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UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF PUERTO RICO

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In re:

The Financial Oversight and Management Board for 

Puerto Rico, 

as representative of

The Commonwealth of Puerto Rico, et al.

Debtors.1

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PROMESA

Title III

Case No. 17 BK 3283-LTS

(Jointly Administered)

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In re:

The Financial Oversight and Management Board for 

Puerto Rico, 

as representative of

The Puerto Rico Electric Power Authority 

(“PREPA”), et al.

Debtor.

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PROMESA

Title III

Case No. 17 BK 4780-LTS

Court Filing Relates Only to PREPA 

and Shall Only be Filed in Case 

No. 17 BK 4780-LTS

Ref. Docket No. 549

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STATEMENT OF SOLUS ALTERNATIVE ASSET MANAGEMENT LP IN RESPONSE

TO THE URGENT JOINT MOTION FOR POSTPETITION SECURED FINANCING

Through its undersigned counsel, Solus Alternative Asset Management LP, on behalf of 

certain funds advised by it (“Solus”), files this statement (this “Statement”) in response to the 

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

 

1 The Debtors in these title III cases, along with each Debtor’s respective Title III case number listed as a 

bankruptcy case number due to software limitations and the last four (4) digits of each Debtor’s federal tax 

identification number, as applicable, are the (i) Commonwealth of Puerto Rico (Bankruptcy Case No. 17 BK 

3283-LTS) (Last Four Digits of Federal Tax ID: 3481); (ii) Puerto Rico Sales Tax Financing Corporation 

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

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); and (v) Puerto Rico Electric Power Authority (“PREPA”) (Bankruptcy Case No. 17 

BK 4780-LTS) (Last Four Digits of Federal Tax ID: 3747).

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(the “Oversight Board”) and the Puerto Rico Fiscal Agency and Financial Advisory Authority 

(“AAFAF”) for Entry of Interim and Final Orders (A) Authorizing Postpetition Secured 

Financing, (B) Granting Priming Liens and Providing Superpriority Administrative Expense 

Claims, (C) Modifying the Automatic Stay, (D) Scheduling a Final Hearing, and (E) Granting 

Related Relief [Docket No. 549] (the “DIP Motion”).2

Solus supports approval of the DIP Facility (as defined below) on an interim basis, subject 

to certain modifications described below. Solus also agrees with the Oversight Board and AAFAF 

that any loans extended under the DIP Facility constitute Current Expenses under the Trust 

Agreement similar to PREPA’s other working capital expenses, including the Fuel Line Loans (as 

defined below). 

STATEMENT

1. Solus is the largest unsecured creditor of the Puerto Rico Electric Power Authority 

(“PREPA”), holding approximately $284 million in principal amount of unpaid fuel line loans 

(“Fuel Line Loans”) that were provided to PREPA under two separate working capital facilities 

(the “Fuel Line Facilities”). Solus is the sole lender under one of the Fuel Line Facilities and is 

also a lender under the other Fuel Line Facility for which Scotiabank de Puerto Rico 

(“Scotiabank”) acts as administrative agent. There is approximately $700 million in principal 

amount of Fuel Line Loans currently outstanding under the Fuel Line Facilities.

2. The proceeds of the Fuel Line Loans were used by PREPA to purchase fuel and to 

pay for other working capital expenses that were necessary for PREPA to operate the system. 

 

2 Capitalized terms used but not defined herein shall have the meanings ascribed to them in the DIP Motion.

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These Fuel Line Loans are Current Expenses3under the Trust Agreement, as expressly 

acknowledged by PREPA in the Fuel Line Facilities and elsewhere.4

3. On January 27, 2018, PREPA by and through the Oversight Board and AAFAF 

filed the DIP Motion requesting, among other things, authorization for PREPA to obtain 

postpetition financing from the Commonwealth, as lender (the “DIP Facility”). The DIP Motion 

seeks priming liens on the Revenue and also seeks superpriority and Current Expense status for 

loans extended under the DIP Facility.

4. Based on PREPA’s publicly filed 13-week cash flow forecast, Solus recognizes that 

PREPA has an immediate liquidity need to meet its operating expenses because PREPA’s General 

Fund is projected to be negative by the week ending February 16, 2018.5 Until the CDL loans or 

other sources of funding become available, the DIP Facility appears to be the best (and only) option 

to pay for PREPA’s near-term operating expenses. 

5. Nevertheless, Solus believes certain modifications to the DIP Facility are 

appropriate, including (i) limiting the amount of loans that can be borrowed on an interim basis to 

the amount that PREPA projects will be needed during this interim period (per the 13-week cash 

flow forecast); (ii) preserving PREPA’s setoff rights against amounts owed by the Commonwealth 

and its instrumentalities; and (iii) requiring notice and a hearing for any material amendments to 

the DIP Facility. These necessary modifications are described in further detail in the limited 

 

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“Current Expenses” are defined in the Trust Agreement to include PREPA’s “reasonable and necessary 

current expenses of maintaining, repairing and operating the System.” Trust Agreement at 15.

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See, e.g., § 2.12 of the Solus Fuel Line Facility (“The Bank and Borrower acknowledge that all obligations 

hereunder...constitute Current Expenses under the Trust Agreement....”). 

5 DIP Motion ¶ 19. 

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objection to the DIP Motion filed by Scotiabank as administrative agent under the Scotiabank Fuel 

Line Facility, which Solus hereby joins and incorporates by reference. 

6. Subject to these modifications, Solus supports approval of the DIP Motion and 

PREPA’s limited borrowing under the DIP Facility on an interim basis until the CDL or other 

more favorable sources of funding become available.6Just as with the Fuel Line Facilities, the use 

of proceeds under the DIP Facility is limited to paying PREPA’s necessary and ongoing operating 

expenses. The DIP Facility may only be used to pay for delineated categories of permitted 

operating expenses, which include “employee payroll and benefits... [purchase of] normal 

operational materials, supplies, fuel and power supplies, vendor and service payments 

(collectively, “Eligible Uses”)...”7 Each category of Eligible Uses is also separately identified in 

the Initial 13-Week Budget which will govern PREPA’s expenditures. Importantly, the DIP 

Facility has favorable interest rate and fees, will not be used to pay Title III costs, other than the 

Carve Out, and does not impose onerous case milestones. 

7. Finally, because the DIP Facility proceeds (like the Fuel Line Facilities) will be 

used exclusively for working capital expenses, Solus agrees with PREPA, AAFAF and the 

Oversight Board that the loans extended under the DIP Facility are Current Expenses and should 

benefit from the priorities afforded all Current Expenses under the Trust Agreement, including the 

Fuel Line Loans.

8. Accordingly, Solus supports approval of the DIP Facility on an interim basis and 

entry of the Interim Financing Order, subject to the modifications described above.

 

6 The Commonwealth and its instrumentalities owe PREPA significant amounts for electricity usage. Those 

amounts should be paid before PREPA borrows more than the shortfall that is forecasted for the interim 

period. 

7 DIP Motion ¶ 1 (Summary of Terms). 

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RESERVATIONS OF RIGHTS

9. Solus reserves all of its rights under PROMESA and any other applicable law, 

including the right to withdraw, supplement or modify this Statement and to file additional 

responses after the Credit Documents are filed and in advance of a final hearing. 

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Dated: February 1, 2018 Respectfully submitted,

s/ Jose L. Ramirez-Coll

Jose L. Ramirez-Coll

USDC-PR No. 221702

jramirez@amrclaw.com

ANTONETTI MONTALVO & RAMIREZ COLL

P.O. Box 13128

San Juan, PR 00908

Telephone: (787) 977-0303

Facsimile: (787) 977-0323

s/ Sandy Qusba

Sandy Qusba*

Nicholas Baker*

Edward R. Linden*

SIMPSON THACHER & BARTLETT LLP

425 Lexington Avenue

New York, New York 10017-3954

Telephone: (212) 455-2000

Facsimile: (212) 455-2502

Email: squsba@stblaw.com

nbaker@stblaw.com

edward.linden@stblaw.com

*admitted pro hac vice in No. 17-04780-LTS

Attorneys for Solus Alternative Asset 

Management LP 

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CERTIFICATE OF SERVICE

I hereby certify that, on this same date, I electronically filed the foregoing with the Clerk 

of the Court using the CM/ECF system, which will send notifications of such filing to all 

CM/ECF participants in this case. 

s/ Jose L. Ramirez-Coll

Jose L. Ramirez-Coll

USDC-PR No. 221702

jramirez@amrclaw.com

ANTONETTI MONTALVO & RAMIREZ COLL

P.O. Box 13128

San Juan, PR 00908

Telephone: (787) 977-0303

Facsimile: (787) 977-0323

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