trustee to file the Master Proof of 

Claim. Indeed, the no-action clause only prohibits bondholders from instituting a “suit, action 

or proceeding” to pursue remedies under the Trust Agreement. Filing a proof of claim does not 

institute a suit, action or proceeding. See Fed. R. Bankr. P. 3007, 1983 Advisory Comm. Note 

(“The contested matter initiated by an objection to a claim is governed by rule 9014.”) (emphasis 

added); Fed. R. Bankr. P. 9014, 1983 Advisory Comm. Note (“[T]he filing of an objection to a 

proof of claim ... creates a dispute which is a contested matter.”) (emphasis added). The same 

Case:17-03283-LTS Doc#:23585 Filed:02/21/23 Entered:02/21/23 15:02:04 Desc: Main

Document Page 10 of 15
8 

also is true when a bondholder settles its bankruptcy claim. Moreover, the National PSA does 

not seek or obtain a remedy under the Trust Agreement within the meaning of the no-action 

clause. To the contrary, National has agreed to refrain from pursuing any action to exercise its 

rights and remedies under the Trust Agreement. And, if the First Amended Plan is confirmed, 

no PREPA bond interest or principal will be paid to National, no receiver will be appointed, and 

no rate covenant will be enforced. Instead, National will receive new bonds issued under a new 

indenture, and other consideration outside the terms and contemplation of the Trust Agreement. 

See, e.g., Lex Claims, LLC v. Garcia-Padilla, 236 F. Supp. 3d 504, 522 (D.P.R. 2017) (bond 

resolution no-action clause did not bar monoline insurer’s motion to intervene because motion 

was “unrelated to the Resolution”). 

14. For precisely this reason, when PREPA Bondholders, including National, 

independently filed their own proofs of claim in the billions of dollars, the Bond Trustee 

correctly did not object. See Claim Nos. 22078, 23396 (National); No. 31087 (Assured); No. 

49143 (Syncora); No. 22078 (Ad Hoc Group Members); see also Claim No. 18449 (Master 

Proof of Claim) (acknowledging that certain monoline insurers “intend to file their own proofs 

of claim against the Authority with respect to their rights under applicable policies of insurance 

and/or insurance agreements”). When PREPA Bondholders entered into the 2019 PSA, the 

Bond Trustee correctly did not take action against them. It also correctly did not object to the 

Oversight Board’s motion to approve the 2019 PSA pursuant to Rule 9019. See ECF No. 1253; 

Preliminary Statement and Reservation of Rights of U.S. Bank National Association as PREPA 

Bond Trustee with Respect to 9019 Motion of Government Parties Relating to PREPA 

Restructuring Support Agreement, ECF No. 1696. Just as uninsured bondholders may file proofs 

of claim, they also may vote their claims. See e.g., In re Allied Owners’ Corp., 74 F.2d 201, 

203-04 (2d Cir. 1934). National, as a monoline insurer, has the right (expressly recognized under 

PROMESA § 301(c)(3)) to vote its insured claims—a right the Trustee does not dispute. See 

Case:17-03283-LTS Doc#:23585 Filed:02/21/23 Entered:02/21/23 15:02:04 Desc: Main

Document Page 11 of 15
9 

Trustee Obj. at 2 n.5. For all of these reasons, the no-action clause is not applicable to, much 

less a prohibition on, settlements of bankruptcy claims by monolines or bondholders. 

15. Public policy favoring settlements in restructuring proceedings also weighs 

strongly against the Bond Trustee’s implausible reading of the Trust Agreement. See Durrett v. 

Housing Auth. of City of Providence, 896 F.2d 600, 604 (1st Cir. 1990); In re Hibbard Brown 

& Co., 217 B.R. 41, 46 (Bankr. S.D.N.Y. 1998) (noting the “general public policy favoring 

settlements”); In re Cent. Valley Processing, Inc., 2007 WL 840500, at *3 (Bankr. E.D. Cal. 

Mar. 16, 2007) (“The policy favouring settlement is particularly acute in the context of 

bankruptcy.”); In re Jefferson, 144 B.R. 620, 623 (Bankr. D.R.I. 1992) (rejecting interpretation 

of statute that would have discouraged settlement, and noting that a “deeply rooted principle of 

American jurisprudence is to favor settlement” (citation omitted)). If the Oversight Board must 

obtain “an accepting vote by a single class of Bondholders,” as the Bond Trustee contends 

(Trustee Obj. at p. 5), this “all-or-nothing” standard would pose a significant impediment to 

settling bondholder claims. By precluding individual PREPA Bondholders or bondholder 

groups from entering separate settlement agreements, it would prevent bondholders from 

engaging in negotiations that account for the unique needs and interests of the individual 

bondholders and reaching agreements that accommodate their unique positions. The Court 

should reject the Bond Trustee’s unsupported reading of the Trust Agreement’s no-action 

clause. 

III. The National Reimbursement Claim Is Adequately Disclosed and Permissible 

under PROMESA 

16. The Unsecured Creditors Committee separately objects to the Disclosure 

Statement for purportedly not explaining the basis for the National Reimbursement Claim. UCC 

Obj. at ¶¶ 13-14. The UCC’s objection is unfounded. The Disclosure Statement makes clear that 

the National Reimbursement Claim is based on an insurance agreement National entered 

Case:17-03283-LTS Doc#:23585 Filed:02/21/23 Entered:02/21/23 15:02:04 Desc: Main

Document Page 12 of 15
10 

directly with PREPA—separate from and in addition to its insurance agreement with the Bond 

Trustee and insured bondholders—which obligates PREPA to reimburse National for any 

payments of principal and interest it makes to insured bondholders. As the Disclosure Statement 

explains: “In connection with the issuance of the insurance policies, PREPA entered into certain 

Bond insurance agreements with National, pursuant to which National asserts that PREPA 

agreed, to the extent that National made payments of principal and interest on or incurs any 

other costs with respect to the Bonds insured by PREPA, to reimburse National, with interest, 

for any and all such payments, and costs (i.e., the Asserted Reimbursement Claim).” Disclosure 

Statement at 34. The Disclosure Statement further explains that the settlement of National’s 

Reimbursement claim for a 20% recovery “avoids the risk that such claim could be allowed in 

full and secured by all net or gross revenues of PREPA, if the Oversight Board does not prevail 

in the Amended Lien & Recourse Challenge.” Id. To answer the UCC’s question, the Disclosure 

Statement plainly shows that the National Reimbursement Claim is not “based on the same 

bonds that are part of National’s bond claims.” UCC Obj. at ¶ 14. 

17. Syncora also objects to the National Reimbursement Claim based on its 

assertion that the claim provides National with post-petition interest that other creditors do not 

receive and violates Section 509(c) by providing National a reimbursement before other 

creditors’ allowed claims are paid in full. Syncora Obj. at ¶ 11. But again, as the Disclosure 

Statement makes clear, the National Reimbursement Claim is based on the unique contractual 

rights National has against PREPA based on its direct insurance agreement with PREPA. The 

National Reimbursement Claim is based on a contractual right separate from National’s Bond 

Claims and the rights of insured bondholders, and therefore it does not constitute post-petition 

interest. For the same reason, Syncora is wrong that Section 509(c) could bar National’s 

recovery. Section 509(c) provides that, where an entity is co-liable with the debtor for a 

creditor’s claim, and the entity obtains a right to reimbursement from the debtor based on its 

Case:17-03283-LTS Doc#:23585 Filed:02/21/23 Entered:02/21/23 15:02:04 Desc: Main

Document Page 13 of 15
11 

payment to the creditor on account of the liability, the entity is subordinated to the creditor until 

it is paid in full. See 11 U.S.C. § 509(c); 4 Collier on Bankruptcy ¶¶ 509.01-509.04 (16th 2022).3

But National is not receiving reimbursement from PREPA as a co-obligor under its bonds within 

the meaning of Section 509(c); it is receiving reimbursement payments based on its independent, 

direct contractual rights against PREPA. 

RESERVATION OF RIGHTS 

18. National hereby reserves all rights with respect to the Disclosure Statement, 

Disclosure Statement Motion, Procedures Motion, and all related documents, including 

National’s right to address any of the foregoing at any hearing or in any supplemental briefing 

related to the Disclosure Statement. 

RESPECTFULLY SUBMITTED, this 21st day of February 2023. 

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

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

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

participants. 

[Remainder of this page intentionally left blank] 

3

 Section 509(c) reads in full: “The court shall subordinate to the claim of a creditor and for the 

benefit of such creditor an allowed claim, by way of subrogation under this section, or for 

reimbursement or contribution, of an entity that is liable with the debtor on, or that has secured, 

such creditor’s claim, until such creditor’s claim is paid in full, either through payments under this 

title or otherwise.” 11 U.S.C. § 509(c) (emphasis added). 

Case:17-03283-LTS Doc#:23585 Filed:02/21/23 Entered:02/21/23 15:02:04 Desc: Main

Document Page 14 of 15
12 

ADSUAR MUÑIZ GOYCO 

SEDA & PÉREZ-OCHOA, P.S.C. 

By: /s/ Eric Pérez-Ochoa 

Eric Pérez-Ochoa 

(USDC-PR No. 206314) 

Luis Oliver-Fraticelli 

(USDC-PR No. 209204) 

Alexandra Casellas-Cabrera 

(USDC-PR No. 301010) 

PO BOX 70294 

San Juan, PR 00936 

Telephone: 787.756.9000 

Facsimile: 787.756.9010 

Email: epo@amgprlaw.com 

 loliver@amgprlaw.com 

acasellas@amgprlaw.com 

Attorneys for National Public Finance 

Guarantee Corporation

WEIL, GOTSHAL & MANGES LLP 

By: /s/ Robert Berezin 

Matthew S. Barr* 

Jonathan Polkes* 

Robert Berezin* 

767 Fifth Avenue 

New York, New York 10153 

Telephone: (212) 310-8000 

Facsimile: (212) 310-8007 

Email: matt.barr@weil.com 

jonathan.polkes@weil.com 

robert.berezin@weil.com

Gabriel A. Morgan* 

700 Louisiana Street, Suite 1700 

Houston, TX 77002 

Telephone: (713) 546-5000 

Facsimile: (713) 224-9511 

Email: gabriel.morgan@weil.com 

*Admitted pro hac vice 

Attorneys for National Public Finance 

Guarantee Corporation

Case:17-03283-LTS Doc#:23585 Filed:02/21/23 Entered:02/21/23 15:02:04 Desc: Main

Document Page 15 of 15