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 PREPA BOND TRUSTEE’S JOINDER 

AND SUPPLEMENTAL OBJECTION TO CONFIRMATION OF 

PROPOSED PREPA TITLE III PLAN OF ADJUSTMENT 

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 (“Commonwealth”) (Bankruptcy Case No. 

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

Corporation (“COFINA”) (Bankruptcy Case No. 17 BK 3284-LTS) (Last Four Digits of Federal 

Tax ID: 8474); (iii) Puerto Rico Highways and Transportation Authority (“HTA”) (Bankruptcy 

Case No. 17 BK 3567-LTS) (Last Four Digits of Federal Tax ID: 3808); (iv) Employees 

Retirement System of the Government of the Commonwealth of Puerto Rico (“ERS”) (Bankruptcy 

Case No. 17 BK 3566-LTS) (Last Four Digits of Federal Tax ID: 9686); and (v) Puerto Rico 

Electric Power Authority (“PREPA”) (Bankruptcy Case No. 17 BK 04780-LTS) (Last Four Digits 

of Federal Tax ID: 3747). 

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TABLE OF CONTENTS 

Page 

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

BACKGROUND ................................................................................................................. 3

LEGAL STANDARDS GOVERNING CONFIRMATION .............................................. 9

JOINDER IN THE BONDHOLDER OBJECTIONS ......................................................... 9

OBJECTION ..................................................................................................................... 10

I. THE PLAN INCLUDES BONDHOLDER SETTLEMENTS THAT 

VIOLATE THE COLLECTIVE, REPRESENTATIVE STRUCTURE OF 

THE TRUST AGREEMENT ................................................................................. 10

A. The Trust Agreement’s Exclusive Collective Action, Representative 

Enforcement, and Pro Rata Distribution Requirements Prohibit the 

Individualized Settlement of PREPA Bond Claims. ................................... 11

B. The Class 1 and National Settlements Do Not Comply with the Trust 

Agreement’s Collective Action, Representative Enforcement, and 

Pro Rata Distribution Requirements. .......................................................... 13

C. The Arguments Made Thus Far in Defense of the Settlements Are 

Without Merit. ............................................................................................. 15

II. THE PLAN DOES NOT SATISFY PROMESA’S CONFIRMATION 

STANDARDS ........................................................................................................ 16

A. The Plan Does Not Comply with Section 1122(a)’s Classification 

Requirements. .............................................................................................. 17

B. The Class 1 and Class 5 Plan Treatments Unfairly Discriminate 

against Dissenting Class 2. .......................................................................... 19

C. The Proposed Competitive Pot Plan Violates Section 1129(a)(3) 

Because It Improperly Seeks to Undermine the Collective Rights of 

PREPA Bond Claims to Unified Representation and Pro Rata 

Treatment. .................................................................................................... 22

D. Neither the Class 1 Settlement nor the National Settlement Should 

Be Approved under Bankruptcy Rule 9019. ............................................... 24

E. The Plan Includes Impermissible Exculpations. ......................................... 26

F. The Plan Fails to Include an Adequate Means of Implementation for 

Class 2. ........................................................................................................ 28

G. The Plan Fails More Generally to Address Coherently the PostEffective Date Duties of the PREPA Bond Trustee or Provide a 

Means for Payment. ..................................................................................... 32

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H. The Court Should Not Permit the Plan’s Effective Date to Occur 

Prior to the Issuance of a Final Order in the Amended Lien & 

Recourse Challenge. .................................................................................... 34

III. THE PROPOSED CONFIRMATION ORDER IS INADEQUATE. .................... 35

CONCLUSION ................................................................................................................. 35

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TABLE OF AUTHORITIES 

Cases Page(s) 

Friedman v. Chesapeake & Ohio Ry. Co., 

261 F. Supp. 728 (S.D.N.Y. 1966) ........................................................................................... 11 

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

748 F.2d 42 (1st Cir. 1984) ....................................................................................................... 17 

In re Am. Roads LLC, 

496 B.R. 727 (Bankr. S.D.N.Y. 2013)...................................................................................... 11 

In re Autterson, 

547 B.R. 372 (Bankr. D. Colo. 2016) ....................................................................................... 17 

In re AWECO, Inc., 

725 F.2d 293 (5th Cir. 1984) .................................................................................................... 25 

In re Coastal Cable T.V., Inc., 

709 F.2d 762 (1st Cir. 1983) ..................................................................................................... 22 

In re Enron Corp., 

302 B.R. 463 (Bankr. S.D.N.Y. 2003)...................................................................................... 11 

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

360 F. Supp. 3d 65 (D.P.R. 2019) ............................................................................................ 25 

In re Healthco Int’l, Inc., 

136 F.3d 45 (1st Cir. 1998) ....................................................................................................... 25 

In re High Voltage Eng'g Corp., 

397 B.R. 579 (Bankr. D. Mass. 2008) ...................................................................................... 26 

In re Hotel Assocs. of Tucson, 

165 B.R. 470 (B.A.P. 9th Cir. 1994) ........................................................................................ 22 

In re Iridium Operating LLC, 

478 F.3d 453 (2d Cir. 2007) ..................................................................................................... 25 

In re Johns–Manville Corp., 

843 F.2d 636, 649 (2d Cir.1988) .............................................................................................. 22 

In re Jorgensen, 

66 B.R. 104 (B.A.P. 9th Cir. 1986) .......................................................................................... 22 

In re Lernout & Hauspie Speech Prods., N.V., 

301 B.R. 651 (Bankr. D. Del. 2003) ......................................................................................... 21 

In re LightSquared Inc., 

513 B.R. 56 (Bankr. S.D.N.Y. 2014)........................................................................................ 19 

In re Master Mortgage Invest. Fund, Inc., 

 168 B.R. 930 (Bankr. W.D. Mo. 1994) .................................................................................... 28 

In re Mullins, 

633 B.R. 1 (Bankr. D. Mass. 2021) ............................................................................................ 9 

In re PTL Holdings LLC, 

2011 WL 5509031 (Bankr. D. Del. 2011) ................................................................................ 28 

In re Quincy Med. Ctr., Inc., 

2011 WL 5592907 (Bankr. D. Mass. 2011) ............................................................................. 28 

In re Tribune. Co., 

972 F.3d 228 (3d Cir. 2020) ................................................................................... 19, 20, 21, 22 

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In re Tribune Co., 

464 B.R. 126 (Bankr. D. Del. 2011) ......................................................................................... 28 

In re Washington Mutual, Inc., 

442 B.R. 314 (Bankr. D. Del. 2011) ......................................................................................... 28 

In re Weber, 

209 B.R. 793 (Bkrtcy. D. Mass. 1997) ..................................................................................... 22 

Jeffrey v. Desmond, 

70 F.3d 183 (1st Cir. 1995) ....................................................................................................... 25 

Johns–Manville Corp., 

843 F.2d 636 (2d Cir.1988) ...................................................................................................... 22 

MeehanCombs Glob. Credit Opportunities Funds, LP v. Caesars Entm’t Corp., 

80 F. Supp. 3d 507 (S.D.N.Y. 2015) ........................................................................................ 11 

Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 

390 U.S. 414 (1968) ................................................................................................................. 25 

Statutes

11 U.S.C. § 943(b)(1) ..................................................................................................................... 9 

48 U.S.C. § 2161 ....................................................................................................................... 9, 17 

48 U.S.C. § 2170 ............................................................................................................................. 9 

48 U.S.C. § 2172 ............................................................................................................................. 4 

48 U.S.C. § 2174 ............................................................................................................................. 9 

48 U.S.C. § 2174(b)(1) ................................................................................................................... 9 

11 U.S.C. § 1126 ........................................................................................................................... 30 

11 U.S.C. § 105(a) ........................................................................................................................ 24 

11 U.S.C. § 1122(a) ........................................................................................................ 2, 9, 17, 18 

11 U.S.C. § 1123(a)(5) .................................................................................................................. 28 

11 U.S.C. § 1123(b)(3) ................................................................................................................. 24 

11 U.S.C. § 1129(a)(2) .................................................................................................................... 9 

11 U.S.C. § 1129(a)(3) .............................................................................................................. 9, 22 

11 U.S.C. § 1129(a)(6) .................................................................................................................... 9 

11 U.S.C. § 1129(a)(8) .................................................................................................................... 9 

11 U.S.C. § 1129(a)(10) .................................................................................................................. 9 

11 U.S.C. § 1129(b) ................................................................................................................ 19, 21 

11 U.S.C. § 1129(b)(1) ................................................................................................................... 9 

11 U.S.C. § 1129(b)(2)(A) .............................................................................................................. 9 

11 U.S.C. § 1129(b)(2)(B) .............................................................................................................. 9 

Other Authorities

Revised Model Simplified Indenture, 

55 Bus. Law. 1115 (2000) ........................................................................................................ 11 

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U.S. Bank National Association—in its capacity as trustee (the “PREPA Bond Trustee”) 

under the terms of that certain Trust Agreement dated as of January 1, 1974 (as amended and 

supplemented from time to time, the “Trust Agreement”),2 pursuant to which the Puerto Rico 

Electric Power Authority (“PREPA”) has issued certain Puerto Rico Electric Power Authority 

Power Revenue Bonds and Puerto Rico Electric Power Authority Power Revenue Refunding 

Bonds (together, the “Bonds”

3

)—respectfully joins in the Bondholder Objections4 as set forth 

herein and submits this supplemental objection to confirmation of the Modified Second Amended 

Title III Plan of Adjustment of the Puerto Rico Electric Power Authority [ECF No. 3296] (as it 

may be amended, the “Plan”), filed by the Financial Oversight and Management Board for Puerto 

Rico (the “Oversight Board”), as Title III representative of PREPA. In support of its joinder and 

supplemental objection (the “PREPA Bond Trustee Objection”), the PREPA Bond Trustee states 

as follows: 

PRELIMINARY STATEMENT 

1. In advance of the Disclosure Statement hearing on February 28, 2023, the Court 

posed a critical question directly related to the role and function of the PREPA Bond Trustee: 

2

 References herein to the Trust Agreement are to the conformed version filed in Fin. 

Oversight & Mgmt. Bd. for Puerto Rico v. U.S. Bank National Association as Trustee, Adversary 

Proceeding No. 19-00391-LTS (“Amended Lien & Recourse Challenge”). (Joint Informative 

Mot., Ex. A, Adv. ECF No. 118.) References to “Adv. ECF No[s].” herein are references to the 

docket in Adversary Proceeding No. 19-00391-LTS. 

3

 Holders of the Bonds, including beneficial holders thereof, shall be referred to herein as 

“Bondholders.” Capitalized terms not otherwise defined herein have the meaning ascribed to them 

in the Plan or the Disclosure Statement for the Modified Second Amended Title III Plan of 

Adjustment of the Puerto Rico Electric Power Authority [ECF No. 3297] (the “Disclosure 

Statement” or “DS”). 

4

 The “Bondholder Objections” are the separate confirmation objections filed on this date 

by the Ad Hoc Group of PREPA Bondholders (the “Ad Hoc Group”), Syncora Guarantee, Inc. 

(“Syncora”), Assured Guaranty Corp., and Assured Guaranty Municipal Corp. (together with 

Assured Guaranty Corp., “Assured”). 

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[W]hether . . . the proposed Plan is patently unconfirmable because 

the Trust Agreement precludes individualized settlement of bond 

claims and non-pro rata distribution of consideration received in 

connection with the satisfaction of bond obligations. 

(Order Concerning Issues for Discussion at Feb. 28, 2023 Disclosure Statement Hr’g, ECF 

No. 3280.) The Court deferred ruling on this issue at the hearing, concluding that it could not 

make a “proper decision” without further information and argument concerning the “Oversight 

Board’s justification for its classifications decisions” and the “construction of the trust agreement.” 

(Feb.28, 2023 Hr’g Tr. 149:15-21.) 

2. For the reasons set forth herein, the answer to the Court’s question is unequivocally 

“yes”—as the Plan does indeed violate the Trust Agreement and those violations render the Plan 

unconfirmable. 

3. A number of discrete confirmation failures flow from the Plan’s Class 1 and Class 

5 “settlements,” its disparate and unfavorable treatment of dissenting Class 2, and its disregard for 

the role of the PREPA Bond Trustee as the collective representative of all Bondholders in the 

ongoing Amended Lien & Recourse Challenge. These confirmation failures include: 

a. misclassifications under section 1122(a) of the Bankruptcy Code; 

b. unfair discrimination against a dissenting class in contravention of section 

1129(b); 

c. the inclusion of settlements ineligible for approval under Bankruptcy Rule 

9019; 

d. improper benefits for certain creditors, including releases and exculpations, for 

violations of the Trust Agreement; 

e. a lack of a good faith in contravention of section 1129(a)(3); and 

f. incoherent or incomplete provisions relating to the Plan’s implementation in 

violation of section 1123(a)(5) as it relates to Class 2, including (i) the 

relationship between the timing of the Final Order in the Amended Lien & 

Recourse Challenge and the timing and amount of Plan distributions (without a 

Disputed Claims reserve), (ii) the intended roles of the GUC Trust relating to 

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Plan distributions, (iii) the relationship of Plan distributions to Class 2 insured 

Bondholders and Non-Settling Monolines,5 and (iv) the post-Effective Date 

rights and duties of the PREPA Bond Trustee. 

4. Based on these objections and those set forth in the Bondholder Objections, the 

PREPA Bond Trustee respectfully requests that the Court deny confirmation of the Plan. 

BACKGROUND 

5. In September 2022, the Oversight Board filed its amended complaint in the 

Amended Lien & Recourse Challenge, challenging both the scope of the liens securing the Bonds 

and the allowable character of any unsecured deficiency claim by the PREPA Bond Trustee as set 

forth in its Master Proof of Claim No. 18449. (Am. Compl., Adv. ECF No. 26.) The Oversight 

Board identified the PREPA Bond Trustee as the sole legal representative of all Bondholders in its 

Amended Complaint (id. ¶ 11) and requested an expedited summary judgment schedule to address 

certain “gating issues” that the Oversight Board contended were impediments to the negotiation 

of a consensual treatment for the PREPA Bond claims in a Title III plan of adjustment (Adv. ECF 

Nos. 62, 63; see also Adv. ECF Nos. 11, 22). The Ad Hoc Group, Assured, and Syncora are 

intervenor-defendants in the Amended Lien & Recourse Challenge. (Adv. ECF No. 36.) 

6. At the same time, the Court mandated that the Oversight Board file a Title III plan 

of adjustment for PREPA and participate in mediation with the Ad Hoc Group, Assured, Syncora, 

and others. (See, e.g., ECF Nos. 2748, 2767.) The PREPA Bond Trustee is currently an Additional 

Party in the Meditation process. 

7. The Oversight Board nominally complied with the Court’s directive, filing the 

initial iteration of PREPA’s Title III plan on December 16, 2022. (ECF No. 3110.) This plan—

like its first amended version filed on February 9, 2023 and the Plan filed on March 1, 2023—did 

5

 The “Non-Settling Monolines” are Assured and Syncora. 

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not provide for a unified treatment of all PREPA Bond claims with contingencies for outcomes in 

the Amended Lien & Recourse Challenge. Instead, it contemplated offering individualized 

“settlements” to subgroups of Bondholders while the Amended Lien & Recourse Challenge would 

continue to be litigated beyond the confirmation date, with the obvious effect of creating a 

competitive opt-out dynamic amongst Bondholders and Monolines by holding out the prospect of 

a different or more favorable individualized share of a limited “pot” without the delay and risks of 

the Amended Lien & Recourse Challenge. 

8. Under the Plan today (and its earlier iterations), the limited pot consists of new 

bonds and related contingent value instruments (“CVI”) to be issued by the Reorganized PREPA 

on the Effective Date when the Bonds are to be cancelled.6 The Oversight Board initially limited 

the size of the pot to $5.4 billion, but it has since increased it to $5.68 billion. The Oversight Board 

now vigorously asserts that no further additions to the pot can be made, despite doing so once 

already. This intransigence is backed by the exclusive power of the Oversight Board to propose or 

modify a Title III plan for PREPA. 48 U.S.C. § 2172. 

9. By the time the Oversight Board filed the initial iteration of PREPA’s plan in 

December 2022, it had already committed significant portions of the pot to other parties. 

6

 Two series of new bonds are proposed: Series A and Series B (the “New Bonds”). The 

Series B Bonds mature in 50 years and are nonrecourse obligations payable solely from a stream 

of Net Revenues derived from certain Legacy Charges, which the Oversight Board contends 

should be sufficient to pay the New Bonds over their term. The Series B Bonds are junior in right 

of principal payment to the Series A Bonds and do not accrue interest after maturity. The CVI is 

payable from the same stream of expected Legacy Charge-based Net Revenues but only if the 

Series B Bonds are paid in full before the CVI expires in 35 years. In some case the New Bonds 

are to be distributed directly to creditors and in some cases they are to be deposited into a GUC 

Trust and creditors are to receive units in the GUC Trust. A draft of the GUC Trust Agreement 

was filed as part of the Plan Supplement on May 31, 2023, including provisions making the GUC 

Trust Units non transferable and providing no rights for unitholders to elect to replace the GUC 

Trustee or GUC Board who the Oversight Board has the power to appoint. 

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Specifically, the Oversight Board struck a deal with the Fuel Line Lenders, which provides them 

approximately $650 million in Series A Bonds, and allocated another $400 million in Series B 

Bonds to the Commonwealth.7 Taking these reductions into account, only approximately $4.6 

billion is left to cover the remainder of the claims asserted by PREPA’s prepetition creditors, which 

include over $8.4 billion in PREPA Bond claims and an estimated $800 million in claims held by 

PREPA’s general unsecured creditors. 

10. The Oversight Board then set the Plan’s competitive settlement dynamic in motion 

among the internal ranks of Bondholders and Monolines using individualized settlements and 

offers. 

11. The Class 1 Settlement. On January 27, 2023, the Oversight Board launched a 

settlement offer to every uninsured Bondholder without the involvement of the PREPA Bond 

Trustee or Court approval. This offer (if accepted) would settle the uninsured Bondholders’ 

individual rights in the Amended Lien & Recourse Challenge for the Bonds held by those holders 

in exchange for the full allowance of their PREPA Bond claims and a less risky and potentially 

much higher percentage recovery in the form of pot assets.8 Ultimately, less than 1% of the 

Bondholders (who in aggregate hold approximately $70 million in Bonds) accepted this offer 

before the February 23, 2023 deadline (the “Settling Bondholders”). (DS 49.) 

12. Upon acceptance of the Settlement Offer, the Plan places Settling Bondholders into 

Class 1 and promises them an initial distribution of Series B Bonds with a face value equal to 50% 

7

 The Fuel Line Lenders’ settlement and Plan treatment are the subject of separate 

objections in the Bondholder Objections in which the PREPA Bond Trustee joins and adopts 

herein as though set forth in full. 

8

 Section 2 of the Settlement Agreement signed by each Class 1 member provides, among 

other things, that it is in settlement of the Parties’ respective asserted rights and claims as set forth 

in the Amended Lien & Recourse Challenge. (Settlement Agreement Notice, Sched. 1 Ex. B. § 2, 

ECF No. 3171.) 

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of the full principal and accrued interest on their Bonds as of the Petition Date. If the Oversight 

Board fully prevails in the Amended Lien & Recourse Challenge following appeal, the Settling 

Bondholders stand to receive 100% of their full Bond claim in cash or Series B Bonds in a 

supplemental distribution. In marginal cases, Settling Bondholders would also receive more Series 

B Bonds if fewer Bondholders made the election to enter into the Class 1 Settlement. No matter 

the outcome, Settling Bondholders also receive CVI for any portion of their claim not otherwise 

covered by Series B Bond distributions.9

13. In contrast, the Plan places uninsured Bondholders who did not accept the 

Oversight Board’s settlement offer (the “Non-Settling Bondholders”) into Class 2, together with 

the Non-Settling Monolines. The treatment for Class 2 varies significantly from that offered to 

Class 1. Claims belonging to the Non-Settling Bondholders are allowed only in the amount of 

(i) perfected Bond Collateral securing their Bonds plus (ii) a Deficiency Claim, in each case as 

ultimately determined by a Final Order in the Amended Lien & Recourse Challenge.10 Only the 

amount of perfected Bond Collateral would be fully covered by Series B Bonds subject to the pot 

limitation. If the Oversight Board ultimately wins the lien portion of the Amended Lien & 

Recourse Challenge and a deficiency claim is allowed for 100% of the Bond claim, the NonSettling Bondholders would still receive only an estimated 46.49% of their estimated Deficiency 

9

 The Plan provides that Class 1 will receive a pro rata share of the amounts held in the 

Sinking Fund subject to the terms of the Trust Agreement, but this has been disregarded here 

because most or all of the funds in the Sinking Fund are subject to other superior rights under the 

Trust Agreement. 

10 The Court mostly rejected the secured claims of the PREPA Bond Trustee in a summary 

judgment ruling on March 22, 2023, in the Amended Lien & Recourse Challenge, and on June 6-

8, 2023, the Court conducted an estimation hearing to potentially reduce the amount of the 

Deficiency Claim for all PREPA Bonds. 

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Claims in Series B Bonds due to the reduced size of the remaining pot.11 (DS 29.) The Plan does 

not provide for any CVI to be distributable to Class 2 members other than a share of the GUC CVI. 

14. The National Settlement. On January 31, 2023, the Oversight Board finalized its 

plan support agreement with National (the “National Settlement”), one of the three Monolines 

(along with Assured and Syncora) for PREPA’s Bonds. (DS 33.) The Monolines are successor 

insurers on various similar monoline insurance policies that have all been the subject of active 

claims during PREPA’s Title III case. 

15. The Plan treats National’s PREPA Bond claims in Class 5, but it treats Assured and 

Syncora’s insured PREPA Bond claims in Class 2, along with the Non-Settling Bondholders. 

Class 5 grants National an allowed claim of $836,145,928 for the $815,250,000 in principal 

amount of PREPA Bonds owned or insured by National (DS Ex. N), slightly less than 10% of the 

outstanding PREPA Bonds. On account of its allowed claim, National would receive Series B 

Bonds equal to 71.65% or $599,098,557. (DS 29.) This pot allotment is not increased or decreased 

based upon the outcome of the Amended Lien & Recourse Challenge. 

16. In addition, outside of Class 5, National is to receive an additional $48,998,151 or 

5.86% denominated as “consummation costs”—i.e., repayment for its fees and expenses (2.86%) 

11 The Plan provides that Holders of Class 2 Deficiency Claims constituting Remaining 

Claims after other Class 2 distributions are to receive a pro rata share of the General Unsecured 

Claim Recovery. The “General Unsecured Claim Recovery” is defined as the aggregate recovery 

by Holders of Claims in the Unsecured Claims Pool, payable from the GUC Trust Assets, 

comprised of (a) the Avoidance Action Proceeds, (b) the GUC New Bonds, if any, and (c) the 

GUC CVI. The Plan elsewhere, however, states that the Deficiency Claim is to be determined in a 

Final Order in the Amended Lien & Recourse Challenge and that initial distributions by the 

Distribution Agent for the benefit of Holders of Allowed PREPA Revenue Bond Claims shall be 

made to the Bond Trustee, as applicable, for such obligation in accordance with the respective 

governing documents for such obligations. (Plan Def. of Amend Lien & Recourse Challenge Final 

Resolution, Art. XXIV.E.2.). No distributions to Class 2 are to occur while they are Disputed 

Claims, i.e., at all times prior to a Final Order in the Amended Lien & Recourse Challenge. (Plan 

Art. XXIV.D.) 

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and compensation for the “structuring” of payments to be made under the Plan (3.00%). (DS 

Ex. N.) This additional amount is payable at the option of the Oversight Board in Series B Bonds 

further depleting the pot.12

17. Appeals in the Amended Lien & Recourse Challenge are inevitable before there 

will be a Final Order within the meaning of the Plan. However, a Final Order is not a clear 

condition to either confirmation of the Plan or the Effective Date, and in any event, the Plan permits 

the Oversight Board to waive all such conditions.13 If the Plan’s Effective Date occurs prior to a 

Final Order in the Amended Lien & Recourse Challenge, the Plan provides that Class 2 Plan 

distributions would be delayed as Disputed Claims for the duration of the appellate process. There 

is no requirement in the Plan for the Distribution Agent to establish a disputed claims reserve to 

protect the holders of Disputed Claims from the disproportionate allocation of Plan consideration 

to Claims that are Allowed on the Effective Date. As a result, there are scenarios in which Series 

A and Series B Bonds—that should go to the Non-Settling Bondholders and Non-Settling 

Monolines in Class 2—would already have been distributed to other Classes. For example, the 

First Circuit could determine on appeal that all of the available Series A and Series B Bonds must 

be paid to the Bondholders on account of their lien rights ahead of the claims of other classes, 

including the Fuel Line Lenders. Together, these provisions add discriminatory risks and costs to 

Class 2 during the Amended Lien & Recourse Challenge that are not borne by other settling 

classes. 

12 Additional objections have been made to the Plan’s treatment of Class 4 Claims in the 

Bondholder Objections in which the PREPA Bond Trustee joins. 

13 See Plan Art. XXXI.B.; id. Art. XXXII.B. 

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LEGAL STANDARDS GOVERNING CONFIRMATION

18. Section 314(b) of PROMESA—codified at 48 U.S.C. § 2174—sets forth the 

requirements for confirmation of a PROMESA Title III plan of debt adjustment. The requirements 

largely track the confirmation standards for municipalities under Chapter 9 of the Bankruptcy 

Code, including the requirement that the plan comply with certain corporate restructuring 

provisions of the Bankruptcy Code expressly adopted by PROMESA. Compare 11 U.S.C. 

§ 943(b)(1), with 48 U.S.C. § 2174(b)(1). These provisions, listed in section 301(a) of PROMESA, 

include the classification requirements of section 1122, the confirmation requirements of section 

1129(a)(2), (3), (6), (8), and (10), and the cramdown provisions of section 1129(b)(1), (b)(2)(A), 

and (b)(2)(B). 48 U.S.C. § 2161; see also 48 U.S.C. § 2170 (applying the Federal Rules of 

Bankruptcy Procedure to cases under PROMESA). 

19. Any violations of the above-listed Bankruptcy Code sections are thus violations of 

section 314(b) of PROMESA and a basis to deny confirmation. A more complete description of 

the legal standards for confirmation is set forth in the Bondholder Objections. 

20. The Oversight Board, as the plan proponent, bears the burden of proving that the 

requirements for confirmation are satisfied. In re Mullins, 633 B.R. 1, 3 (Bankr. D. Mass. 2021). 

In addition, the Court has an independent obligation to determine that the Plan meets all of the 

confirmation standards. Id.

JOINDER IN THE BONDHOLDER OBJECTIONS 

21. Except to the extent otherwise noted or to the extent they are inconsistent with the 

positions of the PREPA Bond Trustee set forth herein, the PREPA Bond Trustee joins in the 

objections to confirmation of the Plan made in the Bondholder Objections, including on the 

grounds that the Plan unfairly discriminates, is not feasible, is not fair and equitable, is not in the 

best interest of creditors, was not proposed in good faith, and rests upon settlements that are 

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unreasonable and should not be approved.14 The PREPA Bond Trustee adopts these arguments as 

its own and incorporates them herein. 

22. The supplemental confirmation objections set forth in the PREPA Bond Trustee 

Objection concern discrete infirmities in the Plan relating to the way it addresses the rights and 

duties of Bondholders, the Monolines, and the PREPA Bond Trustee under the Trust Agreement. 

Nothing herein is intended to limit or waive any objection set forth in the Bondholder Objections 

or any right or remedy of the PREPA Bond Trustee or any Bondholder in the Amended Lien & 

Recourse Challenge. All rights or remedies of the PREPA Bond Trustee and the Bondholders in 

the Amended Lien & Recourse Challenge, including any appeals thereof, are expressly reserved, 

and nothing herein should be construed as a waiver or admission with respect thereto. 

OBJECTION 

I. THE PLAN INCLUDES BONDHOLDER SETTLEMENTS THAT VIOLATE 

THE COLLECTIVE, REPRESENTATIVE STRUCTURE OF THE TRUST 

AGREEMENT 

23. The Class 1 Settlement and Class 5 National Settlement embedded in the Plan 

violate the structure of Bondholder rights and remedies reflected in the Trust Agreement’s 

collective action, representative enforcement, and pro rata distribution requirements. This structure 

is exclusive and expressly precludes individualized settlements and distributions contrary to the 

priorities and mechanisms set forth in the Trust Agreement. (See Trust Agreement §§ 208, 209, 

805, 808, 809, 1102.) 

14 The PREPA Bond Trustee does not join in Assured’s argument that PROMESA is an 

unconstitutional non-uniform bankruptcy law. 

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A. The Trust Agreement’s Exclusive Collective Action, Representative 

Enforcement, and Pro Rata Distribution Requirements Prohibit the 

Individualized Settlement of PREPA Bond Claims. 

24. No-action provisions in bond indentures generally limit the rights of individual 

bondholders to act alone in enforcing rights and remedies in derogation of the rights of larger 

bondholder groups and their trustee who hold rights for the collective benefit of all bondholders. 

Courts routinely apply them to limit litigation by minority bondholders that is inconsistent with 

the objectives of the appointed trustee or the majority of bondholders. See, e.g., MeehanCombs 

Glob. Credit Opportunities Funds, LP v. Caesars Entm’t Corp., 80 F. Supp. 3d 507, 514 (S.D.N.Y. 

2015); Friedman v. Chesapeake & Ohio Ry. Co., 261 F. Supp. 728, 731 n.7 (S.D.N.Y. 1966) 

(“If . . . every holder of a bond or bonds were free to sue at will for himself and for others similarly 

situated, the resulting harassment and litigation would be not only burdensome but intolerable.” 

(quotation marks omitted)). No-action provisions are enforceable in bankruptcy. In re Am. Roads 

LLC, 496 B.R. 727, 729–31 (Bankr. S.D.N.Y. 2013) (“[B]ankruptcy courts have routinely held that 

a party lacks standing to take an action in bankruptcy in violation of a ‘no action’ clause.”); see 

also In re Enron Corp., 302 B.R. 463, 477 (Bankr. S.D.N.Y. 2003).

25. Section 808 of the Trust Agreement is a nonstandard “no-action-plus” provision 

that differs markedly from the no action provisions set forth in model indenture documents.15 It 

provides substantial direct representative enforcement rights to groups of Bondholders, so long as 

they collectively hold in excess of 20% of the outstanding principal and act on behalf of all 

Bondholders. At the same time, it severely curtails the rights of individual Bondholders or smaller 

15 See Revised Model Simplified Indenture, 55 Bus. Law. 1115, 1137–38 (2000) (providing 

example of standard no-action clause). 

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Bondholder groups to act independently or to take actions that are inconsistent with Trust 

Agreement’s collective action and representative enforcement mechanism: 

It is understood and intended that, except as otherwise above 

provided, no one or more holders of the bonds hereby secured shall 

have any right in any manner whatever by his or their action to 

affect, disturb or prejudice the security of this Agreement, or to 

enforce any right hereunder except in the manner herein provided, 

that all proceedings at law or in equity shall be instituted, had and 

maintained in the manner herein provided and for the benefit of all 

holders of such outstanding bonds and coupons, and that any 

individual right of action or other right given to one or more of such 

holders by law is restricted by this Agreement to the rights and 

remedies herein provided. 

(Trust Agreement § 808.) 

26. The collective action and representative enforcement principles of the Trust 

Agreement are further reflected in Section 809, which provides for representative actions by the 

PREPA Bond Trustee by providing that suits “instituted by the Trustee shall be brought in its name 

for the benefit of all” Bondholders, and in Section 805, which requires that post-Event of Default 

recoveries on the Bonds be distributed on a pro rata basis following acceleration, subject to certain 

conditions. (Id. §§ 805, 809, 1102.) 

27. The importance of the Trust Agreement’s collective, representative structure of 

Bondholder rights and remedies has already been recognized in this case. In 2018, the Court held 

that an individual Bondholder—Pan American Grain Company—could not seek relief from the 

automatic stay to unilaterally pursue setoff of its PREPA Bond debt as an individualized remedy: 

Due to the collective structure of bondholder rights and remedies 

under the Operative Trust Agreement, and specifically because of 

the no-action clause of that agreement, which counsel have 

discussed, movant does not have standing to unilaterally bring 

proceedings to enforce collection upon its PREPA bonds. . . . 

Moreover, the no-action clause of the Trust Agreement requires that 

all proceedings in law or equity brought by individual PREPA 

bondholders be maintained for the benefit of all PREPA 

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bondholders. Nothing in the trust instrument or in bankruptcy law 

changes the powers of an individual bondholder under the Trust 

Agreement upon the issuer’s entry into a bankruptcy proceeding. . . 

. 

In effect, movant is asking this Court to create an additional 

noncontractual right to direct payment for certain PREPA 

bondholders. There is no legal basis for such a revision of a complex 

contractual arrangement to benefit a single bondholder that has no 

right to individual relief as against the issuer under the governing 

documents. Such relief would also be inequitable. 

(Nov. 7, 2018 Hr’g Tr. 48:8–50:9, ECF No. 1014.) 

28. Similarly, the Oversight Board relied critically upon the Trust Agreement’s 

collective action and representative enforcement principles when it named the PREPA Bond 

Trustee as the sole defendant in the Amended Lien & Recourse Challenge, characterizing the 

PREPA Bond Trustee “as the legal representative of all PREPA Bondholders with respect to the 

subject matter of this proceeding.” (Am. Compl. ¶ 11, Adv. ECF No. 26.) 

B. The Class 1 and National Settlements Do Not Comply with the Trust 

Agreement’s Collective Action, Representative Enforcement, and Pro Rata 

Distribution Requirements. 

29. The Class 1 and National Settlements violate the restrictions imposed by the Trust 

Agreement in at least three ways.16

30. First, these settlements do not comply with the “exclusivity” rule reflected in 

Section 808, which requires that the rights of Bondholders be exercised collectively through the 

provisions of the Trust Agreement and not on an individualized basis. Because of this rule, 

Bondholders may not “enforce any right [in the Trust Agreement] except in the manner herein 

provided,” and “any individual right of action or other right given to one or more of such holders 

16 It is undisputed that neither National nor the Settling Bondholders complied with the 

notice procedures set forth in Section 808 by providing notice to the PREPA Bond Trustee or 

asking it to take any action on its behalf with respect to the National Settlement. 

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by law is restricted by this Agreement to the rights and remedies herein provided.” (Trust 

Agreement § 808.) The Settling Bondholders and National thus lacked the authority to cut their 

own individualized deals with respect to their PREPA Bond claims. Those claims are, and continue 

to be, part of the overall collective Bond claim held by the PREPA Bond Trustee on behalf of all 

Bondholders. They cannot be carved out of the Amended Lien & Recourse Challenge in the 

manner proposed by the Class 1 and National Settlements and their related treatments in the Plan. 

31. Second, the Class 1 Settlement and the National Settlement violate Section 808’s 

rule against Bondholder action “in any manner whatever” that would “affect, disturb and prejudice 

the security of the Trust Agreement.” (Id. § 808.) In the context of this Title III case and the 

pending Amended Lien & Recourse Challenge, the security of the Trust Agreement consists of the 

recoveries that the PREPA Bond Trustee is seeking, or may seek, to recover on behalf of all 

Bondholders, including bankruptcy plan recoveries in this Title III case and in the Amended Lien 

& Recourse Challenge. Through their respective settlements, the Settling Bondholders and 

National are improperly attempting to lock in individualized treatments for their Bond claims from 

the limited pot currently made available under the Plan without being subject to the outcome of 

the collective action specified by the Trust Agreement. In so doing, they have prejudicially 

impacted the amounts available to other Bondholders and Monolines in violation of Section 808.17

32. Third, based upon the rulings of the Court to date (which could be worsened by the 

outcome of the Section 502(c) estimation process), the Class 1 Settlement and the National 

Settlement provide disproportionate consideration to the Settling Bondholders and National that 

17 Similarly, the extra plan compensation in the form of $50 million of Series B Bonds 

presumably contemplated by the National Settlement in lieu of cash also violates the equal 

distribution requirements of Section 805 of the Trust Agreement and the prior rights of the PREPA 

Bond Trustee. 

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does not comply with the pro rata distribution requirements contained in Section 805 of the Trust 

Agreement or the other provisions of the Trust Agreement mandating pari passu treatment. The 

Plan violates these provisions further by providing that Class 5 consideration is to be paid directly 

to National, instead of going through the PREPA Bond Trustee as the representative of all 

Bondholders. Moreover, there is no disputed claims reserve, so the Plan improperly seeks to 

distribute the limited Plan pot to Settling Bondholders and National before a determination can be 

made in the Amended Lien & Recourse Challenge about who should receive such consideration. 

C. The Arguments Made Thus Far in Defense of the Settlements Are Without 

Merit. 

33. In connection with the Disclosure Statement hearing, National and the Oversight 

Board advanced several arguments for why PREPA, the Settling Bondholders, and National were 

not bound by the Trust Agreement. For example, National contended that its execution of the plan 

support agreement does not equate to instituting a “suit, action or proceeding” within the meaning 

of the first sentence of Section 808. (National Reply in Supp. of DS ¶¶ 12, 13, ECF No. 3244.) 

Even assuming this were true (and it is not), National ignores the exclusive pro rata distribution 

rules in the Trust Agreement. There is no doubt that the National Settlement was separately 

negotiated in an effort to improve the collective treatment that National’s PREPA Bond claims 

might otherwise receive, which it did by locking up an individualized settlement for a 

disproportionate piece of the pot. 

34. National and the Oversight Board also argued that such a broad reading of the Trust 

Agreement’s no-action clause would be bad policy that could undermine the ability of voting 

beneficial Bondholders or their voting insurers to reach settlements beneficial to the bankruptcy 

plan negotiation process. (Id. ¶ 15.) Section 808, however, differs from standard no-action clauses 

in the broad scope of its prohibitions. Moreover, the Oversight Board should not be permitted to 

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induce violations of Section 808 in the Title III case while simultaneously using the representative 

status of the PREPA Bond Trustee to seek global rulings on the rights of all Bondholders in the 

Amended Lien & Recourse Challenge. Here, the Plan’s broken and limited settlements with 

subgroups of Bondholders do not advance any policy of settlement because they do not move 

PREPA’s Title III case toward a substantially consensual plan. 

35. The proponents of the settlements further argued that every Bondholder retains the 

right to sell its PREPA Bonds and that the National Settlement and related Plan terms are nothing 

more than a sale in substance. (Feb. 28, 2023 Hr’g Tr. 140.) This argument makes no sense because 

National has no right to sell the Class 5 Bonds that it insures without the consent of the underlying 

Bondholders. Here, the Class 5 Bonds remain outstanding just like the other PREPA Bonds. The 

only difference is that National and the Oversight Board reached an agreement to 

disproportionately dedicate a percentage of the pot to National in consideration for National’s vote 

and their mutual abandonment of the limitations in the Trust Agreement. 

36. Finally, the Oversight Board and National argued that the Trust Agreement 

(including its no-action provision) is irrelevant because it is going to be cancelled in the Title III 

plan process. (PREPA’s DS Supplemental Omnibus Reply at 14-16, Dkt. No. 3246.) This position, 

however, puts the cart before the horse by assuming that the Oversight Board may confirm a Plan 

that fails to meet PROMESA’s confirmation standards. 

II. THE PLAN DOES NOT SATISFY PROMESA’S CONFIRMATION STANDARDS 

37. A set of confirmation infirmities flow directly from the Plan’s reliance on the 

impermissible Class 1 Settlement and the National Settlement. These infirmities are exacerbated 

by the Plan’s unfair, incomplete, and sometimes incoherent treatment of the remaining NonSettling claims in Class 2 and the ongoing role of the PREPA Bond Trustee in connection with the 

Plan’s implementation. 

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A. The Plan Does Not Comply with Section 1122(a)’s Classification 

Requirements. 

38. Section 301 of PROMESA incorporates the requirement that creditor claims be 

classified in a proposed plan in accordance with section 1122(a) of the Bankruptcy Code. 48 U.S.C. 

§ 2161. Section 1122(a) provides that “a plan may place a claim or an interest in a particular class 

only if such claim or interest is substantially similar to the other claims or interests of such class.” 

The First Circuit has instructed that substantially similar claims should be classified together, even 

though section 1122(a) does not expressly require it. Granada Wines, Inc. v. New England 

Teamsters & Trucking Indus. Pension Fund, 748 F.2d 42, 46-47 (1st Cir. 1984). While this Court 

has previously concluded that Granada Wines’ rule was not explicitly imported into PROMESA 

(Hearing Tr. 77:12–78:12, Case No. 17-03283-LTS, ECF No. 17379),18 the Court clearly has 

discretion under section 1122(a) to require that the classification of PREPA Bond claims be made 

on a legitimate basis consistent with applicable law and the purposes of Title III. 

39. Section 1122(a) requires that the separate classification of substantially similar 

claims (let alone the division of a unified claim) must have an appropriate business or economic 

justification, and there can be none where the prospective class is based entirely on settlement 

rights that do not exist. See In re Autterson, 547 B.R. 372, 397 (Bankr. D. Colo. 2016) (“[T]he 

Court will place the burden on the plan proponent to justify any separate classification of 

substantially similar claims, if a party in interest objects on gerrymandering grounds.” (quotation 

marks omitted)). 

40. Here, the Plan violates section 1122(a) in multiple ways. First, the Plan separates 

Bond claims held by uninsured Bondholders into Class 1 and Class 2 based solely on whether the 

18 The PREPA Bond Trustee does not concede that the Granada Wines is inapplicable. 

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individual Bondholders agreed to the Oversight Board’s offer to settle their portion of the 

Amended Lien & Recourse Challenge with respect to their Bonds. This separate classification is 

improper under section 1122(a) because it lacks any legitimate basis. The Settling Bondholders—

whose claims fall into Class 1—had no individual right to settle any portion of the Amended Lien 

& Recourse Challenge; indeed, such a right is expressly precluded by the collective action 

requirements of the Trust Agreement, including Section 808’s no-action clause. As a result, the 

Plan’s Class 1 designation lacks any basis or justification sufficient to satisfy section 1122(a). All 

uninsured Bonds should get the same plan recovery as agreed in the Trust Agreement’s collective 

action, representative enforcement, and pro rata distribution provisions, and they all should be 

counted in the same class, without exception.19

41. Second, the Plan separates insured Bond claims into Class 2 and Class 5 without 

justification. Claims for Bonds insured by Assured and Syncora fall into the former class, while 

claims for Bonds insured by National are placed into the latter. The only proffered basis for this 

inconsistent classification is the National Settlement, but that settlement does not satisfy section 

1122(a) for the same reason that the Class 1 Settlement does not: like the Settling Bondholders in 

Class 1, National has no individual right to settle any portion of the Amended Lien & Recourse 

Challenge—and therefore its improper efforts to settle its “share” of that action do not provide a 

legitimate basis under section 1122(a) to classify its insured PREPA Bond claims separately from 

those of Assured and Syncora.20

19 For mechanical reasons related to simplifying distributions to insured bondholders, 

courts have permitted or required insured bonds to be separately classified (while maintaining 

equivalent economic recovery against the debtor for both the insured and uninsured classes), but 

this consideration is not relevant to Class 1. 

20 The PREPA Bond Trustee joins in the arguments made in the Bondholder Objections 

that these classifications were also part of an improper gerrymandering effort. 

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B. The Class 1 and Class 5 Plan Treatments Unfairly Discriminate against 

Dissenting Class 2. 

42. The Plan also violates Title III’s prohibition against unfair discrimination. Section 

1129(b) of the Bankruptcy Code, as incorporated into Title III, protects dissenting classes of 

creditors from receiving discriminatory plan consideration relative to other classes by including 

an express cramdown requirement prohibiting “unfair discrimination.” In re LightSquared Inc., 

513 B.R. 56, 99 (Bankr. S.D.N.Y. 2014). Here, Class 2 has rejected the Plan and is impaired, 

making it eligible for cramdown protection against unfair discrimination. The Bondholder 

Objections correctly argue that the proposed treatment of PREPA Bonds in Class 1 and Class 5 

presumptively discriminates against the treatment in Class 2 for the same type of PREPA Bond 

claim and that there is no justification for the discrimination.21

43. In In re Tribune. Co., 972 F.3d 228, 242–45 (3d Cir. 2020), the Third Circuit upheld 

confirmation of a chapter 11 plan over the “unfair discrimination” objection of a class of senior 

noteholders who argued that the plan did not absolutely implement the terms of its subordination 

agreement with certain other creditors who were included within other accepting classes. The 

Third Circuit concluded on narrow facts that the complex plan could be confirmed without 

precisely adhering to the terms of the subordination agreements, where the deviation was very 

small. Id. In its analysis, the court identified eight principles that courts should apply when 

examining unfair discrimination, which can be summarized as follows: 

1) “A subordination agreement does not need to be enforced to 

the letter in the case of a cramdown, and subordinated 

amounts may be allocated to other classes not entitled 

outside bankruptcy to benefit from subordination 

21 The Bondholder Objections also explain why the treatment provided to the Class 4 Fuel 

Line Loan Claims also results in unfair discrimination, and the PREPA Bond Trustee joins in that 

argument. 

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agreements as long as that allocation is not presumptively 

unfair (and, if so, the presumption is not rebutted)”; 

2) “[U]nfair discrimination applies only to classes of creditors 

(not the individual creditors that comprise them)”; 

3) “[U]nfair discrimination is determined from the perspective 

of the dissenting class”; 

4) Classes should be aligned correctly to permit comparison; 

5) The analysis should be done as of the time of the unfair 

discrimination analysis using net present value of payments 

and allocation of risk; 

6) Adjust total plan distributions to pro rata percentage 

comparisons applying any applicable subordinations; 

7) Determine whether to presume unfair discrimination by 

determining whether there is a materially lower percentage 

recovery for the dissenting class or a materially greater risk 

to the dissenting class in connection with the proposed 

distributions; and 

8) Determine whether the plan proponent can overcome the 

rebuttable presumption of unfair discrimination. 

Id. at 242-44. 

44. Applying the Tribune analysis here ineluctably leads to the conclusion that the Plan 

materially and unjustifiably discriminates against Class 2 relative to Classes 1 and 5. Based upon 

the Court’s summary judgment ruling in the Amended Lien & Recourse Challenge and prior 

commitments of the pot, the highest recovery that Class 2 can receive is 46.49%, even if there is a 

Final Order that finds the unsecured Deficiency Claim held by the PREPA Bond Trustee is allowed 

in the full amount of the principal and interest owing on the PREPA Bonds as of the Petition Date. 

Both Classes 1 and 5 will receive a significantly higher percentage recovery based upon the current 

rulings of the Court. National, for example, would receive 71.65% of its insured Bonds, plus an 

additional 5.86% of cash or Series B Bonds. The Settling Bondholders in Class 1 could possibly 

get 100% of their claims covered in Series B Bonds, which is impossible for the members of Class 

2 as there are not enough Series B Bonds available under any scenario. 

45. Moreover, the discriminatory treatment of Class 2 is further reflected in the 

potentially indirect nature of the Plan distributions to Class 2 based upon a Deficiency Claim. (See 

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supra n.11.) If Class 2 Deficiency Claims are only entitled to receive units in the GUC Trust, as 

opposed to Series B Bonds, the units to be received (according the current draft of the GUC Trust 

Agreement) are non-transferable and the GUC Trust would be controlled by an unnamed Oversight 

Board appointee without any meaningful right of unitholder representation. This twice removed 

status and added layer of expense and delay are unfair and should not be permitted. 

46. Although Section 1129(b)’s unfair discrimination requirement does not require the 

absolute application of subordination agreements, as confirmed in Tribune, the pro rata distribution 

provisions of the Trust Agreement and the Bondholder-to-Bondholder agreement to accept the 

priorities of payment set forth in the Trust Agreement remain determinative as to what is fair and 

how much disparity in the timing, quantity, and quality of the plan consideration, if any, should be 

tolerated. This case goes beyond classes of unsecured claims being generally of the same level; it 

instead involves identical claims subject to collective action and representative enforcement 

provisions and an express understanding about how holders of such claims would share recoveries 

on an equal footing. 

47. The Trust Agreement’s parity terms undermine any conceivable justification for 

the obvious discriminatory treatment of Class 2. National, like the Settling Bondholders in Class 

1, had no right to settle its “share” of Amended Lien & Recourse Challenge and to pocket the 

consideration. The discrimination is entirely gratuitous and is not needed to achieve a confirmable 

plan. See In re Lernout & Hauspie Speech Prods., N.V., 301 B.R. 651, 660 (Bankr. D. Del. 2003) 

(“The hallmarks of the various [unfair discrimination] tests have been whether there is a reasonable 

basis for the discrimination, and whether the debtor can confirm and consummate a plan without 

the proposed discrimination.”). The National Settlement was not even offered to other 

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Bondholders or to Assured and Syncora. Accordingly, the Oversight Board cannot overcome the 

Tribune presumption that the discrimination here is “unfair” and therefore prohibited. 

C. The Proposed Competitive Pot Plan Violates Section 1129(a)(3) Because It 

Improperly Seeks to Undermine the Collective Rights of PREPA Bond Claims 

to Unified Representation and Pro Rata Treatment. 

48. Under Section 1129(a)(3) of the Bankruptcy Code, made applicable by PROMESA 

§ 301, a bankruptcy plan must be proposed in good faith. Good faith is not defined in the Code, 

and courts have differed about whether the requirement pertains to the way a plan is proposed or 

encompasses a broader substantive requirement. What courts generally consider is whether “there 

exists a reasonable likelihood that the plan will achieve a result consistent with the objective and 

purposes of the Bankruptcy Code.” In re Weber, 209 B.R. 793, 797 (Bkrtcy. D. Mass. 1997) 

(internal quotation marks omitted); see also In re Coastal Cable T.V., Inc., 709 F.2d 762, 764 (1st 

Cir. 1983) (noting that there must be a relation between a restructuring plan and the purposes that 

the restructuring statute was designed to serve). 

49. In making this determination, courts look to whether the debtor has proposed a plan 

with “honesty and good intentions and with a basis for expecting that a reorganization can be 

effected.” In re Johns–Manville Corp., 843 F.2d 636, 649 (2d Cir.1988) (quotations omitted); see 

also In re Jorgensen, 66 B.R. 104, 109 (B.A.P. 9th Cir. 1986) (“Good faith requires a fundamental 

fairness in dealing with one’s creditors.”). Further, plans that are proposed with mechanisms to 

create artificially impaired accepting classes have been denied confirmation for not being proposed 

in good faith. In re Hotel Assocs. of Tucson, 165 B.R. 470, 475 (B.A.P. 9th Cir. 1994). 

50. The Bondholder Objections to confirmation include lack of good faith, and the 

PREPA Bond Trustee joins in that broader objection. Here, the PREPA Bond Trustee makes an 

additional objection based on section 1129(a)(3) that is premised on the Oversight Board’s pattern 

of disregard for the collective action, representative enforcement, and pro rata distribution 

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provisions of the Trust Agreement, as reflected in the impermissible Class 1 Settlement and 

National Settlement discussed above. 

51. The Plan’s bad faith is further revealed in its putative treatment of the Disputed 

Claims of the PREPA Bond Trustee and Class 2 Bondholders during the inevitable Amended Lien 

& Recourse Challenge litigation and appeals occurring after confirmation. The Plan implies in 

several places that the Amended Lien & Recourse Challenge will proceed to a Final Order and that 

this disposition will be used to distribute the limited pot of Series B Bonds. It does so by defining 

the Amended Lien & Recourse Challenge, Bond Collateral, and Deficiency Claim in terms of 

needing a “Final Order,” but this limitation is used inconsistently in a manner that is highly unfair 

to Class 2. A Final Order is not required in order for the Plan to become confirmed or for the 

Effective Date to occur or for distributions to move forward for other Classes of Allowed Claims. 

The only real effect is to designate Class 2 as Disputed Claims that get no distributions during the 

pendency of Amended Lien & Recourse Challenge.22 In light of the large relative size of the Class 

2 and the inevitable appeals, this targeted adverse treatment cannot be squared with the 

requirements of good faith. This alone fails to meet the requirement to propose Title III plans in 

good faith, and the Court should not confirm the Plan. 

22 To the extent that the Class 2 Plan treatment is construed to require Class 2 Creditors to 

become subject to the GUC Trust instead of receiving a share directly of the General Unsecured 

Creditor Recovery assets, the Plan is even more discriminatory because, among other 

disadvantages, the GUC units are generally nontransferable and the Bondholders as unit holders 

would be given no effective representation in the selection of the GUC Trustee and GUC Board. 

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D. Neither the Class 1 Settlement nor the National Settlement Should Be 

Approved under Bankruptcy Rule 9019.23

52. The Plan expressly requires a confirmation order providing that settlements are 

deemed approved under Bankruptcy Rule 9019 to the extent applicable. (See Plan Art. 

XXXI.A(e).) In Article XXXVI.D, the Plan provides that the failure of any party to raise a timely 

Bankruptcy Rule 9019 objection to any settlement in the Plan is forever enjoined. 

53. Article XX.I further provides that Bankruptcy Rule 9019 protects the National 

Settlement as follows: 

Pursuant to sections 105(a) and 1123(b)(3) of the Bankruptcy Code 

and Bankruptcy Rule 9019, the provisions of the National 

Settlement shall constitute a good-faith compromise and settlement 

among PREPA, the Oversight Board, and National of all Claims, 

Causes of Action, interests, and controversies among such parties, 

including all potential Claims, Causes of Action, interests, and 

controversies between PREPA, the Oversight Board, and National, 

and are in consideration of the value provided to PREPA by 

National pursuant to the National Settlement. The Plan shall be 

deemed a motion to approve the National Settlement as a good-faith 

compromise and settlement of all of the Claims, interests, Causes of 

Action and controversies described in the foregoing sentence 

pursuant to section 1123(b)(3) of the Bankruptcy Code and 

Bankruptcy Rule 9019, and entry of the Confirmation Order shall 

constitute the Title III Court’s approval of the National Settlement, 

as well as a finding by the Title III Court that the National Settlement 

is in the best interests of PREPA, the Oversight Board, and Holders 

of Claims and is fair, equitable, and reasonable. 

54. It is well settled that Rule 9019 sets out the procedure for a court to approve the 

compromise of a claim of uncertain value belonging to the estate or claim being made against the 

estate with the idea of maximizing value available for creditors. Such settlements between the 

debtor and a creditor must be “fair and equitable” and are not supposed to elevate the settling 

23 This objection and many others apply equally to the Fuel Line Lender settlement, which 

is addressed in the Bondholder Objections in which the PREPA Bond Trustee joins. 

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creditor’s priority for distributions under the Bankruptcy Code. See In re Iridium Operating LLC, 

478 F.3d 453, 455 (2d Cir. 2007). In Protective Comm. for Indep. Stockholders of TMT Trailer 

Ferry, Inc. v. Anderson, 390 U.S. 414, 424, 441 (1968), the Supreme Court held that a settlement 

approved as part of a reorganization plan must be “fair and equitable” to all creditors. The Fifth 

Circuit has interpreted that decision to require compliance with the priority scheme whenever a 

bankruptcy court approves a settlement that entails the distribution of estate assets to creditors, 

whether as part of or before the confirmation of a Chapter 11 plan. In re AWECO, Inc., 725 F.2d 

293, 298 (5th Cir. 1984). In Irridium, the Second Circuit constructed a narrow exception to the 

requirement of strict compliance with bankruptcy payment priorities, noting that “whether a 

settlement’s distribution plan complies with the Bankruptcy Code’s priority scheme will often be 

the dispositive factor.” 478 F.3d at 464. 

55. In the First Circuit, a motion to approve a compromise or settlement with the estate 

pursuant to Bankruptcy Rule 9019 requires a court generally to assess whether the proposed 

settlement falls below “the lowest point in the range of reasonableness.” In re Fin. Oversight & 

Mgmt. Bd. for Puerto Rico, 360 F. Supp. 3d 65, 75 (D.P.R. 2019) (quotation marks omitted). In 

doing so, the courts in the First Circuit consider, among other factors: 

(i) the probability of success in the litigation being compromised; 

(ii) the difficulties, if any, to be encountered in the matter of 

collection; (iii) the complexity of the litigation involved, and the 

expense, inconvenience and delay attending it; and, (iv) the 

paramount interest of the creditors and a proper deference to their 

reasonable views in the premise. 

Jeffrey v. Desmond, 70 F.3d 183, 185 (1st Cir. 1995); see also In re Healthco Int’l, Inc., 136 F.3d 

45, 50 (1st Cir. 1998) (considering the “probability of success were the claim to be litigated,” “a 

reasonable accommodation of the creditors’ views regarding the proposed settlement,” and “the 

experience and competence of the fiduciary proposing the settlement”). The Jeffrey factors are not 

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exclusive, and courts also often consider the public policy considerations of the settlement. In re 

High Voltage Eng'g Corp., 397 B.R. 579, 601-02 (Bankr. D. Mass. 2008). 

56. Here, neither the Class 1 settlement nor the National Settlement qualify for approval 

under Bankruptcy Rule 9019 for two reasons. First, there is nothing in the First Circuit’s 

jurisprudence surrounding Bankruptcy Rule 9019 that allows a debtor to pay estate consideration 

to a creditor for entering into a legally ineffective settlement of ongoing litigation, which the 

creditor lacked the authority to settle. Paying estate consideration for a plan vote coupled with 

misclassification of the settled claim is not a real settlement covered by Bankruptcy Rule 9019. 

57. Second, the disparate consideration is in clear violation of the Bankruptcy Code’s 

priority scheme because National is subject to the equal distributive intercreditor agreements in 

the Trust Agreement, and the National Settlement, according to David Skeel, dedicates more Series 

B Bonds to National for its Class 5 Bonds than would be possible for all of the Bond claims. (Skeel 

Dep. Tr. 119-22.) It is not fair and equitable to the Non-Settling Bondholders, Assured, and 

Syncora, and therefore cannot be approved. 

58. Here, Jeffrey’s fourth factor (“the paramount interests of creditors”) looms large, in 

that the paramount interest of creditors requires that the Oversight Board negotiate a global Bond 

claim settlement that can be accomplished in a manner consistent with the collective action, 

representative enforcement, and pro rata distribution provisions of the Trust Agreement. 

Accordingly, the Court should deny approval of the Class 1 Settlement and the National Settlement 

under Bankruptcy Rule 9019. 

E. The Plan Includes Impermissible Exculpations. 

59. The Plan provides exculpation in favor of National, other named settling parties 

(including the Fuel Line Lenders), and a nonspecific set of Entities consisting of their respective 

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present and former Related Persons.24

60. In Article XXVII.D, the Oversight Board protects National, the Fuel Line Lenders, 

and their Related Persons as Exculpated Parties, as follows: 

Except as otherwise specifically provided in the Plan, no Exculpated 

Party shall have or incur, and each Exculpated Party is released and 

exculpated from any Cause of Action for any claim related to 

any act or omission in connection with, relating to, or arising out 

of, the Title III Case, the formulation, preparation, 

dissemination, negotiation, or filing of the Fuel Line Lender 

PSA, the National PSA, Disclosure Statement, the Plan, the 

Uninsured Bond Settlement Agreement, the Vitol Settlement 

Agreement, or any Restructuring Transaction, contract, instrument, 

release or other Definitive Document, agreement, or document 

created or entered into in connection with the Disclosure Statement 

or the Plan, the filing of the Title III Case, the pursuit of 

Confirmation, the pursuit of consummation, the administration and 

implementation of the Plan, including the issuance of securities 

pursuant to the Plan, or the distribution of property under the Plan 

or any other related agreement, except for claims related to any act 

or omission that is determined in a Final Order to have constituted 

actual fraud or gross negligence, but in all respects such Entities 

shall be entitled to reasonably rely upon the advice of counsel with 

respect to their duties and responsibilities pursuant to the Plan. The 

Exculpated Parties have, and upon completion of the Plan shall 

be deemed to have, participated in good faith and in compliance 

with the applicable laws with regard to the solicitation of votes 

and distribution of consideration pursuant to the Plan and, 

therefore, are not, and on account of such distributions shall not 

be, liable at any time for the violation of any applicable law, rule, 

or regulation governing the solicitation of acceptances or 

rejections of the Plan or such distributions made pursuant to the 

Plan. 

61. This exculpation would insulate all Exculpated Parties from claims that they 

violated the Trust Agreement or otherwise took actions inconsistent with its terms. Such an 

exculpation is completely inappropriate for a plan that is not substantially consensual. In this 

24 The PREPA Bond Trustee joins in the broader objections to the scope of the release and 

exculpation provisions of the Plan set forth in the Bondholder Objections and underscores here 

specific releases and exculpations related to National and the Fuel Line Lenders. 

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context, exculpations must be limited to estate professionals and fiduciaries. “[A] party's 

exculpation is based upon its role or status as a fiduciary.” In re PTL Holdings LLC, 2011 WL 

5509031, *12 (Bankr. D. Del. 2011). Accordingly, “courts have permitted exculpation clauses 

insofar as they ‘merely state[ ] the standard to which . . . estate fiduciaries [a]re held in a chapter 

11 case.’” Id. (quoting In re Washington Mutual, Inc., 442 B.R. 314, 350 (Bankr. D. Del. 2011) 

(alterations in original). “That fiduciary standard, however, applies only to estate fiduciaries.” 

Washington Mutual, 442 B.R. at 350; see also In re Tribune Co., 464 B.R. 126, 189 (Bankr. D. 

Del. 2011) (holding that exculpation provision must “exclude non-fiduciaries”). 

62. Neither National nor the Fuel Line Lenders are estate professionals or fiduciaries. 

National simply entered into a self-serving plan support agreement, which violates the Trust 

Agreement’s collective action, representative enforcement, and pro rata distribution provisions. 

The Fuel Line Lenders secured a settlement with the Oversight Board that purports to give them 

priority over the Bonds, which is not the Board’s right to give. These are not appropriate bases for 

exculpation. See In re Master Mortgage Invest. Fund, Inc., 168 B.R. 930, 934–38 (Bankr. W.D. 

Mo. 1994) (considering any identity of interest between the debtor and released party, the 

contribution of the released party to the reorganization, the necessity of the proposed injunction, 

any agreement by a substantial majority of creditors, and whether the plan will pay the claims of 

the affected classes); see also In re Quincy Med. Ctr., Inc., 2011 WL 5592907 (Bankr. D. Mass. 

2011) (summarizing and agreeing with past decisions using Master Mortgage). 

63. Moreover, the limiting language with respect to National’s monoline obligations is 

inadequate and overbroad. 

F. The Plan Fails to Include an Adequate Means of Implementation for Class 2. 

64. Under section 1123(a)(5) of the Bankruptcy Code, as incorporated into PROMESA, 

a proposed Title III Plan must provide an adequate means of implementation. Here, the Plan only 

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provides an adequate means of implementation for favored classes, and it leaves a series of unfair, 

incomplete, or incoherent provisions for unfavored Class 2. 

65. As discussed above, the Oversight Board seeks confirmation and the right to have 

the Plan become effective prior to a Final Order in the Amended Lien & Recourse Challenge. 

During the post-Effective Date period, Class 2 claims would be Disputed Claims ineligible for 

distributions, and the Oversight Board would be free to distribute Series B Bonds (and other Plan 

consideration) to other Allowed Claims without a disputed claims reserve. Given the 

overwhelming size of Class 2, a disputed claims reserve is essential to protect Bondholders in the 

event that they ultimately prevail in the Amended Lien & Recourse Challenge.25

66. Also missing from the Plan with respect to the Monoline insurance policies issued 

by the Non-Settling Monolines in Class 2 is a custodial trust or other mechanism to combine the 

cash flow from the Plan consideration distributable to Insured Bondholders in Class 2 with postEffective Date Monoline insurance policy payments. The Oversight Board simply lumps NonSettling Monolines with Non-Settling Bondholders in Class 2 with no provision for how the Series 

B Bonds issued under the Plan relate to the ongoing Monoline insurance policies. 

67. PREPA purchased the Monoline insurance for the Insured Bonds in Class 2 and has 

an obligation to provide a consistent treatment for those Insured Bonds including both Plan 

distributions and preserved Policy rights. The Plan fails to account for this in multiple ways. 

68. First, the Plan does not clearly indicate who will receive plan distributions: the 

Monoline Insurer or the underlying holder of Insured Bonds. 

69. Art. XXIV.L of the Plan provides: 

25 As discussed below, the Court should prohibit the Plan Effective Date from occurring 

before a Final Order is entered in the Amended Lien & Recourse Challenge. 

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For all purposes of the Plan, including, without limitation, for 

purposes of distributions pursuant to the terms and provisions of this 

Article XXIV, the Holder of a Claim shall mean any Entity who, 

directly or indirectly, has investment power with respect to any 

Claim, which includes the power to dispose or to direct the 

disposition of such Claim; provided, however, that, solely with 

respect to Insured PREPA Revenue Bonds and Bankruptcy Code 

section 1126, the Holder of any Insured PREPA Revenue Bond 

Claims shall be determined in accordance with PROMESA section 

301(c)(3) and any law or governing documents applicable to such 

Insured PREPA Revenue Bond Claims. 

This provision could be construed to provide that the underlying Insured Bondholders are to 

receive all of the Class 2 distributions on account of their Allowed PREPA Revenue Bond Claims 

(as defined in the Plan). Alternatively, it could also be construed to defer to the Monoline Insurance 

Agreements (defined below) to resolve that issue without any mechanism in place for resolution. 

In any event, there is no provision in the Plan to address the relationship of distributions of Series 

B Bonds or the payments thereon with the rights of Holders of Insured Bonds under their Policies. 

70. Second, the Plan is also unclear about the post-Effective Date status of the 

Monoline insurance policies insuring Class 2 PREPA Bonds. Section XXIV excludes “Insurance 

Policies” and related documents issued by a Monoline Insurer from the general cancellation of 

contracts on the Effective Date, but there is a drafting error because the definition of Insurance 

Policies excludes all Monoline insurance policies arguably leaving them and “related documents” 

within the cancellation provision. Likewise, the only other provision purporting to preserve Class 

2 Monoline Insurance rights (Article XXI.F) only excludes them from the operation of the 

provision assuming other types of Insurance Policies as executory contracts: 

Subject to the terms and provisions of Article XXI.H hereof, each 

of the Debtor’s Insurance Policies and any agreements, documents, 

or instruments relating thereto, are treated as Executory Contracts 

under the Plan and shall be assumed as of the Effective Date; 

provided, however, that such treatment shall not, and shall not be 

construed to, discharge or relieve any Monoline Insurer with respect 

to its respective obligations to Holders of Claims under policies of 

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insurance and applicable law and governing documents with respect 

thereto, as applicable, under this Plan. 

71. Third, the Plan does not coherently provide for a post-Effective Date Monoline 

Insurance claims process for Insured Bonds subject to Class 2. The PREPA Bond Trustee (in its 

capacity as trustee, paying agent, or fiscal agent) is currently required pursuant to the relevant 

Monoline insurance policies and certain agreements with PREPA (the “Monoline Insurance 

Agreements”) to submit claims to Assured and Syncora under the terms of the their Monoline 

insurance policies before each scheduled payment date and to make distributions of those amounts 

to the Holders of their Insured Bonds. Assured and Syncora are third-party beneficiaries to the 

relevant Monoline Insurance Agreements. The Monoline Insurance Agreements further provide 

subrogation and assignment rights to Assured and Syncora with respect to their respective policy 

payments. Article XXIV of the Plan fails to coherently address the post-Effective Date status of 

the Monoline Insurance Agreements with the PREPA Bond Trustee or the claims process. Article 

XXIV.E.7 provides: 

Except ... as specifically provided otherwise in the Plan ... , on the 

Effective Date, the PREPA Revenue Bonds and Fuel Line Facilities 

and all instruments and documents related thereto will be deemed 

automatically cancelled, terminated, and of no further force or effect 

against the Debtor without any further act or action under any 

applicable agreement, law, regulation, order or rule, with the Debtor 

and the applicable trustee, paying agent, or fiscal agent, as the 

case may be, having no continuing obligations or duties and 

responsibilities thereunder; provided, however, that, 

notwithstanding anything contained herein to the contrary, the 

PREPA Revenue Bonds and Fuel Line Facilities and such other 

instruments and documents shall continue in effect solely (i) to allow 

the Distribution Agent to make any distributions as set forth in the 

Plan and to perform such other necessary administrative or other 

functions with respect thereto, (ii) to allow Holders of Allowed 

PREPA Revenue Bond Claims, Allowed National Claims, and 

Allowed Fuel Line Loan Claims to receive distributions in 

accordance with the terms and provisions of the Plan, (iii) for any 

trustee, agent, contract administrator, or similar entity under all 

instruments and documents related thereto, to perform 

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necessary functions, including making distributions, in 

accordance with the Plan and to have the benefit of all the rights 

and protections and other provisions of such instruments and 

documents, as applicable, and all other related agreements, (iv) 

to set forth the terms and conditions applicable to parties to such 

documents and instruments other than the Debtor, or (v) as may 

be necessary to preserve any claims under the respective 

Insurance Policies and related documents issued by a Monoline 

Insurer. Notwithstanding the foregoing, and except as otherwise 

expressly provided in the Plan, such bonds or bond documents that 

remain outstanding shall not form the basis for the assertion of any 

Claim against the Debtor or Reorganized Debtor, as the case may be. 

72. As applied to the Monoline Insurance Agreements for Class 2 Insured Bonds, this 

provision is incomplete and incoherent. It not only uses a definition of Insurance Policies that 

excludes Monoline insurance policies, but it also apparently relieves PREPA of all of its 

obligations under the Monoline Insurance Agreements, while at the same time preserving the 

duties of the PREPA Bond Trustee to perform “necessary functions,” whatever that means. This 

provision likewise fails to indicate who is obligated to pay for the ongoing performance of postEffective Date duties that the Plan preserves. The Oversight Board should be required to include 

a sensible custodial trust arrangement for the treatment of Class 2 Insured Bonds as part of its duty 

to provide an adequate means of implementation. 

G. The Plan Fails More Generally to Address Coherently the Post-Effective Date 

Duties of the PREPA Bond Trustee or Provide a Means for Payment. 

73. Article XXIV.E.7 is a one-size-fits-all cancellation provision that fails to 

adequately describe what continuing rights and duties of the PREPA Bond Trustee, in that or some 

related capacity, will survive and on what terms. It raises, but leaves unanswered, numerous 

questions about what happens after the Effective Date. Rather than parse each deficiency, the 

PREPA Bond Trustee proposes the following paragraph to replace Article XXIV.E.7 as it relates 

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to the PREPA Bond Trustee, the Trust Agreement, and any related documents and instruments, 

including those relating to Monoline insurance for the PREPA Bonds26: 

Notwithstanding anything in the Plan or the Confirmation Order to 

the contrary, and subject to prior entry of a Final Order in the 

Amended Lien & Recourse Challenge and any related order of the 

Title III Court on remand if applicable, then on the Effective Date 

thereafter, (i) the Trust Agreement and PREPA Revenue Bonds will 

be deemed automatically cancelled and terminated as against the 

Debtor expressly subject to the preservation of all rights of any 

Insured Bondholder as against any Non-Settling Monoline Insurer 

with respect to any monoline insurance applicable thereto, and 

subject to Article XX herein and the elections made thereunder with 

respect to the National Insured Bonds, (ii) the PREPA Bond Trustee 

in all capacities under the Trust Agreement and any related 

documents and instruments, including with respect to any Monoline 

insurance policies for the PREPA Revenue Bonds, shall be 

discharged and released of all duties under the Trust Agreement, the 

PREPA Revenue Bonds, and any Monoline Insurance Agreements, 

except for (a) the retention and distribution of collateral consistent 

with the outcome of the Amended Lien & Recourse Challenge in 

accordance with the Trust Agreement, including in the Sinking 

Fund, in each case subject to its charging lien rights, (b) the 

distribution of Series B Bonds and CVI or other Plan consideration 

to Bondholders and/or Monoline Insurers in accordance with the 

written instructions of the Distribution Agent, subject to payment of 

the PREPA Bond Trustee’s reasonable fees and expenses incurred 

in connection therewith, the preservation of its charging lien rights 

and exculpation in an order of the Court in form and substance 

satisfactory to the PREPA Bond Trustee. With respect to the 

National Insurance Policies, the PREPA Bond Trustee in its capacity 

as such or in any related paying agency or fiscal agency shall 

cooperate with the Reorganized PREPA and National in the 

implementation of Article XX hereunder, subject to payment of its 

fees and expenses and indemnity reasonably acceptable to the 

PREPA Bond Trustee. Absent a new agreement with any NonSettling Monoline, the PREPA Bond Trustee shall have no duty to 

make monoline insurance claims after the Effective Date and each 

Non-Settling Monoline Insurer shall be responsible for making bond 

insurance payments to Bondholders directly in the amounts and at 

the times set forth in their respective Monoline Insurance policies. 

The Debtor and the Distribution Agent agree to cooperate with the 

26 Nothing herein is intended to compromise or limit any objection to confirmation or any 

position of the PREPA Bond Trustee in the Amended Lien & Recourse Challenge. 

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PREPA Bond Trustee in the surrender and cancelation of PREPA 

Bonds at DTC, (including the provision of post Effective Date 

distributions through DTC) and with the distribution of any Series 

B Bonds of CVI though DTC, and that all reasonable fees and 

expense of the PREPA Bond Trustee in connection therewith shall 

be paid by the Reorganized PREPA. All rights, privileges, and 

protections of the PREPA Bond Trustee under the Trust Agreement 

as against the holders of PREPA Revenue Bonds shall remain in full 

force and effect. Subject to the foregoing rights, privileges, and 

protections, the PREPA Bond Trustee is and shall remain authorized 

to pursue any appeal of this Order or any order entered in the 

Amended Lien & Recourse Challenge. 

74. To be clear, however, even if the foregoing language is included to the satisfaction 

of the PREPA Bond Trustee, the Plan remains unconfirmable for the other reasons identified herein 

and in the Bondholder Objections, and the PREPA Bond Trustee reserves the right to object to 

confirmation of the Plan based upon such deficiencies and further reserves all rights relating to the 

preservation of all liens and rights of the Bondholders and the PREPA Bond Trustee in any Final 

Order resolving the Amended Lien & Recourse Challenge. 

H. The Court Should Not Permit the Plan’s Effective Date to Occur Prior to the 

Issuance of a Final Order in the Amended Lien & Recourse Challenge. 

75. As indicated above, the Plan currently gives the Oversight Board the discretion to 

proceed not only to confirmation but also to the Effective Date before a Final Order is entered in 

the Amended Lien & Recourse Challenge. Thus, if the Plan is confirmed, the PREPA Bond Trustee 

and Bondholders may be forced to seek an emergency stay to prevent a serious misallocation of 

the Plan consideration while the First Circuit reviews the Court’s decisions about the Bond 

Collateral and Deficiency Claim estimation. Depending on the outcomes of those appeals, the 

confirmation order may need to be changed to deny confirmation, to alter the amount of required 

plan consideration, or to distribute it differently in accordance with the First Circuit’s 

determinations. Instead of setting the stage for costly and burdensome emergency motion practice, 

it would be more appropriate for the Court to require that the Plan’s Effective Date cannot occur 

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until thirty (30) days after entry of a Final Order in the Amended Lien & Recourse Challenge, 

absent further order from the Court following notice and hearing for good cause shown by the 

Oversight Board or the Reorganized PREPA. 

III. THE PROPOSED CONFIRMATION ORDER IS INADEQUATE. 

76. Separately, the PREPA Bond Trustee has objected to the form of the proposed 

Confirmation Order. All objections to the form of the confirmation order shall be deemed 

incorporated and made part of the PREPA Bond Trustee Objection for all purposes. 

CONCLUSION 

77. For the reasons stated herein and in the Bondholder Objections, the PREPA Bond 

Trustee respectfully requests that the Court find the Plan unconfirmable. 

We hereby certify that, on this same date, we electronically filed the foregoing with the 

clerk of the Court using the CM/ECF system, which will notify the attorneys of record. 

Respectfully submitted, In San Juan, Puerto Rico, today June 12, 2023. 

RIVERA, TULLA AND FERRER, 

LLC 

By: /s/Eric A. Tulla 

Eric A. Tulla, USDC-DPR No. 118313 

Rivera Tulla & Ferrer Building 

50 Quisqueya Street 

San Juan, PR 00917-1212 

Tel: (787)753-0438 

Fax: (787)767-5784 

Email: etulla@riveratulla.com 

MASLON LLP 

By: /s/Clark T. Whitmore

Clark T. Whitmore (admitted pro hac vice) 

Michael C. McCarthy (admitted pro hac vice) 

John T. Duffey (admitted pro hac vice) 

Jason M. Reed (admitted pro hac vice) 

90 South Seventh Street, Suite 3300 

Minneapolis, MN 55402 

Telephone: 612-672-8200 

Facsimile: 612-642-4800 

Email: clark.whitmore@maslon.com 

mike.mccarthy@maslon.com 

john.duffey@maslon.com 

jason.reed@maslon.com 

ATTORNEYS FOR U.S. BANK NATIONAL 

ASSOCIATION, IN ITS CAPACITY AS 

TRUSTEE

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