Natbony Declaration Exhibit 2 

 

Case:17-03283-LTS Doc#:24541-2 Filed:06/12/23 Entered:06/12/23 22:44:57 Desc:

Exhibit 2 - Brownstein Dep Tr Page 1 of 11
1

2 IN THE UNITED STATES DISTRICT COURT

 FOR THE DISTRICT OF PUERTO RICO

3 Case No. 17-BK-3283-LTS

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

4 In re:

5 THE FINANCIAL OVERSIGHT AND MANAGEMENT

 BOARD FOR PUERTO RICO,

6

 as representative of

7

 THE COMMONWEALTH OF PUERTO RICO, et al.,

8

 Debtors.

9 -----------------------------------------x

 Case No. 17-BK-4780-LTS

1 0 -----------------------------------------x

 In re:

1 1

 THE FINANCIAL OVERSIGHT AND MANAGEMENT

1 2 BOARD FOR PUERTO RICO,

1 3 as representative of

1 4 THE PUERTO RICO ELECTRIC POWER AUTHORITY,

1 5 Debtor.

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

1 6 May 16, 2023

 9:31 a.m.

1 7

1 8 VIDEOTAPED DEPOSITION of DAVID

1 9 BROWNSTEIN, held at the offices of Kramer

2 0 Levin Naftalis & Frankel LLP, located at 1177

2 1 Avenue of the Americas, New York, New York

2 2 10036, before Anthony Giarro, a Registered

2 3 Professional Reporter, a Certified Realtime

2 4 Reporter and a Notary Public of the State of

2 5 New York.

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Exhibit 2 - Brownstein Dep Tr Page 2 of 11
1 DAVID BROWNSTEIN

2 to answer on deliberative process

3 privilege.

4 MR. NATBONY: Well, then

5 have your conversation.

6 MR. MERVIS: Okay.

7 THE VIDEOGRAPHER: The time

8 is 3:17 p.m. And we're going off the

9 record.

1 0 (A short recess was taken.)

1 1 THE VIDEOGRAPHER: The time

1 2 is 3:20 p.m. And we're back on the

1 3 record.

1 4 MR. MERVIS: So, Bill, I had

1 5 given a prophylactic instruction

1 6 based on DPP concerns. And based on

1 7 consultation with the witness off the

1 8 record, in light of what I've learned

1 9 about the context of the

2 0 communications you were asking about,

2 1 I'm going to maintain the instruction

2 2 and ask the witness not to answer.

2 3 Q Let's change topics a little

2 4 bit back to the fuel line lenders.

2 5 Do you have any

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Exhibit 2 - Brownstein Dep Tr Page 3 of 11
1 DAVID BROWNSTEIN

2 understanding as to what the role is of

3 the fuel line lenders in PREPA's current

4 day-to-day operations?

5 A They do not have one.

6 Q Did PREPA borrow any money,

7 to your knowledge, from the fuel line

8 lenders between 2015 and 2023? This is

9 after the initial fuel line credits.

1 0 MR. MERVIS: That's two

1 1 questions.

1 2 MR. NATBONY: I'll go back.

1 3 Q Do you know whether PREPA

1 4 borrowed any money from the fuel line

1 5 lenders in 2015 to 2023?

1 6 A You're using 2015 because of

1 7 what?

1 8 Q Because it's after the

1 9 initial fuel line credit agreements.

2 0 A So since they entered into

2 1 their credit agreements, you're asking

2 2 whether those were rolling loans to

2 3 PREPA? Absolutely, they were, as far as

2 4 I know.

2 5 Q No.

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Exhibit 2 - Brownstein Dep Tr Page 4 of 11
1 DAVID BROWNSTEIN

2 Do you know whether there

3 are any additional loans that were taken

4 out?

5 A I don't know, other than, of

6 course, the relending bonds, if you want

7 to call those loans.

8 Q Now, I think you said that

9 under the plan with respect to the fuel

1 0 line lenders and others, you said Series

1 1 A Bonds and Series B Bonds have the same

1 2 risks. Do you recall saying that?

1 3 A Yes, uh-huh.

1 4 Q So I just want to understand

1 5 and confirm.

1 6 Are you saying that a bond

1 7 series that's expected to pay off in 35

1 8 years has the same risk as a bond series

1 9 that is expected to pay off in five

2 0 years?

2 1 MS. SPILLANE: Object to the

2 2 form.

2 3 MR. MERVIS: Object to the

2 4 form.

2 5 A Okay. So first off, the

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Exhibit 2 - Brownstein Dep Tr Page 5 of 11
1 DAVID BROWNSTEIN

2 Series B Bonds have an expected maturity

3 of 22 years, just so you'll know; right?

4 They have a final maturity of 50. But

5 the projections show they'll pay off --

6 so in 22 or 35. So you're comparing it

7 anyway. That doesn't really matter.

8 What I am talking about is

9 the credit structure is the same on all

1 0 the bonds. And so none have more risk.

1 1 If you want to say duration risk is a

1 2 risk, sure, you could say that. I

1 3 believe that given the structure, which

1 4 you'll see tomorrow, that you will find

1 5 that there is -- I hope you will find --

1 6 well, let me leave it at that. I need to

1 7 just be careful.

1 8 Q Just to clarify then, when

1 9 you said that the risks were the same for

2 0 the Series A and Series B Bonds, you were

2 1 referring to the structure of the bonds?

2 2 A Correct.

2 3 Q You agree with me that not

2 4 knowing what's going to happen over 35

2 5 years is a different risk than not

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Exhibit 2 - Brownstein Dep Tr Page 6 of 11
1 DAVID BROWNSTEIN

2 the customer and then use that to pay

3 debt service.

4 Q Under the current structure

5 as set forth in the plan, realizing that

6 it may change tomorrow, is an event of

7 default defined differently for Series A

8 and Series B Bonds?

9 A I don't recall.

1 0 Q Would you call the fuel line

1 1 lender of PREPA to be a legacy debt?

1 2 A What do you mean by the term

1 3 legacy? Can you define that for me?

1 4 Q For past services.

1 5 A Absolutely.

1 6 Q You wouldn't consider the

1 7 debt to be for current services?

1 8 A Well, the debt is in limbo

1 9 like all the other debt.

2 0 Q And PREPA has been able to

2 1 operate without paying down that debt;

2 2 isn't that true?

2 3 A PREPA has been able to

2 4 operate without paying any of its debt.

2 5 Q Including the debt to the

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Exhibit 2 - Brownstein Dep Tr Page 7 of 11
1 DAVID BROWNSTEIN

2 fuel lines; right?

3 A Including the debt to the

4 fuel lines.

5 Q Now, in coming to a

6 settlement with the fuel line lenders,

7 there was an issue concerning whether the

8 fuel line lenders' debt were current

9 expenses under the trust agreement? I

1 0 don't know if you were nodding your head

1 1 yes or saying yes.

1 2 A I'm sorry. Can you say that

1 3 again?

1 4 Q In coming to a settlement

1 5 with the fuel line lenders, there was an

1 6 issue concerning whether the fuel line

1 7 lenders' debt was current expenses under

1 8 the trust agreement; correct?

1 9 A Well, what they have said is

2 0 that it is.

2 1 Q And does the board have a

2 2 position on whether it is?

2 3 MR. MERVIS: Objection to

2 4 the form.

2 5 A Well, we've been in

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Exhibit 2 - Brownstein Dep Tr Page 8 of 11
1 DAVID BROWNSTEIN

2 priority. If the bondholders believed

3 they didn't have priority, I'm not quite

4 sure why they would have given that up.

5 So there are loads of questions. And I

6 don't have answers for it.

7 Q But, again, to the best of

8 your knowledge, this document, this

9 restructuring support agreement never

1 0 actually went forward; right?

1 1 MR. MERVIS: Object to the

1 2 form.

1 3 A What I can tell you is

1 4 clearly, it was signed. This is a

1 5 signature copy. So it was signed and I

1 6 suspect by the government as well. PREPA

1 7 signed it. So what my expectation is, is

1 8 that it was signed, that they probably --

1 9 well, when the board came in, the board

2 0 met with the creditors and said to each

2 1 creditor group, because we met with the

2 2 creditors and said we need to make some

2 3 slight modifications to the agreement.

2 4 Q You mean the trust

2 5 agreement?

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Exhibit 2 - Brownstein Dep Tr Page 9 of 11
1 DAVID BROWNSTEIN

2 A No. To the RSA in order to

3 proceed with the deal. Hindsight's

4 20-20. They were very small. And then

5 we'd let this go forward. And if you

6 didn't agree, we would put them into

7 bankruptcy.

8 Q Do you have any knowledge as

9 to why the provisions about amending the

1 0 trust agreement concerning the definition

1 1 of current expenses was in this document?

1 2 A I don't.

1 3 MS. SPILLANE: Objection to

1 4 form.

1 5 MR. MERVIS: Objection.

1 6 A I just don't know. I mean

1 7 I've never really noticed it was in

1 8 there, although I mean it may have been

1 9 something between the fuel line lenders

2 0 and the bondholders as part of their

2 1 settlement with each other that, you

2 2 know, we don't have knowledge of.

2 3 Q Do you have an opinion as to

2 4 whether the fuel line lender loans result

2 5 in an expense or a debt?

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Exhibit 2 - Brownstein Dep Tr Page 10 of 11
1

2 C E R T I F I C A T I O N

3

4

5 I, ANTHONY GIARRO, a Shorthand Reporter

6 and a Notary Public, do hereby certify that

7 the foregoing witness, DAVID BROWNSTEIN, was

8 duly sworn on the date indicated, and that the

9 foregoing, to the best of my ability, is a

10 true and accurate transcription of my

11 stenographic notes.

12 I further certify that I am not employed

13 by nor related to any party to this action.

14

15

16 <%5259,Signature%>

 ____________________

17 ANTHONY GIARRO

18

19

20

21

22

23

24

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Exhibit 2 - Brownstein Dep Tr Page 11 of 11