IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

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

No. 17-BK-3283-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

No. 17-BK-4780-LTS

(Jointly Administered)

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

as representative of

PUERTO RICO ELECTRIC POWER AUTHORITY,

Movant,

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 

(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).

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v.

AD HOC GROUP OF PREPA BONDHOLDERS; HON. 

RAFAEL HERNÁNDEZ-MONTAÑEZ, in his capacity as 

Speaker of the Puerto Rico House of Representatives;

HON. JOSÉ L. DALMAU-SANTIAGO, in his capacity as 

President of the Puerto Rico Senate; PV PROPERTIES, 

INC.; SISTEMA DE RETIRO DE LOS EMPLEADOS DE 

LA AUTORIDAD DE ENERGÍA ELÉCTRICA; UNIÓN 

DE TRABAJADORES DE LA INDUSTRIA ELÉCTRICA 

Y RIEGO, INC.; MANUEL GONZALEZ JOY; 

WHITEFISH ENERGY HOLDINGS, LLC; OFFICIAL 

COMMITTEE OF UNSECURED CREDITORS; U.S. 

BANK NATIONAL ASSOCIATION, in its capacity as 

bond trustee; SYNCORA GUARANTEE INC.; ASSURED 

GUARANTY CORP.; ASSURED GUARANTY 

MUNICIPAL CORP.; AHIMSA FOUNDATION; AD 

HOC COMMITTEE OF NATIONAL ASSIGNED 

CLAIMS

Respondents.

SUPPLEMENTAL OMNIBUS REPLY OF THE PUERTO 

RICO ELECTRIC POWER AUTHORITY TO OBJECTIONS 

TO THE (I) ADEQUACY OF THE DISCLOSURE STATEMENT, (II) RELIEF 

REQUESTED IN THE DISCLOSURE STATEMENT MOTION, AND (III) RELIEF 

REQUESTED IN THE CONFIRMATION DISCOVERY PROCEDURES MOTION

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TABLE OF CONTENTS

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

BACKGROUND ............................................................................................................................ 5

OMNIBUS REPLY ........................................................................................................................ 7

I. THE NATIONAL DEAL DOES NOT RENDER THE AMENDED PLAN 

PATENTLY UNCONFIRMABLE .............................................................................. 7

A. The Amended Plan Is Not Patently Unconfirmable as a Result of 

Unfair Discrimination ....................................................................................... 7

B. The Separate Classification of National Does Not Prohibit Approval of 

the Disclosure Statement nor Render the Amended Plan Patently 

Unconfirmable ................................................................................................ 10

C. The Trust Agreement Does Not Require All Bond Claims to be in the 

Same Class or Prohibit the Oversight Board from Separately 

Classifying Bond Claims ................................................................................ 14

D. The Treatment of National’s Reimbursement Claim and National’s 

Receipt of Certain Consideration in the Form of Fees Do Not Render 

the Amended Plan Patently Unconfirmable.................................................... 16

II. THE DISCLOSURE STATEMENT CONTAINS ADEQUATE 

INFORMATION REGARDING BASIS FOR NATIONAL SETTLEMENT .......... 18

III. THE DISCLOSURE STATEMENT CONTAINS ADEQUATE 

INFORMATION REGARDING THE LEGACY CHARGE..................................... 21

IV. THE DISCLOSURE STATEMENT CONTAINS ADEQUATE 

INFORMATION REGARDING THE NEW BONDS AND CVI............................. 23

V. UTIER’S SUPPLEMENTAL OBJECTION RAISES ISSUES NOT 

RELEVANT TO THIS PROCEEDING..................................................................... 23

A. UTIER Prematurely and Improperly Argues the Merits of CBA 

Rejection ......................................................................................................... 23

B. SREAEE Continues to Misconstrue the Proposed Treatment of 

Pension Claims................................................................................................ 24

CONCLUSION............................................................................................................................. 28

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TABLE OF AUTHORITIES

Page(s)

CASES

Granada Wines, Inc. v. New England Teamsters & Trucking Indus. Pension Fund,

748 F.2d 42 (1st Cir. 1984)......................................................................................................11

In re Barney & Carey Co.,

170 B.R. 17 (Bankr. D. Mass. 1994) .........................................................................................8

In re City of Colo. Springs Spring Creek Gen. Improvement Dist.,

187 B.R. 683 (Bankr. D. Colo. 1995)................................................................................11, 14

In re Corcoran Hosp. Dist.,

233 B.R. 449 (Bankr. E.D. Cal. 1999).....................................................................................11

In re Destileria Nacional, Inc.,

No. 20-01247, 2021 WL 820178 (Bankr. D.P.R. Mar. 3, 2021) .............................................13

In re Dow Corning Corp.,

244 B.R. 634 (Bankr. E.D. Mich. 1999)..................................................................................11

In re Hanish, LLC,

570 B.R. 4 (Bankr. D.N.H. 2017)............................................................................................12

In re Hermanos Torres Perez Inc.,

No. 09-05595 EAG, 2011 WL 5854929 (Bankr. D.P.R. Nov. 21, 2011)............................8, 11

In re Red Mountain Mach. Co.,

448 B.R. 1 (Bankr. D. Ariz. 2011).....................................................................................12, 14

In re Rosewood at Providence, LLC,

470 B.R. 619 (Bankr. M.D. Ga. 2011).....................................................................................12

In re Sacred Heart Hosp.,

182 B.R. 413 (Bankr. E.D. Pa. 1995) ......................................................................................11

In re Save Our Springs (S.O.S.) Alliance, Inc.,

388 B.R. 202 (Bankr. W.D. Tex. 2008)...................................................................................11

In re SPM Mfg. Corp.,

984 F.2d 1305 (1st Cir. 1993)..................................................................................................13

In re Tribune Co.,

972 F.3d 228 (3rd Cir. 2020) .................................................................................................7, 8

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U.S. Bank N.A. v. Vill. at Lakeridge, LLC (In re Vill. at Lakeridge, LLC),

814 F.3d 993 (9th Cir. 2016) ...................................................................................................13

Victory Park Credit Opportunities, LP v. VPR Liquidation Tr.,

539 B.R. 305 (W.D. Tex. 2015).............................................................................................8, 9

STATUTES

11 U.S.C. § 509(c) ...................................................................................................................15, 16

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

11 U.S.C. § 1125(a)(1).............................................................................................................22, 24

PROMESA § 301(a)......................................................................................................................22

PROMESA § 305...........................................................................................................................20

Puerto Rico Energy Public Policy Act, Act 17-2019, § 6(a) ...........................................................4

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To the Honorable United States District Court Judge Laura Taylor Swain:

The Oversight Board,

2 as Title III representative of PREPA, respectfully submits this 

supplemental omnibus reply (the “Supplemental Omnibus Reply”) in support of approval of the 

Disclosure Statement, and in response to the supplemental objections filed in connection with the 

same. In support of this Supplemental Omnibus Reply, the Debtor respectfully states as follows:

Preliminary Statement

1. The Oversight Board has always sought, and continues to seek, to build as much 

consensus as possible for Title III plans of adjustment, including PREPA’s. The Oversight Board 

is pleased it was able to reach a settlement with National Public Finance Guarantee Corporation 

(“National”), embodied in the National PSA, of its approximately $836 million in claims arising 

from its ownership or insurance of bonds (the “National Insured Bond Claim”) and an estimated 

$244.7 million in claims for reimbursement on account of payments and costs incurred with respect 

to bonds it insures (“National Reimbursement Claim”). In satisfaction of these claims, which 

National asserted were fully secured and owed par plus accrued interest, National will receive 

Series B Bonds in the amount of 71.65% of the National Insured Bond Claim and 20% of the

National Reimbursement Claim. The Amended Plan enjoys the support of three major classes of 

creditors—representing over $1.8 billion in claims—and furthers PREPA’s path towards 

confirmation of the Amended Plan and emergence from Title III.

2. The Oversight Board filed the Amended Plan and an amended Disclosure Statement 

on February 9, 2023, to reflect the terms of the National PSA, enhance the terms of the Series B 

Bonds offered to settle with other bondholders, and supplement disclosures to address issues raised 

2 Capitalized terms used in this Supplemental Omnibus Reply but not defined herein shall have the meaning ascribed 

to such terms in the Omnibus Reply of the Puerto Rico Electric Power Authority to Objections to the (I) Adequacy of 

the Disclosure Statement, (II) Relief Requested in the Disclosure Statement Motion, and (III) Relief Requested in the 

Confirmation Discovery Procedures Motion [ECF No. 3206] (the “Omnibus Reply”).

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by various parties-in-interest in the initial Disclosure Statement objections. Various parties have 

filed supplemental objections to address these new features of the Amended Plan and Disclosure 

Statement which are addressed below. Other objections serve as impermissible sur-replies, or 

object to pre-existing features of the Amended Plan and Disclosure Statement, which should be

rejected as outside the scope of the Court’s order allowing supplemental objections. In any event, 

all supplemental objections should be overruled, and the confirmation process should be permitted 

to proceed. 

3. The Ad Hoc Group, Syncora, and Assured, who, unlike National, chose not to settle 

with the Oversight Board and instead litigate their claims to seek payment in full plus interest,

assail National’s decision to accept a significant haircut on its bond claims as somehow “unfair” 

and “discriminatory.” On one hand, they argue National is actually receiving an 83% recovery in 

Series B Bonds, while on the other they argue the Disclosure Statement recoveries are misleadingly 

high because the Series B Bonds will trade significantly under par. Their criticism of the National 

settlement further ignores that Settling Bondholders could receive 100% recoveries on their claims 

based on the outcome of the Amended Lien & Recourse Challenge and will also receive CVI, 

while National’s recovery on the National Insured Bond Claim is capped at 71.65% and National 

will not receive any CVIs in the Amended Plan. Regardless, these issues are not related to the 

adequacy of disclosure of the National settlement. As these parties recently admitted, issues such 

as unfair discrimination and the basis for settlement require development of the factual record,3

and thus the National settlement cannot render the Amended Plan patently unconfirmable on its 

face.

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

Municipal Corp., and Syncora Guarantee, Inc. Concerning the Government Parties’ Refusal to Commence Plan 

Discovery [ECF No. 3219] (the “Informative Motion”) ¶ 4 (“The reasoning behind those settlements [with National 

and the Fuel Line Lenders] will need to be explored through discovery”).

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4. Other objections argue the separate classification of National’s claim renders the 

Amended Plan patently unconfirmable. But this Court has previously held that classification is a 

confirmation issue which involves factual inquiry into the business or governmental justification 

of separate classification. See, e.g., Case No. 17-bk-3283-LTS, ECF No. 19812 ¶ 64. Here, 

National’s rights differ from other bond claims as they have settled their claims to collateral 

security and negotiated for a custodial trust structure which necessitates separate classification. 

See Omnibus Reply at 19 n.8. 

5. Certain objectors also take issue with the terms of the settlement as it relates to the 

National Reimbursement Claim. They argue that National is receiving postpetition interest while 

other bondholders are not, or that its reimbursement claim is not allowable. National’s 

reimbursement claim arises from PREPA’s prepetition contractual obligation to reimburse 

National for payments National made under its insurance policies to provide bondholders the 

interest PREPA did not pay. The reasonableness of PREPA’s settlement, providing it a 20% 

distribution, should be determined in connection with confirmation. If National’s reimbursement 

claim is allowable and not settled, it will cost PREPA far more than the 20% settlement. In any 

event, the treatment of the National Reimbursement Claim could never render the Amended Plan 

unconfirmable because the Amended Plan provides that if the settlement of that claim is not 

approved or the reimbursement claim is not allowed, National will not receive any recovery on 

account of the National Reimbursement Claim, but National would still be required to support the 

Amended Plan as long as it receives the settlement amounts unrelated to its reimbursement claim. 

See National PSA § 6.1(c).

6. As to the remaining Supplemental Objections addressing the adequacy of the 

information contained in the Disclosure Statement, the Supplemental Objections and comments 

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have either been addressed by revisions to the Disclosure Statement or should be overruled for the 

reasons set forth below and in the chart attached hereto as Exhibit A (the “Supplemental Omnibus 

Reply Chart”). The Oversight Board has incorporated certain of the additional requested 

inclusions in a modified Disclosure Statement filed contemporaneously herewith. A redline of the 

modified Disclosure Statement to the February 9, 2023, Disclosure Statement is attached hereto as 

Exhibit B.

7. The Amended Plan incorporates settlements of over $1.8 billion of claims and 

provides alternate treatments to creditors consistent with their legal rights in different litigation 

outcomes, while also ensuring PREPA can complete its transformation and achieve its mandate to 

provide electric power to the people of Puerto Rico in a reliable, clean, resilient, and affordable 

manner. See Act 17-2019 § 6(a). The contention of certain creditors that PREPA is taking “an 

unlimited number of ‘free shots’” at proposing plans (Syncora Supp. Obj. ¶ 12), is particularly

unmeritorious. First, PROMESA Title III only allows PREPA to propose plans of adjustment. 

Second, it was bondholders who requested the Court to set a deadline for the Oversight Board to 

submit a “toggle” plan before the Amended Lien & Recourse Challenge was resolved. The Court 

imposed a deadline for PREPA to either propose a plan (which could be a toggle plan), a detailed 

plan term sheet, a litigation path, or to show cause why the case should not be dismissed. PREPA 

proposed a toggle plan and a litigation path. Having procured the order imposing the deadline, 

these creditors now seek to derail confirmation before the confirmation hearing even begins and 

before the litigation is resolved. The Oversight Board respectfully submits their objections to 

Disclosure Statement approval based on patent unconfirmability should be overruled because they 

are wrong, and the Disclosure Statement should be approved.

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BACKGROUND

8. On December 16, 2022, the Oversight Board filed with this Court, among other 

things: (i) the Plan; (ii) the Disclosure Statement; (iii) the Disclosure Statement Motion; and (iv) 

the Confirmation Discovery Procedures Motion.

9. The Court established February 3, 2023, at 5:00 p.m. (AST), as the deadline to file 

objections to (i) the adequacy of the information contained in the Disclosure Statement, (ii) the 

relief requested in the Disclosure Statement Motion, and (iii) the relief requested in the 

Confirmation Discovery Procedures Motion (the “Objection Deadline”). See ECF No. 3132.

10. On or before the Objection Deadline, the Oversight Board received eleven (11) 

objections to (i) the Disclosure Statement, (ii) the relief requested in the Disclosure Statement 

Motion, and/or (iii) the relief requested in the Confirmation Discovery Procedures Motion.4

11. On February 9, 2023, the Oversight Board filed the Amended Plan [ECF No. 3200]

and Disclosure Statement [ECF No. 3201] reflecting, among other things, the inclusion of a 

settlement reached between the Oversight Board and National, revisions to the Disclosure 

Statement to reflect that settlement and other changes contained in the Amended Plan, and 

numerous changes to accommodate the Objections to the Disclosure Statement and Disclosure 

Statement Motion. 

12. On February 10, 2023, the Oversight Board filed the Omnibus Reply. 

13. That same day, the Ad Hoc Group filed an Urgent Motion to File Supplemental 

Objection to Disclosure Statement for First Amended Title III Plan of Adjustment of the Puerto 

4 Objections were received from: (1) Hon. Rafael Hernández-Montañez [Case No. 17-bk-3283-LTS, ECF No. 23311]; 

(2) PV Properties, Inc. [Case No. 17-bk-3283-LTS, ECF No. 23567]; (3) UTIER [ECF No. 3178]; (4) the SREAEE 

[ECF No. 3179]; (5) Manuel Gonzalez Joy [ECF No. 3181]; (6) the Committee [ECF No. 3186]; (7) the PREPA Bond 

Trustee [ECF No. 3187]; (8) Assured [ECF No. 3188]; (9) the Ad Hoc Group [ECF No. 3189]; (10) Syncora [ECF 

No. 3190]; and (11) Whitefish Energy Holdings, LLC [ECF No. 3185].

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Rico Electric Power Authority [ECF No. 3204], requesting permission for the Ad Hoc Group and 

other parties in interest to file supplemental objections to the amended Disclosure Statement. 

14. On February 13, 2023, the Court entered the Order Granting Urgent Motion to File 

Supplemental Objection to Disclosure Statement for First Amended Title III Plan of Adjustment of 

the Puerto Rico Electric Power Authority [ECF No. 3210], granting the Ad Hoc Group, and any 

other parties in interest, permission to file supplemental objections to the amended Disclosure 

Statement on or before 3:00 p.m. (AST) on February 17, 2023, with replies due on or before 3:00 

p.m. (AST) on February 21, 2023. 

15. On February 17, 2023, the Oversight Board received supplemental objections and 

joinders to supplemental objections from the Ad Hoc Group [ECF No. 3225] (the “AHG Supp. 

Obj.”), the Committee [ECF No. 3226] (the “UCC Supp. Obj.”), UTIER [ECF No. 3221] (the 

“UTIER Supp. Obj.”), the SREAEE [ECF No. 3220] (the “SREAEE Supp. Obj.”), PV Properties 

[ECF No. 3230] (the “PV Properties Supp. Obj.”), the Trustee [ECF No. 3224] (the “Trustee Supp. 

Obj.”), Syncora [ECF No. 3223] (the “Syncora Supp. Obj.”), the National Assignees (as defined 

below) [ECF No. 3222] (the “AHC Obj.”), AHIMSA [ECF No. 3228] (the “AHIMSA Obj.”), and 

Assured [ECF No. 3229] (collectively, the “Supplemental Objections”). 

16. Contemporaneously herewith, the Oversight Board filed the Modified Disclosure 

Statement for the First Amended Title III Plan of Adjustment of the Puerto Rico Electric Power 

Authority incorporating, among other things, changes to accommodate the Supplemental 

Objections to the Disclosure Statement.

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OMNIBUS REPLY

17. For the reasons set forth herein, the Supplemental Objections should be overruled 

in their entirety.5

I. THE NATIONAL DEAL DOES NOT RENDER THE AMENDED PLAN 

PATENTLY UNCONFIRMABLE 

18. The primary change in the Amended Plan is its incorporation of the terms of 

settlement with National. National is a major monoline insurer, holding or insuring over $800

million in PREPA bonds. Various Supplemental Objectors complain about the settlement 

embodied in the National PSA, and the different treatment National will receive pursuant to the 

Amended Plan. Further, the Committee contends the National PSA renders the Disclosure 

Statement unintelligibly complex. These objections will be addressed in turn. 

A. The Amended Plan Is Not Patently Unconfirmable as a Result of Unfair 

Discrimination

19. The Ad Hoc Group, Syncora, and the National Assignees argue the Amended 

Plan’s treatment of National unfairly discriminates against the other bondholder classes. AHC 

Obj. at 7; Syncora Supp. Obj. ¶¶ 5–11; AHG Supp. Obj. ¶¶ 5–16. Unfair discrimination, however,

is a confirmation objection, and, indeed, is only a valid objection if the class that contains the 

objecting parties ultimately rejects the Amended Plan. If, for example, the Settling Bondholders 

Class (Class 1) votes to accept the Amended Plan, then no unfair discrimination challenge can be 

raised with regard to that Class at confirmation. In re Tribune Co., 972 F.3d 228, 242 (3rd Cir. 

5 Failure of the Debtor to address other arguments made in the Supplemental Objections does not constitute a waiver of 

the Debtor’s rights to object to such arguments at the hearing(s) to consider approval of the Disclosure Statement or 

confirmation of the Amended Plan. The Debtor denies many of the factual and legal assertions and characterizations 

contained in the Supplemental Objections and, for the avoidance of doubt, affirms that the Disclosure Statement, 

Disclosure Statement Motion, and Confirmation Procedures Discovery Motion all can be approved or granted over 

each and every objection. Similarly, the Amended Plan is confirmable, and the Oversight Board will demonstrate it 

satisfies all applicable confirmation standards at the confirmation hearing. 

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2020). None of the Supplemental Objectors address the considerable authority, including from 

this Court, refusing to consider unfair discrimination at the disclosure statement stage. See

Omnibus Reply ¶¶ 22, 33. 

20. The Ad Hoc Group, Syncora, and Assured, moreover, have essentially conceded 

the Amended Plan cannot be patently unconfirmable on the ground of unfair discrimination, as 

only a few days ago they filed an “informative motion” demanding extensive discovery into, 

among other things, the factual issues underpinning the settlements making up the Amended Plan 

and the different treatment being received by National and the other bondholders. See Informative 

Motion ¶ 4. By seeking discovery on the basis that unfair discrimination is an intensely factual 

issue, these parties can no longer maintain that unfair discrimination is apparent from the face of 

the Amended Plan. June 17, 2022 Hr’g Tr. 26:22–27:4.

21. In any event, these unfair discrimination objections are without merit. As the cases 

cited by the Supplemental Objectors demonstrate, the difference in treatment between National 

and the other bondholder classes is permissible if it is supported by a “legitimate basis” or, in this 

case, a governmental purpose. In re Barney & Carey Co., 170 B.R. 17, 25 (Bankr. D. Mass. 1994) 

(cited by AHG Supp. Obj. ¶ 5); see also In re Hermanos Torres Perez Inc., No. 09-05595 EAG, 

2011 WL 5854929, at *9 (Bankr. D.P.R. Nov. 21, 2011) (cited by Syncora Supp. Obj. ¶ 7; AHG

Supp. Obj. ¶ 5) (permitting materially different treatment based on “compelling justifications”). 

And, among other things, courts have held different treatment is justifiable on the basis of 

settlement, Victory Park Credit Opportunities, LP v. VPR Liquidation Trust, 539 B.R. 305, 315 

(W.D. Tex. 2015) (quoting In re Mortgage Inv. Co. of El Paso, Tex., 111 B.R. 604 (Bankr. W.D.

Tex. 1990)), and contribution to the reorganization by the creditor. In re Tribune Co., 972 F.3d at 

244. 

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22. Here, National is receiving different treatment than the other bondholders because, 

among other things, it settled its asserted entitlement to collateral security and other issues when 

other bondholders would not. Under the National PSA, the Oversight Board obtained a variety of 

benefits, including certainty with respect to National’s treatment (and any concomitant cost to 

PREPA ratepayers) and the pre-pledged support of a large creditor for the Amended Plan. 

National’s treatment compensates National for these benefits, by giving National certainty as to 

its treatment (71.65% on account of its bond claim) in exchange for the greater certainty given to 

PREPA and the Oversight Board.6

 This settlement and the contribution it makes to PREPA’s 

reorganization justify the disparate treatment. Victory Park Credit Opportunities, LP, 539 B.R. at

315.

23. Moreover, National’s treatment will not necessarily pay it more than the treatment 

other bondholders will receive. National’s recovery is fixed at 71.65% with no CVI, unlike 

Settling Bondholders, who, in the Amended Plan, could receive 100% recoveries from the New 

Bonds and CVIs they receive, depending on the outcome of the Amended Lien & Recourse 

Challenge and distributions made on account of the CVI. It is thus incorrect to contend National 

is getting “a vastly better deal for identical claims” than the Settling Bondholders. AHG Supp. 

Obj. ¶ 8; see also Syncora Supp. Obj. ¶¶ 2, 7–8. National is getting different, more stable 

treatment, but is not receiving the upside other creditors may potentially receive.

7

 

6 Various creditors attempt to increase the amount that they argue National is receiving by including in the amount that 

National is receiving on account of its reimbursement claim and/or certain amounts it will receive on accounts of its 

fees and/or expenses. These other recoveries are discussed infra in Section I.D. They are not, however, payments 

made on account of National’s bond claims, and thus should not be considered in the unfair discrimination calculus. 

Uninsured bondholders have no rights to reimbursement, which arise from postpetition payments made by National 

on account of its insurance policies. Nor do they have an entitlement to be paid fees and expenses.

7 National’s treatment is not based on the insured nature of the National bonds, cf. Syncora Supp. Obj. ¶ 9, nor on 

“whether [the bond] was insured by a particular monoline.” Id. ¶ 10. The considerations discussed in the main text, 

and which justify different treatment, only apply to claims held by National, because National entered into the National 

PSA.

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24. Nor is it true that National is receiving “more in a ‘good-faith settlement’ than NonSettling Bondholders can receive if they win.” Syncora Supp. Obj. ¶ 5 (emphasis in original). 

While the Amended Plan does not contemplate providing Non-Settling Bondholders with greater 

recovery than approximately 56% in the event they prevail in the Amended Lien & Recourse 

Challenge, the Oversight Board has expressly noted that if the Non-Settling Bondholders win in 

both the Lien Counts and Recourse Counts and demonstrate that the value of their collateral 

exceeds the value of the Bonds available for distribution to them, then the Amended Plan might

not be confirmable.8

 In the event they obtained such litigation victories, Bondholders may be 

entitled to receive more than National. 

25. At bottom, instead of continuing to litigate, National has settled its asserted claim 

to liens on all of PREPA’s future revenues, which, if they prevailed on, could jeopardize PREPA’s 

ability to restructure. In return for that settlement, and pledging to support the Amended Plan, 

National is receiving an agreed-upon recovery. The Non-Settling Bondholders must be paid the 

value of their share of the collateral if they prevail in the Amended Lien & Recourse Challenge. 

The Amended Plan cannot otherwise be confirmed. If the Non-Settling Bondholders prevail on 

the Recourse Count, but not the Lien Count, they can be paid less than National because National 

is receiving consideration for settling the lien challenge.

B. The Separate Classification of National Does Not Prohibit Approval of the 

Disclosure Statement nor Render the Amended Plan Patently Unconfirmable

26. In their Supplemental Objections, neither Syncora nor the Ad Hoc Group challenge 

the separate classification of National. Indeed, on the contrary, Syncora recognizes that 

8 Notably, it is unlikely any of the objecting parties will elect to join the Settling Bondholder class and thus they will 

not even be part of the class against which the Amended Plan allegedly discriminates. The bondholders and monolines 

who elect to join this class will be known by the February 28 hearing on the adequacy of the Disclosure Statement, as 

acceptances are due February 24.

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“legitimate reasons” to separately classify National exist if National negotiated for a custodial trust 

structure and commutations (Syncora Supp. Obj. ¶ 2)—which it did. A new set of parties, 

however, calling themselves the “Ad Hoc Committee of National Claim Assignees” (the “National 

Assignees”)9 filed a supplemental objection challenging their classification as uninsured 

bondholders in Class 2 and not in National’s class (Class 5). AHC Obj. at 6–7. The National 

Assignees claim they own bonds previously owned by National and, as a result, their claims are 

“identical” to National’s and cannot be separately classified. id. at 9, 11–12. The National 

Assignees are wrong. As a preliminary matter, classification is a matter for confirmation, not the 

disclosure statement hearing. Omnibus Reply ¶¶ 27–28. As such, National Assignees’ arguments 

are premature and should not be considered at this time. 

27. In any event, the National Assignees’ claims should be classified separately from 

National’s claims. Bankruptcy Code § 1122(a) only provides that similar claims may be classified 

together, it does not require that all similar claims be classified in one class.10 National’s separate 

classification is justified (indeed, required) because National settled its claims, including all 

asserted lien and recourse claims and reimbursement claims, in exchange for, among other things, 

an obligation to vote for the Amended Plan and a special custodial trust structure applicable to the 

bonds it continues to insure. Omnibus Reply ¶ 31; see also In re Corcoran Hosp. Dist., 233 B.R. 

449 (Bankr. E.D. Cal. 1999) (existence of settlement with creditor justified separate classification); 

In re Dow Corning Corp., 244 B.R. 634 (Bankr. E.D. Mich. 1999) (same). This settlement changes 

9 The National Assignees have not yet filed their required Rule 2019 disclosure and so the Oversight Board—

ironically—does not have adequate information regarding their claims and the composition of their so-called Ad Hoc 

Committee. 

10 See, e.g., In re City of Colo. Springs Spring Creek Gen. Improvement Dist., 187 B.R. 683, 690 (Bankr. D. Colo. 1995) 

(“In summary, there is no requirement in § 1122 that similar claims be classified together. Therefore, it does not 

matter whether the Bond Claims of Class III are similar to Bond Claims in other classes.”). The Title III Court has 

previously determined that Granada Wines, Inc. v. New England Teamsters & Trucking Indus. Pension Fund, 748 

F.2d 42, 43 (1st Cir. 1984), is not applicable in these PROMESA Title III cases. July 14, 2022, Hr’g Tr. 80:13–25. 

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the legal character of the claims and differentiates it from the non-settling bond claims of the 

National assignees. Id.; In re Save Our Springs (S.O.S.) Alliance, Inc., 388 B.R. 202, 236 (Bankr. 

W.D. Tex. 2008) (permitting separate classification of settled claims because settlement rendered 

the claims “uniquely situated”); In re Sacred Heart Hosp., 182 B.R. 413 (Bankr. E.D. Pa. 1995) 

(holding that classification of settling bond claims into one class was appropriate because 

“[b]ondholders effectively gave up both their secured and unsecured claims in return for a certain 

specific treatment under the settlement agreement . . . .”). Moreover, the custodial trust structure 

alone justifies separate classification, as it cannot be applied to uninsured bonds, such as those held 

by the National Assignees. Omnibus Reply ¶ 39. The National Assignees ignore this argument 

and these cases, which are fatal for their argument, despite the fact they were in the Omnibus 

Reply. The National Assignees are not subject to the same settlement, have not agreed to settle 

their lien and recourse assertions in exchange for a stated recovery, and have not agreed to support 

the Amended Plan. 

28. The National Assignees’ gerrymandering assertions (AHC Obj. at 12) are further 

without basis. There are at least three other (and maybe more) potential impaired accepting 

classes, even setting aside National’s separate classification. In re Hanish, LLC, 570 B.R. 4, 13 

n.26 (Bankr. D.N.H. 2017) (classification objection “moot” where there are several impaired 

accepting classes); In re Rosewood at Providence, LLC, 470 B.R. 619, 629 (Bankr. M.D. Ga. 2011) 

(classification scheme of plan not problematic “there is no suggestion of gerrymandering to create 

an accepting impaired class, because multiple impaired voting classes have accepted the plan”); In 

re Red Mountain Mach. Co., 448 B.R. 1, 7–8 (Bankr. D. Ariz. 2011) (where multiple impaired 

accepting classes exist, no classification violation in plan’s classification scheme).11 And, even if 

11 The National Assignees complain that the basis for National’s separate classification is not contained in the Amended 

Plan or Disclosure Statement. AHC Obj. at 12. That is not correct—the Disclosure Statement explains the settlement 

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the National Assignees were included with National in Class 5, the class may still vote to accept 

the Amended Plan.

29. For similar reasons, the National Assignees are incorrect that they must be 

classified with National because “a valid assignment of a claim . . . does not divest the claim of its 

priority in bankruptcy or alter the debtor’s obligation to pay the debt.” AHC Obj. at 10 (citing In 

re SPM Mfg. Corp., 984 F.2d 1305, 1318 (1st Cir. 1993)).12 Nothing in the Amended Plan divests 

the claims of the National Assignees of the priority of their claims. Rather, they are not classified 

in the same class as National because their claims have not been settled (and were divested by 

National before it entered into any settlement) nor could the custodial trust structure contemplated 

for the National bonds be implemented with respect to their uninsured bonds. Nothing prohibits 

that result.13 

and includes all the relevant background regarding the various items of litigation being settled. See Disclosure

Statement Section II.B.2.ii, V.G.1–2, V.G.7, VI.C.1. Regardless, there is no obligation for the Oversight Board to put 

forward its legal arguments in support of confirmation of the Amended Plan in either document. Rather, the Oversight 

Board will demonstrate separate classification satisfies the relevant standard at confirmation.

12 The National Assignees appear to assert that they possess reimbursement claims that should be classified in Class 6. 

AHC Obj. at 12. They offer no support for this proposition but, even if correct, for the same reasons explained in the 

main text those reimbursement claims should not be classified with National’s claims, because they are not subject to 

the same settlement. 

13 In re SPM Mfg. Corp., 984 F.2d at 1318, does not support the National Assignees. The National Assignees simply 

cite certain statements from the First Circuit’s decision rejecting an argument that certain claimants’ rights to certain 

moneys were subordinated to others due to the original holder divesting itself of its lien. Id. No such situation exists 

here. Similarly, the court in In re Destileria Nacional, Inc., No. 20-01247, 2021 WL 820178, at *2 (Bankr. D.P.R. 

Mar. 3, 2021), made a general statement that an assignee of a claim steps into the original claimant’s “shoes.” Nothing 

is said about separate classification of other claims based on the original claimant entering into a settlement. 

Moreover, the National Assignees ignore case law that recognizes that the assignment of a claim can alter the claim’s 

character. See, e.g., U.S. Bank N.A. v. Vill. at Lakeridge, LLC (In re Vill. at Lakeridge, LLC), 814 F.3d 993, 1000 (9th 

Cir. 2016) (insider claim does not retain insider status if sold to non-insider).

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C. The Trust Agreement Does Not Require All Bond Claims to be in the Same 

Class or Prohibit the Oversight Board from Separately Classifying Bond 

Claims

30. The Trustee’s Supplemental Objection repeats its argument14 that the Amended 

Plan is patently unconfirmable because it separately classifies Settling Bondholders and National 

from Non-Settling Bondholders. Trustee Supp. Obj. at 3–6. Under the Trustee’s theory, the Trust 

Agreement virtually mandates that all bond claims be placed in the same class. The Trustee, 

however, acknowledges that separate classification is permissible where there is “a legitimate 

reason supported by credible proof.” Id. at 3 (citing In re Chateaugay Corp., 89 F.3d 942, 949 (2d 

Cir. 1996)). As discussed above, supra Section I.A, and in the Omnibus Reply, Omnibus Reply ¶ 

27 (collecting cases), because this standard requires development of the factual record and inquiry 

into the circumstances of the case, this Court and others have refused to consider classification 

challenges at the disclosure statement stage. Moreover, as explained above, the settlement with 

National requires different treatment of its claims, and separate classification of National is 

required due to its custodial trust treatment. See supra Section I.B. And, while the Trustee 

complains “[t]he Oversight Board cites no case in which pari passu bondholder claims under a 

single indenture are split into plan subclasses” in a manner that violates the relevant indenture, 

Trustee Supp. Obj. at 3, the Trustee overlooks In re City of Colo. Springs Spring Creek Gen. 

Improvement Dist., 187 B.R. at 686–92, which permitted a plan that (1) separately classified 

14 The Trustee’s Supplemental Objection does not raise any issues specific to the Amended Plan and amended Disclosure 

Statement. Instead, it is an impermissible sur-reply almost entirely dedicated to rehashing arguments the Trustee’s 

original objection already raised and already refuted by the Omnibus Reply—namely, that the Trust Agreement 

purportedly precludes separate settlements and classifications of bond claims. See Trustee Supp. Obj. at 1 (“The 

Amended Plan and Amended Disclosure Statement do little, if anything, to address the prior objections of the PREPA 

Bond Trustee.”); id. at 3 (citing to and responding to the Oversight Board’s omnibus reply). It should be disregarded 

for that reason, and because it raises premature confirmation objections that are irrelevant to the adequacy of the 

Disclosure Statement.

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bondholders holding bonds issued under the same trust indenture and (2) gave different classes of 

bondholders different treatment in violation of the applicable indenture.

31. The Trustee next argues that individual PREPA bondholders do not have the right 

to split off or settle “their portion” of the Trustee’s rights, such that the Settlement Offer is 

impermissible. Trustee Supp. Obj. at 3. The Settlement Offer, however, does not settle the 

Trustee’s rights, but enables a bondholder to choose which class they want to be in for purposes 

of settling the bondholder’s rights. The Trustee does not cite to any provision of the Trust 

Agreement that would bar a bondholder from settling its own rights, and none exists. The Trust 

Agreement’s no-action clause (Trust Agreement § 808) only limits an individual bondholder from 

pursuing remedies under the Trust Agreement that would affect all bondholders; it does not bar 

any bondholder from settling its claim in a manner that does not impact the rights of other, nonsettling bondholders (in the same way it could not bar an individual holder from selling their 

claim). Nor has the Trustee articulated how the settlement of these claims impacts Non-Settling 

Bondholders’ rights and remedies under the Trust Agreement when those rights are preserved and 

actively being litigated in the context of the Amended Lien & Recourse Challenge.15

32. In any event, the Trust Agreement is a prepetition contract not being assumed. It 

is just a claim. It is not specifically enforceable against PREPA and it cannot dictate classification 

under a federal plan of adjustment. PROMESA would preempt any contractual restriction on plan 

classification under the Trust Agreement (if one existed), in the same way that the Trustee admits 

individual bondholders have the right to vote their claims and bind a class to a certain treatment 

notwithstanding provisions in the Trust Agreement that require 100% consent to change interest 

15 Indeed, if the Trustee were correct about the scope of its asserted security interest, the fact that National and other 

bondholders settled their claims at reduced amounts would actually enhance Non-Settling Bondholders interests in 

the collateral, not impair their rights.

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and principal payment terms. See Trustee Supp. Obj. at 4. For the same reasons bondholders can 

vote, they can also elect to be included in the Settling Bondholder Class, and the Trustee points to 

nothing in PROMESA that prohibits such an outcome.

D. The Treatment of National’s Reimbursement Claim and National’s Receipt 

of Certain Consideration in the Form of Fees Do Not Render the Amended 

Plan Patently Unconfirmable

33. Syncora argues the Amended Plan is patently unconfirmable due to its treatment of 

the National Reimbursement Claim because (1) it constitutes payment of postpetition interest not 

provided to other bondholders and (2) it violates Bankruptcy Code § 509(c). Syncora Supp. Obj. 

¶ 11. The Ad Hoc Group similarly argues that the National Reimbursement Claim is not allowable 

because it is allegedly a claim for postpetition interest. AHG Supp. Obj. ¶¶ 10–12. Both of these 

arguments are incorrect because the treatment of National’s claim settles the allowability of the 

claims. It settles all issues including the contentions the objectors make. National has asserted the 

Reimbursement Claim is not on account of postpetition interest but, instead, arises from PREPA’s 

covenant under prepetition reimbursement agreements that require PREPA to reimburse National 

for payments it makes on account of bonds. See Disclosure Statement Section II.B.2.ii. If National 

is correct, its reimbursement claim would not be on account of postpetition interest and thus 

allowable. Moreover, National has asserted Bankruptcy Code § 509(c) is not applicable because 

the reimbursement claim is not on account of a bond claim but, instead, a separate contractual 

obligation to reimburse National. In light of the potential infirmities in the claim, the Oversight 

Board has determined to settle National’s reimbursement claim in an allowed amount of 20% of 

the asserted claim, far below the settlement of its bond claim. The reasonableness of that 

settlement is a confirmation issue. Regardless, the Amended Plan’s treatment of the National 

Reimbursement Claim cannot render the Amended Plan patently unconfirmable because the 

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settlement provides for that contingency. If the Court denies approval of the National settlement 

as it relates to the National Reimbursement Claim for any reason, National would not be entitled 

to receive any distribution on account of the National Reimbursement Claim, but the balance of 

the settlement would survive. See National PSA § 6.1(c).

34. The Ad Hoc Group and Syncora also argue the fees and expenses National would 

receive under the Amended Plan are “a backdoor recovery on [National’s] claim.” AHG Supp. 

Obj. ¶ 13; see also Syncora Supp. Obj. ¶ 2 n.6 (referring to fees as a “gift with purchase”). 

Syncora and certain members of the Ad Hoc Group, of course, did not complain when they

received a similar fee pursuant to the PSA signed in connection with the Commonwealth 

restructuring, Case No. 17-bk-3283-LTS, ECF No. 19813 (“CW Plan”) Art. III.3, and neither the 

Ad Hoc Group nor Syncora had qualms about receiving the “waiver and support fees” under the 

2019 RSA. Definitive Restructuring Support Agreement, available at https://drive.google.com/

open?id=1STXXAeklqmG_rJN5zqWCwJMoN8-1cOpO (last accessed Feb. 20, 2023), § 4. Both 

the Ad Hoc Group and Syncora ignore or expressly elide the fact the fees and expenses of 

supporting creditors have been included in every Title III plan confirmed by this Court, and have 

been provided separately from treatment on the supporting creditors’ claims. CW Plan Art. III; 

Case No. 17-bk-3283-LTS, ECF No. 5048, Ex. A, Art. III; Case No. 17-bk-3283-LTS, ECF No. 

22581, Ex. A, Art. III. 

35. The Ad Hoc Group, however, attempts to distinguish the RSA fees approved in 

other cases because those RSAs “resulted in settlements in which other, less-active holders were 

able to participate.” AHG Supp. Obj. ¶ 15. The fees and expenses being paid to National are no 

different—they constitute consideration, separate from the treatment of National’s prepetition 

claims, for National negotiating and structuring the terms of the Series B Bonds and the New 

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Master Indenture which will be distributed to almost all creditors under the Amended Plan. For 

example, the Amended Plan now contains an interest rate covenant for Series B Bonds that was 

added as part of the negotiations with National. See Amended Plan, Article XIX.J. The Oversight 

Board will demonstrate that these fee and expense payments satisfy the confirmation standards at 

the confirmation hearing. They do not render the Amended Plan patently unconfirmable. 

II. THE DISCLOSURE STATEMENT CONTAINS ADEQUATE INFORMATION 

REGARDING BASIS FOR NATIONAL SETTLEMENT

36. The Committee argues the Disclosure Statement “offers practically no explanation 

of the underlying issues being settled” under the National PSA to satisfy Bankruptcy Rule 9019. 

UCC Supp. Obj. ¶ 14. To the contrary, the Disclosure Statement provides ample information on

the issues being settled under the National PSA and the rationale for the settlement. Section I.A 

of the Disclosure Statement describes the National Bond Claim and National Reimbursement 

Claim and explain the National PSA is based on “several factors, including a settlement of its 

asserted security interest in PREPA’s future revenues, and its asserted right to appoint a receiver 

for PREPA.” The issues surrounding National’s security interest and assertion of entitlement to 

par plus interest are comprehensively discussed in numerous places describing the Amended Lien 

& Recourse Challenge (see, e.g., Disclosure Statement Sections II.B.24, II.B.4, V.G.2, VI.C), 

while National’s asserted receiver right, among others, is comprehensively discussed in 

descriptions of various receiver motions (see, e.g., Disclosure Statement Sections V.G.2, V.G.7).

The risks associated with the Oversight Board losing on those issues are similarly described in 

numerous places. See, e.g., Disclosure Statement Section VIII.A. Section II.B.7 of the Disclosure 

Statement provide a list of the rights and active litigations National is settling, while Section II.B.2 

describes National’s obligations to support the Amended Plan and take other steps that inure to the 

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benefit of PREPA’s reorganization, such as its obligation to negotiate and approve the New Master 

Indenture. The National PSA is also attached as Exhibit N to the Disclosure Statement. 

37. The Committee next argues the Disclosure Statement lacks “the legal and factual 

bases for allowing [the National Reimbursement Claim].” UCC Supp. Obj. ¶ 14. Again, this is 

incorrect. The National Reimbursement Claim is comprehensively described in Section II.B.2(i)

of the Disclosure Statement. That section explains that the claim arises from certain Bond 

insurance agreements PREPA entered into with National 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, that PREPA would reimburse National with 

interest for any and all such payments and costs. Id. That section further explains that National 

asserts such claims are secured and that the settlement of the claim “avoids the risk that such claim 

could be allowed in full and secured by all future net or gross revenues of PREPA, if the Oversight 

Board does not prevail in the Amended Lien & Recourse Challenge.” Id. Whether settlement of 

the claim in the amount of 20% is reasonable is a question for confirmation. 

38. The Committee next argues the Disclosure Statement understates National’s 

recovery at 71.65% when its purported recovery is actually 83% before including the Interim 

Charge that National would receive during the case. This argument misses the mark. Both the 

Committee (¶¶ 5–6) and Ad Hoc Group (¶ 2) arrive at 83% by incorrectly attributing to the 

recovery on the National Insured Bond Claim: (i) 3.0% for compensation of National’s reasonable 

fees and expenses in negotiating the National PSA; (ii) 2.86% in consideration for structuring of 

payments to holders of claims of the National Insured Bonds; and (iii) the 20% recovery on the 

National Reimbursement Claim. The fees and expenses National would receive, however, are not 

on account of its claims, a fact the Disclosure Statement repeatedly discloses. See Disclosure 

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Statement Sections II.B.2, VI.C.2, and VI.D.4(ii). As in both the Commonwealth and HTA 

disclosure statements, Case No. 17-bk-3283-LTS, ECF No. 17628; Case No. 17-bk-3283-LTS, 

ECF No. 21269, professional fees and consummation costs are not accounted for in the calculation 

of a claimholder’s recovery on their Allowed Claim and are instead listed separately. Moreover, 

the 20% recovery on the National Reimbursement Claim is on account of a separately classified 

claim, arising from separate agreements with PREPA, and therefore is correctly separately 

accounted for in disclosing recoveries on respective claims. See Claim No. 23396 ¶ 12 (separately 

asserting a secured claim for “any amounts paid and the amount of any and all costs, expenses, 

and fees incurred by National in connection with” the underlying bonds to the extent allowed under 

separate agreements with PREPA); Claim No. 22078 ¶ 26 (same). There is also nothing 

misleading or inadequate, because, however creditors choose to conceptualize National’s recovery, 

its treatment was clearly disclosed and could be added up using simple arithmetic. 

39. Finally, the Committee may take issue with National receiving monies generated 

by an Interim Charge (UCC Supp. Obj. ¶ 7), but it does not contest that the charge itself is

adequately described in the Disclosure Statement (including through the attached National PSA). 

Rather, it argues the cash flow National would receive under the charge should be added to its 

disclosed recovery. The Interim Charge, however, is not a component of the Amended Plan, and 

therefore is not plan treatment on account of National’s claim. If approved by PREB, it would 

provide certain cash flow to National until the Effective Date, but if the Amended Plan is not 

confirmed, any interim payment received would reduce distributions to National under a future 

plan of adjustment. National PSA § 6.2. The Court has recognized that it cannot interfere with 

how a Title III debtor uses its property during a case pursuant to PROMESA § 305. Here, PREPA 

has determined, subject to PREB approval, to provide modest cash flow to National as part of a 

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settlement prior to the Amended Plan’s effective date, and not as treatment under a plan. That 

component of the settlement is adequately described, and since it is not part of the Amended Plan 

or National’s treatment under the Amended Plan, it does not need to be added to the description 

of National’s recovery under the Amended Plan. In a similar manner, monies totaling millions of 

dollars that were paid to the Ad Hoc Group, Syncora and Assured under the 2019 RSA are also 

not detailed in the Amended Plan. They were not distributed on account of the creditor’s 

prepetition claim—the same is true here with respect to National.

III. THE DISCLOSURE STATEMENT CONTAINS ADEQUATE INFORMATION 

REGARDING THE LEGACY CHARGE

40. The Committee and Ad Hoc Group argue the Disclosure Statement lacks adequate 

information regarding the Legacy Charge. See UCC Supp. Obj. ¶ 24; AHG Supp. Obj. ¶ 22–24. 

Specifically, the Committee argues adequate information requires “the underlying customer 

information necessary to calculate the projected annual revenues to support the illustrative cash 

flow for New Bonds.” UCC Supp. Obj. ¶ 24. The Committee cites no case or authority for the 

proposition that adequate information requires disclosure of the underlying data of projections so 

that hypothetical investors can recreate the projections. Here, the Disclosure Statement provides 

detailed information regarding the total projected net revenues available for payment of bonds,

Disclosure Statement Section I.B; id. Ex. P at 6,16 the projected costs not accounted for in the 

Fiscal Plan that must be taken from total revenues, id. Ex. P at 5–6, the intended rate structure by 

class, id. Section II.B.3, and detailed risks associated with design and implementation of the 

Legacy Charge. See, e.g., id. Sections VIII.B, VIII.E–F, VIII.M. The Oversight Board submits 

this information is adequate for creditors to know the treatment of their claims, the charges that 

16 The projected cash flows supporting debt service on the New Bonds are also attached as Exhibit D to the Disclosure 

Statement.

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will support that treatment, and the projected cash flow to be generated from the charge. The 

Oversight Board will, at confirmation, demonstrate the facts relevant to satisfying each 

confirmation requirement (e.g., feasibility, best interest of creditors, etc.). Through the depository 

and plan discovery procedures, interested parties will be provided the opportunity to review and 

contest the Oversight Board’s confirmation evidence. Exhibit P to the Disclosure Statement

already explains the various considerations and methodology that went into calculating the Legacy 

Charge. 

41. The Ad Hoc Group and AHIMSA argue the Disclosure Statement is deficient 

because it does not explain why the principal amount of New Bonds increased from $5.4 billion 

to $5.68 billion from the last iteration of the Plan and thus increases the value available for 

creditors (including bondholders). AHG Supp. Obj. ¶¶ 17–19; AHIMSA Obj. ¶ 13. These 

objections cite no authority for the proposition that the adequate information standard requires the 

Disclosure Statement to explain why plan amendments were made (particularly where, as here, the 

change is only 5%). That is likely because Bankruptcy Code § 1125(a)(1), made applicable by 

PROMESA § 301(a), expressly defines “adequate information” to exclude information “about any 

other possible or proposed plan.” There is no confirmation requirement regarding that, either. The 

Oversight Board filed Exhibit P to the Disclosure Statement detailing its methodology in deriving 

the Legacy Charge that will generate the revenue that will be used to pay the New Bonds. 

Supporting information and data will be added to the document discovery repository. At 

confirmation, the Oversight Board will demonstrate the facts necessary to satisfy the requirements 

of confirmation. The Oversight Board has always maintained that it changes its debt sustainability 

and other determinations based on new facts or if it finds it made a mistake.

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IV. THE DISCLOSURE STATEMENT CONTAINS ADEQUATE INFORMATION 

REGARDING THE NEW BONDS AND CVI

42. The Oversight Board incorporated requested language and made substantial 

enhancements to the terms of the Series B Bonds in the Amended Plan and Disclosure Statement. 

Various parties, nevertheless, continue to argue the Disclosure Statement does not contain 

adequate information regarding the Series B Bonds and CVI. They raise these arguments despite 

the fact that the terms of the Series B Bonds have since been negotiated by National, the New 

Master Indenture is subject to the reasonable approval rights of the Fuel Line Lenders and National, 

and certain parties such as the Ad Hoc Group believed the Disclosure Statement contained enough 

information on the Series B Bonds for them to circulate a letter to all bondholders concluding the 

Series B Bonds would trade under par. ECF No. 3189, Ex. A. To dispel arguments regarding 

purported inadequate disclosure, attached as Exhibit C is a chart that provides a citation to where 

supposedly lacking information regarding the Series A & B Bonds and CVI can, in fact, be located 

in the Disclosure Statement. 

V. UTIER’S SUPPLEMENTAL OBJECTION RAISES ISSUES NOT RELEVANT 

TO THIS PROCEEDING

A. UTIER Prematurely and Improperly Argues the Merits of CBA Rejection

43. UTIER once again argues the Disclosure Statement fails to contain adequate 

information regarding the potential rejection of the UTIER CBA. UTIER Supp. Obj. ¶ 7. As 

UTIER acknowledges, however, the Oversight Board disclosed that it “is continuing to engage in 

negotiations regarding the unsustainable obligations described above. If an agreement cannot be 

reached with respect to these obligations, PREPA may need to seek rejections of the CBAs.” 

Disclosure Statement Section III.B.5. As has been made clear through both the quoted language 

as well as the Oversight Board’s reply to UTIER’s initial objection [ECF No. 3178], the Oversight 

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Board remains hopeful of reaching a consensual resolution with respect to amended CBAs. Should 

such agreements prove unattainable, PREPA may be left with no option aside from seeking the 

rejection of the UTIER CBA. But that rejection would not be implemented through the Amended 

Plan; it would proceed pursuant to a separate rejection motion subject to meeting the applicable 

evidentiary burden within such distinct proceeding. As a practical matter, the pension fund is 

underfunded by approximately $3.5 billion. Without more, the CBA’s must be rejected absent a

consensual resolution because there is simply insufficient money to satisfy the existing CBAs by 

any yardstick.

44. UTIER seeks to prematurely litigate the merits of a hypothetical future rejection 

motion, arguing the Disclosure Statement lacks adequate information regarding such hypothetical 

litigation. The Bankruptcy Code defines “adequate information” as “information of a kind, and in 

sufficient detail, as far as is reasonably practicable in light of the nature and history of the 

debtor . . . .” 11 U.S.C. § 1125(a)(1). Simply put, it is not reasonably practicable to provide 

additional information regarding the basis for rejecting the UTIER CBA when the pension 

underfunding is by itself sufficient cause, and such rejection has not and may not occur. It is

certainly not necessary to do so in the Disclosure Statement

B. SREAEE Continues to Misconstrue the Proposed Treatment of Pension 

Claims

45. SREAEE asserts the Disclosure Statement fails to contain adequate information 

regarding the source of payments supporting accrued but unpaid benefits to retirees and other 

future pensioners. SREAEE Supp. Obj. ¶¶ 6–13. Its confusion, however, arises from its strained 

readings of the Disclosure Statement and misunderstandings regarding its terms. SREAEE first 

argues the Disclosure Statement implies the PREPA PayGo Trust will be paid out of a separate 

charge rather than as ordinary operating expenses. Not so. As has always been the case, the 

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Disclosure Statement clearly states that “[t]o ensure Participants receive their accrued monthly 

benefits, the Amended Plan provides for funding of retiree benefits under a pay-as-you-go 

(‘PayGo’) system, which will be paid as ordinary operating expenses from PREPA’s revenues as 

described in the Certified Fiscal Plan.” Disclosure Statement Section III.B.6. 

46. SREAEE points to a statement describing LUMA’s position that PayGo expenses 

should be reflected separately on customer bills to allege confusion regarding whether the PayGo 

Trust will be funded from a separate source. SREAEE Supp. Obj. ¶¶ 6–7. But whether the rate 

increase for pensions is obtained through a rider process rather than a base rate case, or how 

pension costs are ultimately reflected on the face of customers’ bills, the source of such funds 

(here, PREPA’s revenues available for operating expenses) is not affected. Moreover, the 

itemization on a customer’s bill also may not be in the Oversight Board’s control and may require 

PREB’s approval. While LUMA believes that transparency under Puerto Rico law requires that 

such amounts be separately itemized from the base rate on the bill, no determination has been 

made on the issue. In any event, the obligations to fund the PREPA PayGo Trust under the

Amended Plan will be paid as operating expenses and there is no adverse economic impact 

associated with either position. See Amended Plan Art. I.A.167. 

47. SREAEE next asserts that being paid as ordinary expenses is somehow 

“discriminatory” to pensioners. SREAEE Supp. Obj. ¶ 9. To the extent SREAEE wishes to assert 

there is any unfair discrimination among the classes, such argument is a factual inquiry 

inappropriate for consideration at the Disclosure Statement stage. Regardless, any such 

discrimination rings hollow, as the operating expenses (including PREPA’s future PayGo 

obligations) are required to be paid in advance of any payments on account of the New Bonds. If 

anything, the pension payments are treated more favorably than other claimholders. Indeed, it is 

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for this reason the Ad Hoc Group has argued the New Bonds will trade below par because the 

supporting charge is subordinate to PREPA’s operating expenses. ECF No. 3189 ¶¶ 83–86. The 

Disclosure Statement, therefore, adequately discloses the source of SREAEE’s recoveries, and the 

SREAEE Objection should be overruled on these grounds.

48. SREAEE further argues modification of the pension system from a funded plan to 

the PayGo plan should not be permitted because the “savings achieved by the pension reform are 

projected at around $200 million,” which SREAEE unilaterally determines without evidence to be 

“insignificant.” SREAEE Supp. Obj. ¶ 15. SREAEE misses the point. The conversion to PayGo 

shows the pension fund runs out of money. Paying PayGo costs a fortune. SREAEE takes it for 

granted. It is not required. It increases PREPA’s expenses and creates a need to raise electric rates 

to pay the expenses. PREPA does not want its retirees to be worse off than the Commonwealth’s 

retirees, but its desire to protect PREPA’s retirees does not create a defense to rejection of the 

CBAs. That $200 million more would fund additional benefits is beside the point. SREAEE has 

no entitlement to PayGo in the first place. SREAEE can reiterate its position at confirmation, but 

it is not relevant at this time, nor is it a determination for SREAEE to make. SREAEE’s argument 

also fails to acknowledge that the savings are represented on a “present value basis” over a period 

of twenty years, and the dollar value of such savings (and the corresponding savings to ratepayers) 

are materially higher throughout such period. Disclosure Statement Section III.B.6.

49. Finally, SREAEE dismisses summarily the Oversight Board’s true concern 

regarding funded plans, namely the rates that would be required to be charged to customers to 

support funded pension obligations. SREAEE Supp. Obj. ¶¶ 16–17. Absent pension reform, the 

rates charged to consumers would be exponentially higher, as described in Section III.B.6 of the

Disclosure Statement. If SREAEE believes the treatment under the Amended Plan does not 

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comply with PROMESA—despite substantially identical treatment having been confirmed (and 

upheld on appeal) for three other pension systems in the Commonwealth’s Title III Case—it can 

assert such position in connection with the confirmation hearing. 

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CONCLUSION

WHEREFORE the Debtor respectfully requests entry of an order, substantially in the form 

of the Revised Disclosure Statement Order attached to the Omnibus Reply as Exhibit B, (i) 

overruling the Objections and Supplemental Objections, (ii) granting the Disclosure Statement 

Motion and approving the adequacy of the information contained in the Disclosure Statement, and 

(iii) granting the Debtor such other and further relief as is just.

Dated: February 21, 2023

San Juan, Puerto Rico

Respectfully submitted,

/s/ Luis F. del Valle-Emmanuelli

Luis F. del Valle-Emmanuelli

USDC-PR No. 209514

P.O. Box 79897

Carolina, Puerto Rico 00984-9897

Tel. 787.647.3503

Fax. N/A

dvelawoffices@gmail.com

Of Counsel for A&S Legal Studio, PSC

434 Avenida Hostos

San Juan, PR 00918

Tel (787) 751-6764/763-0565

Fax (787) 763-8260

Co-Attorney for the Financial Oversight and 

Management Board as Representative for PREPA

/s/ Martin J. Bienenstock

Martin J. Bienenstock

Paul V. Possinger

Ehud Barak

Margaret A. Dale

Michael T. Mervis

Daniel S. Desatnik

Elliot R. Stevens

(Admitted Pro Hac Vice)

PROSKAUER ROSE LLP

Eleven Times Square

New York, NY 10036

Tel: (212) 969-3000

Fax: (212) 969-2900

Email: mbienenstock@proskauer.com

ppossinger@proskauer.com

ebarak@proskauer.com

mdale@proskauer.com

mmervis@proskauer.com

ddesatnik@proskauer.com

estevens@proskauer.com

Attorneys for the Financial 

Oversight and Management Board 

as representative for PREPA

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