EXHIBIT A 

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Exhibit A - Proposed Recommendation Letter Page 1 of 7
March 2023 

THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS OF THE PUERTO 

RICO ELECTRIC POWER AUTHORITY

c/o Paul Hastings LLP, 200 Park Avenue, New York, New York 10166 

To the Holders of Class 7 General Unsecured Claims: 

The Official Committee of Unsecured Creditors (the “Committee”) appointed in the 

Title III case of the Puerto Rico Electric Power Authority (“PREPA”) is writing to you in 

connection with PREPA’s solicitation of your vote with respect to the enclosed proposed 

Second Amended Title III Plan of Adjustment of the Puerto Rico Electric Power Authority, 

dated February 26, 2023 (the “Plan”).1 You should carefully read all the materials that 

accompany this letter (as it may be supplemented, the “Committee Letter”), including the 

instructions for completing and mailing your Ballot. All Ballots must be received by the 

Claims and Noticing Agent by [_______], 2023 at 5:00 p.m. (Atlantic Standard Time) (the 

“Voting Deadline”) to be counted.

AT THIS TIME, THE COMMITTEE DOES NOT SUPPORT THE OVERSIGHT 

BOARD’S PROPOSED PLAN, INCLUDING THE PROPOSED PLAN DISTRIBUTION 

TO HOLDERS OF GENERAL UNSECURED CLAIMS IN CLASS 7—A 

DISTRIBUTION THAT, ACCORDING TO THE DISCLOSURE STATEMENT, MAY 

RANGE FROM 0.1% AND 100%, DEPENDING ON THE OUTCOME OF NUMEROUS 

CONTINGENCIES, INCLUDING THE OUTCOME OF THE AMENDED LIEN & 

RECOURSE CHALLENGE. 

ACCORDINGLY, AT THIS TIME, THE COMMITTEE URGES ALL HOLDERS 

OF CLASS 7 GENERAL UNSECURED CLAIMS TO VOTE TO REJECT THE PLAN. 

However, the Committee remains in discussions with the Oversight Board regarding 

potential modifications to the Plan to improve the recovery to general unsecured creditors. 

If such modifications are made, the Committee may supplement this Committee Letter, 

including to update its recommendation. For that reason, if you have the ability to submit 

your Ballot online (in accordance with the procedures set forth on your Ballot), the 

Committee recommends that you hold off submitting your Ballot until we get closer to the 

Voting Deadline. Please visit the Committee’s website at www.creditorspr.org for any 

further updates. 

A. Introduction 

The Committee’s members were appointed by the United States Trustee, a unit of the 

United States Department of Justice, to represent, in a fiduciary capacity, the interests of all 

general unsecured creditors of PREPA (and other debtors under Title III of PROMESA). These 

unsecured creditors include, for example, employees, vendors, suppliers, service providers, and 

parties with litigation claims. The Committee’s seven members serve without pay and 

 

1

 All capitalized terms used but not defined in this letter have the meanings set forth in the Plan. 

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represent a broad cross-section of the general unsecured class. Committee members include, 

among others, suppliers of goods and services, contract counterparties, and litigation claimants. 

The Committee is a fiduciary to holders, like you, of unsecured claims2 against PREPA, 

and it has worked tirelessly during PREPA’s Title III case to protect your interests. Among 

other things, in October 2019, the Committee objected to a settlement between the Oversight 

Board and certain holders of PREPA’s non-recourse bonds that, if approved, would have 

allowed more than $8 billion in secured claims on account of such non-recourse bonds. The 

Committee believed then, and continues to believe today, that the collateral securing the nonrecourse bonds consists only of limited funds on deposit in certain specified accounts controlled 

by the bond trustee, and that, as non-recourse obligations, the non-recourse bonds have no 

additional or deficiency claim against PREPA. 

Several years after the Committee’s October 2019 objection, the Oversight Board 

ultimately decided not to move forward with the proposed settlement and, instead, in the fall of 

2022, adopted the Committee’s position and filed an amended complaint and related summary 

judgment motion seeking a ruling from the Court that (a) the PREPA bond claims are secured 

only by very limited funds held in certain specified accounts (approximately $16 million) and 

(b) the PREPA bondholders are not entitled to an unsecured deficiency claim for the difference 

between their more than $8 billion in claims and the limited value of their collateral (i.e., 

approximately $16 million) because their bond claims only have recourse only to the limited 

collateral in certain specified accounts. This litigation is referred in the Plan and the Disclosure 

Statement as the “Amended Lien & Recourse Challenge.” On February 1, 2023, the Court 

heard oral argument on the Oversight Board’s and PREPA bondholders’ motions for summary 

judgment, but it has not yet issued a ruling on these matters. 

B. Treatment of Allowed Class 7 General Unsecured Claims 

The Plan provides that holders of allowed General Unsecured Claims in Class 7 will 

receive their pro rata share of the General Unsecured Claim Recovery, which is comprised of 

(a) Avoidance Action Proceeds, (b) the GUC New Bonds (in the form of Series B Bonds), if 

any, and (c) the GUC CVI. 

According to the Disclosure Statement, the Avoidance Actions Proceeds and the GUC 

CVI have only de minimis value, and would provide holders of allowed General Unsecured 

Claims with an estimated recovery percentage of only 0.1%. Thus, the only component of the 

General Unsecured Claim Recovery that could provide material recoveries to general unsecured 

creditors are the GUC New Bonds (in the form of Series B Bonds). However, the amount of 

Series B Bonds to be made available to holders of allowed General Unsecured Claims 

under the Plan is unknown at this time and depends, among other things, on the 

resolution of the Amended Lien & Recourse Challenge. For that reason, the Disclosure 

Statement estimates that the recovery to holders of allowed General Unsecured Claims 

ranges from 0.1% to 100%, depending on the resolution of the Amended Lien & Recourse 

Challenge and other contingencies. 

 

2

 Unsecured claims are claims that are not secured by any collateral. 

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1. New Bonds Waterfall 

The aggregate amount of New Bonds to be distributed to holders of allowed General 

Unsecured Claims (Class 7) under the Plan is a function of a complex waterfall (the “New 

Bonds Waterfall”) pursuant to which an aggregate amount of $5.68 billion of New Bonds (in 

the form of Series A Bonds and Series B Bonds) would be issued by Reorganized PREPA and 

then allocated to various creditor groups, taking into account the outcome of a series of 

contingencies, including, most notably, the outcome of the Amended Lien & Recourse 

Challenge. 

Importantly, under the New Bonds Waterfall, holders of allowed General Unsecured 

Claims will only receive Series B Bonds to the extent any such bonds remain available 

after mandatory distributions have been made to the Fuel Line Lenders, Bondholders, 

Monolines, and National. The amount of New Bonds that would be so distributed to these 

creditor groups is not fixed, but, instead, depends on certain contingencies, including the 

outcome of the Amended Lien & Recourse Challenge. In fact, depending on the outcome of 

these contingencies, it is possible that no Series B Bonds would be available to holders of 

allowed General Unsecured Claims. 

2. Estimated Recovery Percentages for Holders of Allowed General Unsecured 

Claims 

The following table provides the estimated recovery percentages for holders of allowed 

General Unsecured Claims based on the outcome of two contingencies: (i) the resolution of the 

Amended Lien & Recourse Challenge and (ii) the aggregate amount of allowed General 

Unsecured Claims. 

In particular, as it relates to the Amended Lien & Recourse Challenge, the recovery 

table below illustrates three potential outcomes: 

a. the Bondholders’ security interest is limited to the funds in certain specified 

accounts and the Bondholders have no recourse to PREPA’s assets beyond the 

funds in such specified accounts; 

b. the Bondholders’ security interest is limited to the funds in certain specified 

accounts but the Bondholders have recourse to PREPA’s present and future 

revenues (i.e., they have Unsecured Deficiency Claims); and 

c. the Bondholders are secured by, and have recourse to, all of PREPA’s present 

and future revenues. 

Moreover, as it relates to the aggregate size of allowed General Unsecured Claims, the 

recovery table below shows three illustrative examples, namely, $800 million in allowed 

claims, $1.2 billion in allowed claims, and $1.6 billion in allowed claims. 

As the below table illustrates, the recovery percentages for holders of allowed General 

Unsecured Claims cannot be determined with any specificity at this time. 

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Outcome in Amended Lien & Recourse Challenge 

Security Interest 

Limited to Funds 

in Specified 

Accounts and No 

Recourse Beyond 

Such Funds 

Security Interest 

Limited to Funds in 

Specified Accounts, 

but Recourse to 

PREPA’s Present 

and Future 

Revenues 

Security Interest, 

and Recourse to, 

All Present and 

Future Revenues 

Aggregate Amount of Allowed General Unsecured Claims $800 million 100.00% 46.5% 0.10%+ 

$1.2 billion 100.00% 44.3% 0.07%+ 

$1.6 billion 100.00% 42.4% 0.05%+ 

C. What’s the Problem with the Plan? 

The Committee believes that the Plan is not confirmable, for a variety of reasons.3 First 

and foremost, under the Plan, various groups of unsecured creditors stand to receive 

substantially greater recoveries than holders of General Unsecured Claims in Class 7. 

Moreover, and unlike the distribution to holders of General Unsecured Claims, the distributions 

to these other unsecured creditors do not depend on the outcome of the Amended Lien & 

Recourse Challenge. In other words, while other creditors receive substantial, guaranteed 

recoveries, general unsecured creditors face a highly uncertain and contingent recovery under 

the Plan (as illustrated in the above recovery table). 

For example, the Committee believes that: 

 The Plan provides that unsecured Fuel Line Lenders receive a guaranteed 

distribution (which does not depend on the outcome of the Amended Lien & 

Recourse Challenge) in the form of Series A Bonds equal to approximately 

92.7% of their total allowed claims. Moreover, the Series A Bonds to be 

received by the Fuel Line Lenders are of significantly higher quality than the 

Series B Bonds to be distributed to general unsecured creditors, including as it 

relates to maturity (15 years vs. 50 years), expected repayment date (5 years vs. 

35 years), and payment priority (payment of principal on the Series A Bonds 

must be paid before payment of principal on the Series B Bonds). 

 

3

 For the avoidance of doubt, the Oversight Board does not agree with the Committee’s views regarding the Plan, 

including the recovery percentages provided below for the Fuel Line Lenders and National. 

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 The Plan provides National (one of the monolines that insured PREPA’s nonrecourse bonds) with an aggregate distribution in the form of Series B Bonds of 

more than 83% of their bond claims. As with the distribution to the unsecured 

Fuel Line Lenders, National’s distribution does not depend on the outcome of 

the Amended Lien & Recourse Challenge, even though the Committee believes 

that National should have no claims at all (beyond a claim secured by very 

limited funds in the Sinking Fund). 

Please note that the Committee is also considering holding in-person creditor 

information sessions in Puerto Rico to explain, among other things, the New Bonds 

Waterfall and the Committee’s opposition to the Plan. Please visit the Committee’s 

website at www.creditorspr.org for details regarding the time and location of these 

sessions. 

D. Committee’s Recommendation 

Each creditor (including individual members of the Committee) must make its own 

independent decision as to whether or not the Plan is acceptable to that creditor and should 

consult with its own legal and/or financial advisor(s) before voting to accept or reject the Plan. 

That said, for the reasons stated above the Committee recommends that you vote to reject 

the Plan. 

As noted, the Committee remains in discussions with the Oversight Board regarding 

potential modifications to the Plan to improve the recovery to general unsecured creditors. 

If such modifications are made, the Committee may supplement this Committee Letter, 

including to update its recommendation. For that reason, if you have the ability to submit 

your Ballot online (in accordance with the procedures set forth on your Ballot), the 

Committee recommends that you hold off submitting your Ballot until we get closer to the 

Voting Deadline. Please visit the Committee’s website at www.creditorspr.org for any 

further updates. 

E. Submitting Your Ballot 

The Oversight Board has provided Ballots herewith for holders of claims in Class 7 to 

utilize in order to vote to accept or reject the Plan, which Ballots must be returned in 

accordance with the procedures set forth in the ballot instruction sheet and the Disclosure 

Statement. Please read the directions on the Ballot carefully and complete your Ballot in 

its entirety before returning it. Your Ballot must be returned so as to be actually received 

by the Balloting Agent no later than the Voting Deadline, i.e., 5:00 p.m. (Atlantic 

Standard Time) on ____________, 2023. 

* * * 

The positions taken by the Committee in this Letter are those of the Committee and/or its 

advisors and have not been approved by or endorsed by the Bankruptcy Court. Each creditor 

(including individual members of the Committee) must make its own independent decision as to 

whether or not the Plan is acceptable to that creditor and should consult with its own legal and/or 

financial advisor(s) before voting to accept or reject the Plan. 

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YOU ARE URGED TO CAREFULLY READ THE DISCLOSURE STATEMENT 

AND THE PLAN. THE DESCRIPTION OF THE PLAN IN THIS COMMITTEE 

LETTER IS INTENDED TO BE A SUMMARY ONLY. 

THIS COMMITTEE LETTER MAY NOT BE RELIED UPON FOR ANY 

PURPOSE OTHER THAN THE COMMITTEE’S VIEWS ON HOW TO VOTE ON THE 

PLAN, AND THE INFORMATION CANNOT BE RELIED UPON FOR ANY OTHER 

PURPOSE. THE COMMITTEE DOES NOT GUARANTEE ANY PARTICULAR 

RESULT IN PREPA’s TITLE III CASE. THE COMMITTEE CANNOT PROVIDE ANY 

ASSURANCES REGARDING THE AGGREGATE AMOUNT OF GENERAL 

UNSECURED CLAIMS THAT WILL ULTIMATELY BE ALLOWED, OR THE RATE 

OF RECOVERY THAT WILL ULTIMATELY BE REALIZED BY ANY HOLDER OF 

SUCH A CLAIM. 

THIS COMMUNICATION DOES NOT CONSTITUTE, AND SHALL NOT BE 

CONSTRUED AS, A SOLICITATION BY ANY INDIVIDUAL MEMBER OF THE 

COMMITTEE. 

THE OFFICIAL COMMITTEE OF 

UNSECURED CREDITORS OF 

THE PUERTO RICO ELECTRIC POWER AUTHORITY 

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