230626 ORD RE CLAIM ESTIMATION VERSION JUNE 26, 2023 1

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.

No. 17 BK 4780-LTS

THE FINANCIAL OVERSIGHT AND MANAGEMENT 

BOARD FOR PUERTO RICO,

as representative of

PUERTO RICO POWER ELECTRIC AUTHORITY,

Plaintiff/Counterclaim-Defendant,

Adv. Proc. No. 19-00391-LTS

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 (the “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); (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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230626 ORD RE CLAIM ESTIMATION VERSION JUNE 26, 2023 2

PUERTO RICO FISCAL AGENCY AND FINANCIAL 

ADVISORY AUTHORITY, THE OFFICIAL COMMITTEE 

OF UNSECURED CREDITORS OF ALL TITLE III 

DEBTORS, CORTLAND CAPITAL MARKET SERVICES, 

SOLA LTD., SOLUS OPPORTUNITIES FUND 5 LP, 

ULTRA MASTER LTD, ULTRA NB LLC, UNION DE 

TRABAJADORES DE LA INDUSTRIA ELECTRICA Y 

RIEGO INC., AND SISTEMA DE RETIRO DE LOS 

EMPLEADOS DE LA AUTORIDAD DE ENERGIA 

ELECTICA,

Intervenor-Plaintiffs,

-vU.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE,

Defendant/Counterclaim-Plaintiff,

THE AD HOC GROUP OF PREPA BONDHOLDERS, 

ASSURED GUARANTY CORP., ASSURED GUARANTY 

MUNICIPAL CORP., NATIONAL PUBLIC FINANCE 

GUARANTEE CORPORATION, AND SYNCORA 

GUARANTEE, INC., 

Intervenor-Defendants/Counterclaim-Plaintiffs.

ORDER CONCERNING BONDHOLDERS’ UNSECURED NET REVENUE CLAIM ESTIMATION

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230626 ORD RE CLAIM ESTIMATION VERSION JUNE 26, 2023 3

APPEARANCES:

OF COUNSEL FOR 

A&S LEGAL STUDIO, PSC

By: Luis F. del Valle-Emmanuelli

434 Avenida Hostos

San Juan, PR 00918

PROSKAUER ROSE LLP

By: Martin J. Bienenstock

 Ehud Barak

 Margaret Dale

 Jeffrey W. Levitan

Michael T. Mervis

 Daniel S. Desatnik

 Elliot R. Stevens

Eleven Times Square

New York, NY 10036

and

Steven O. Weise

2029 Century Park East, Suite 2400

Los Angeles, CA 90067

and

Paul V. Possinger

70 West Madison, Suite 3800

Chicago, IL 60602

and

Jared M. DuBosar

2255 Glades Road, Suite 421 Atrium

Boca Raton, FL 33431

Attorneys for the Financial

Oversight and Management Board

as Representative for PREPA

CASILLAS, SANTIAGO & TORRES LLC

By: Juan J. Casillas Ayala

 Israel Fernández Rodríguez

 Juan C. Nieves González

 Cristina B. Fernández Niggemann

PO Box 195075

TORO COLÓN MULLET P.S.C. 

By: Manuel Fernández-Bared

 Linette Figueroa-Torres

 Nayda Perez-Roman

P.O. Box 195383

San Juan, PR 00919-5383

KRAMER LEVIN NAFTALIS & FRANKEL 

LLP

By: Amy Caton

Thomas Moers Mayer

 Alice J. Byowitz

1177 Avenue of the Americas

New York, New York 10036

and

Gary A. Orseck

Matthew M. Madden

2000 K Street NW, 4th Floor

Washington DC 20006

Counsel for the Ad Hoc Group of PREPA 

Bondholders

REICHARD & ESCALERA, LLC

By: Rafael Escalera

 Sylvia M. Arizmendi

 Carlos. R. Rivera-Ortiz

255 Ponce de León Avenue

MCS Plaza, 10th Floor

San Juan, PR 00917-1913

QUINN EMANUEL URQUHART & 

SULLIVAN, LLP

By: Susheel Kirpalani

 Daniel Salinas

 Eric Kay

51 Madison Avenue, 22nd Floor

New York, New York 10010-1603

Counsel for Syncora Guarantee, Inc.

CASELLAS ALCOVER & BURGOS P.S.C.

By: Heriberto Burgos Pérez

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230626 ORD RE CLAIM ESTIMATION VERSION JUNE 26, 2023 4

San Juan, PR 00919

PAUL HASTINGS LLP

By: Luc A. Despins

 Nicholas A. Bassett

 G. Alexander Bongartz

200 Park Avenue

New York, New York 10166

Counsel to the Official Committee of 

Unsecured Creditors

MARINI PIETRANTONI MUÑIZ LLC

By: Luis C. Marini-Biaggi

 Carolina Velaz-Rivero

250 Ponce de León Ave., Suite 900

San Juan, Puerto Rico 00918

O’MELVENY & MYERS LLP

By: John J. Rapisardi

 Maria J. DiConza

 Gabriel L. Olivera

7 Times Square

New York, NY 10036

and

Peter Friedman

1625 Eye Street, NW

Washington, DC 20006

and 

Elizabeth L. McKeen

Ashley M. Pavel

610 Newport Center Drive, 17th Floor

Newport Beach, CA 92660

Attorneys for the Puerto Rico Fiscal Agency

and Financial Advisory Authority

MCCONNELL VALDÉS LLC

By: Nayuan Zouairabani

270 Muñoz Rivera Avenue, Suite 7

Hato Rey, Puerto Rico 00918

 Ricardo F. Casellas-Sánchez

 Diana Pérez-Seda

P.O. Box 364924

San Juan, PR 00936-4924

CADWALADER, WICKERSHAM & TAFT 

LLP

By: Howard R. Hawkins, Jr.

 Mark C. Ellenberg

 Casey J. Servais

 William J. Natbony

 Thomas J. Curtin

200 Liberty Street

New York, New York 10281

Counsel for Assured Guaranty Corp. and

Assured Guaranty Municipal Corp. 

RIVERA, TULLA AND FERRER, LLC

By: Eric A. Tulla

Rivera Tulla & Ferrer Building

50 Quisqueya Street

San Juan, PR 00917-1212

MASLON LLP

By: Clark T. Whitmore

 Michael C. McCarthy

 John Duffey

 Jason M. Reed

90 South Seventh Street, Suite 3300

Minneapolis, MN 55402

Attorneys for U.S. Bank National Association, 

in its Capacity as Trustee 

ORTIZ MENDOZA & FARINACCI 

FERNÓS, LLC

By: Rafael A. Ortiz-Mendoza

Edificio Banco Cooperativo Plaza

623 Ponce de León Ave., Suite 701-B

San Juan, PR 00917-4820

Co-counsel to SREAEE

BUFETE EMMANUELLI, C.S.P.

By: Rolando Emmanuelli-Jiménez

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230626 ORD RE CLAIM ESTIMATION VERSION JUNE 26, 2023 5

WACHTELL, LIPTON, ROSEN & KATZ

By: Richard G. Mason

 Amy R. Wolf

 Emil A. Kleinhaus

Angela K. Herring

Michael H. Cassel

51 West 52nd Street

New York, New York 10019

Attorneys for Cortland Capital Market 

Services LLC, as Administrative Agent

SIMPSON THACHER & BARTLETT LLP

By: Nicholas Baker

425 Lexington Avenue

New York, New York 10017

Attorneys for Cortland Capital Market 

Services LLC, as Administrative Agent and 

SOLA LTD, Solus Opportunities Fund 5 LP, 

Ultra Master LTD and Ultra NB LLC

 Jessica E. Méndez-Colberg

 Zoé C. Negrón-Comas

P.O. Box 10779

Ponce, Puerto Rico 00732

Counsel UTIER 

Co-counsel to SREAEE

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230626 ORD RE CLAIM ESTIMATION VERSION JUNE 26, 2023 6

LAURA TAYLOR SWAIN, United States District Judge

On March 22, 2023, the Court issued its Opinion and Order Granting in Part and 

Denying in Part the Financial Oversight and Management Board for Puerto Rico’s Motion for 

Summary Judgment and the Defendant’s and Intervenor-Defendants’ Cross-Motion for Summary 

Judgment (Docket Entry No. 147)2 (the “Summary Judgment Order”).

3

 In the Summary 

Judgment Order, addressing cross-motions for summary judgment on Counts I-VII of the 

Oversight Board’s First Amended Complaint Objecting to Defendant’s Claims and Seeking

Related Relief (Docket Entry No. 26) (the “FAC”), and Counts I & II of the counterclaim 

complaint included in the Bondholder Defendants’4 Defendant’s and Intervenor-Defendants’ 

Answer, Affirmative Defenses, and Counterclaims (Docket Entry No. 47) (the “Defendants’ 

Answer and Counterclaim Complaint”), the Court held, inter alia, that:

(a) the Trust Agreement granted the Bondholders security interests 

only in moneys actually deposited to the Sinking Fund, Selfinsurance Fund, Capital Improvement Fund, Reserve Maintenance 

Fund, and Construction Fund (as defined in the Trust Agreement); 

(b) the Bondholders have perfected their liens in the Sinking Fund, 

Self-insurance Fund, and Reserve Maintenance Fund, over which 

the Trustee has established control (as discussed below);[5] (c) the 

2 Unless otherwise noted, all references herein to Docket Entry Nos. are references to 

Adversary Proceeding No. 19-00391.

3 All capitalized words used but not defined herein shall have the meanings ascribed to 

them in the Summary Judgment Order or in any specific document the Court is citing.

4 U.S. Bank National Association as Trustee (the “Trustee”), the Ad Hoc Group of PREPA 

Bondholders (the “Ad Hoc Group” or the “AHG”), Assured Guaranty Corp. and Assured 

Guaranty Municipal Corp. (“Assured”), National Public Finance Guarantee Corporation 

(“National”), and Syncora Guarantee Inc. (“Syncora,” and together with the Trustee, Ad 

Hoc Group, and Assured, the “Bondholders” or the “Defendants”).

5 The Court declined to address the Bondholders’ possible perfection of their liens on the 

Capital Improvement Fund and Construction Fund, because the record before the Court 

provided no evidence from either party as to the form of the assets comprising those 

Funds and their custodial status, and means of perfection may vary with the form of the 

asset in question. Subsequent to the ruling, the parties have attempted to work through 

those lien perfection issues, including with respect to the Reserve Maintenance Fund, 

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230626 ORD RE CLAIM ESTIMATION VERSION JUNE 26, 2023 7

Bondholders have no security interest in the covenants and remedies 

provided for by the Trust Agreement; but (d) based on PREPA’s 

payment and equitable relief covenants in the Trust Agreement, the 

Bondholders have an unsecured claim (within the meaning of 

11 U.S.C. § 101(5)(B)) to be liquidated by reference to the value of 

future Net Revenues (as defined in the Trust Agreement) that would, 

under the waterfall provisions of the Trust Agreement and 

applicable nonbankruptcy law, have become collateral upon being 

deposited in the specified funds and payable to the Bondholders over 

the remainder of the term of the Bonds (the “Unsecured Net 

Revenue Claim”).

(Summary Judgment Order at 13-14 (emphasis added).) The Court held that the value of the 

Unsecured Net Revenue Claim must be determined “either consensually or through proceedings 

under section 502 of the Bankruptcy Code.”6

 (Summary Judgment Order at 62, 70.) The parties 

have not reached consensus, and the Court now proceeds, after briefing and an evidentiary 

hearing, to estimate the value of the Unsecured Net Revenue Claim.

The Court has subject matter jurisdiction of this matter pursuant to section 306(a) 

of PROMESA. 48 U.S.C. § 2166(a). The Court has considered carefully all the parties’ 

submissions,

7 and for the following reasons the Court’s estimation of the value of the Unsecured 

which Fund’s inclusion as within the control of the Trustee was due to a misstatement by 

the Oversight Board’s counsel.

6 References herein to the provisions of Title 11 of the United States Code (the 

“Bankruptcy Code”) are to sections made applicable in these cases by section 301 of the 

Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”). 

48 U.S.C. § 2161. The Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) 

are made applicable in these Title III cases by section 310 of PROMESA. 48 U.S.C. 

§ 2170. PROMESA is codified at 48 U.S.C. section 2101 et seq. References herein to 

PROMESA section numbers are to the uncodified version of the legislation. 

7 The Court has also received and reviewed, inter alia, the following pleadings: SREAEE’s 

Substantive Opening Brief in Support of Estimation of the Unsecured Net Revenue Claim 

(Docket Entry No. 187) (the “SREAEE 502 Brief”); UTIER’s Substantive Opening Brief 

for Estimation of the Unsecured Net Revenue Claim and Joinder to SRAEE’s Substantive 

Opening Brief (Docket Entry No.188) (the “UTIER 502 Brief”); Memorandum of the 

Financial Oversight and Management Board for Puerto Rico in Support of Estimation of 

Unsecured Net Revenue Claim (Docket Entry No. 192) (the “FOMB 502 Brief”); Joinder 

of the Puerto Rico Fiscal Agency and Financial Advisory Authority to the Legal 

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230626 ORD RE CLAIM ESTIMATION VERSION JUNE 26, 2023 8

Net Revenue Claim as of July 3, 2017 (the “Estimation Date”),8 is $2,388,000,000.00.

I.

PROCEDURAL BACKGROUND AND PRE-HEARING GUIDANCE ON CLAIM ESTIMATION

The factual background underlying this adversary proceeding is set forth in the 

Summary Judgment Order; the Court assumes readers’ familiarity with that Order. (See

Summary Judgment Order at 14-19.) In addition to the summarized holding above, the Court 

made the following statements in the Summary Judgment Order with respect to valuing the 

Arguments in the Memorandum of the Financial Oversight and Management Board for 

Puerto Rico in Support of Estimation of Unsecured Net Revenue Claim (Docket Entry 

No. 195) (the “AAFAF 502 Joinder”); Limited Joinder and Reservation of Rights of 

Intervenor-Plaintiff Official Committee of Unsecured Creditors in Support of 

Memorandum of Financial Oversight and Management Board for Puerto Rico in Support 

of Estimation of Unsecured Net Revenue Claim (Docket Entry No. 196) (the “UCC 502 

Joinder”); The PREPA Bond Trustee’s and PREPA Bondholders’ Opening Brief in 

Support of their Proposed Estimation of their Unsecured Net Revenue Claim (Docket 

Entry No. 197) (the “Defendants’ 502 Brief”); Motion to Inform and Reservation of 

Rights of the Ad Hoc Committee of National Claim Assignees (the “AHC RoR”) (Docket 

Entry No. 199 in Adv. Proc. No. 19-00391 and Docket Entry No. 3488 in Case No. 17-

4780); Limited Response of Fuel Line Lenders Concerning Estimation of Unsecured Net 

Revenue Claim (Docket Entry No. 220) (the “FLL Response”); SREAEE’s Response 

Brief in Support of Estimation of the Unsecured Net Revenue Claim (Docket Entry 

No. 221) (the “SREAEE Response”); UTIER’s Response Brief in Support of Estimation 

of the Unsecured Net Revenue Claim (Docket Entry No. 223) (the “UTIER Response”); 

Response to the Plaintiff’s and Plaintiff-Intervenors’ Opening Briefs in Support of their 

Proposed Estimation of the Unsecured Net Revenue Claim (Docket Entry No. 225) (the 

“Defendants’ Response”); Response of the Financial Oversight and Management Board 

for Puerto Rico in Support of Estimation of Unsecured Net Revenue Claim [ECF 

No. 192] (Docket Entry No. 226) (the “FOMB Response”); Intervenor-Plaintiff Official 

Committee of Unsecured Creditors’ Response Brief in Connection with Estimation of 

Unsecured Net Revenue Claim (Docket Entry No. 230) (the “UCC Response”). 

Additionally, in response to the Court’s Order Concerning PREPA Trust Agreement

(Docket Entry No. 115), the Oversight Board and the Defendants filed an agreed-upon 

conformed trust agreement as Exhibit A to their Joint Informative Motion Submitting 

Conformed Trust Agreement in Response to January 5, 2023 Order Concerning PREPA 

Trust Agreement [ECF No. 115] (Docket Entry No. 118 Ex. A) (the “Trust Agreement”). 

8 The parties’ experts have agreed that July 3, 2017, the date on which PREPA filed its 

Title III petition, is the appropriate reference date for claim estimation. (See infra

section II.D; see also 11 U.S.C. § 502(b).)

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230626 ORD RE CLAIM ESTIMATION VERSION JUNE 26, 2023 9

Unsecured Net Revenue Claim:

• By operation of the remedies of the Trust Agreement, providing the 

means to potentially generate moneys from outside of the liened 

Funds by a judgment for specific performance, and by virtue of 

section 101(5)(b) of the Bankruptcy Code, the Bondholders are 

entitled to a general unsecured claim. (Summary Judgment Order 

at 59.)

• In the event that the Bondholders obtained specific performance and 

a receiver raised rates to satisfy payment of the Bonds, the Revenues 

received would not be paid ahead of Current Expenses, and the 

receiver would not have the freedom to charge rates that are not 

“reasonable” ((TA § 502) 22 L.P.R.A. § 196(l)) or be completely 

untethered from the Trust Agreement—any such remedies and 

Revenues would still be subject to the payment restrictions and 

priorities of the Trust Agreement. (E.g., TA §§ 503, 506-507.) Any 

equitable claim reduced to payment arising from the Trust 

Agreement must have no greater value than the value that could 

be achieved through the application of the equitable remedies to 

fulfill the Trust Agreement’s unsecured covenant to pay the 

Bonds from the Net Revenues of the System. (Summary 

Judgment Order at 60 (emphasis added).)

• The value of the Unsecured Net Revenue Claim must be 

determined with reference to the value of Net Revenues that 

would, under the waterfall provisions of the Trust Agreement 

and applicable nonbankruptcy law, have become collateral 

upon being deposited in the specified funds and payable to the 

Bondholders over the remainder of the term of the Bonds. 

Valuing the Unsecured Net Revenue Claim may also require 

accounting for the likelihood of payment of the Bondholders’ claim 

in relation to claims higher up the Trust Agreement’s payment 

waterfall. Cf. In re Hemingway Transp., Inc., 993 F.2d 915, 923 

(1st Cir. 1993) (to value a contingent claim, the court discounts the 

claim’s value to “reflect the uncertainty of the contingency”). In its 

reply, the Committee articulated a potential measure of the 

Bondholders’ Unsecured Net Revenue Claim as “a right to payment 

in an amount equal to the present value of the future net revenues 

that PREPA may generate” or “what someone would pay now for 

the right to potentially receive net revenue payments from PREPA 

in the future, taking into account the enormous difficulties and 

legion of uncertainties affecting, and limiting, PREPA’s ability to 

generate any such net revenues.” (UCC Reply ¶ 24 (emphasis in 

original).) That said, the Court will not predetermine the method of 

valuation or the appropriate time at which valuation should be 

gauged before all parties can be heard from on the matter. 

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230626 ORD RE CLAIM ESTIMATION VERSION JUNE 26, 2023 10

Accordingly, the unsecured portion of the Master PREPA Bond 

Claim is a general unsecured claim, the value of which must be 

determined hereafter, either consensually or through proceedings 

under section 502 of the Bankruptcy Code. (Summary Judgment

Order at 61-62 (emphasis added).)

• Summary judgment with respect to Count I of the Defendants’ 

Answer and Counterclaim Complaint, seeking a “Declaratory 

Judgment that Under the Trust Agreement the Trustee Has Recourse 

to the Sinking Fund and the Right to Obtain Specific Performance 

of Covenants to Fund the Sinking Fund, and in the Event of Default 

Has Recourse to All PREPA Revenues and Other Moneys[,]” is 

granted to the extent that the Court hereby declares that (i) the 

Defendants have recourse to the Sinking Fund, in which the Trustee 

has a valid, perfected lien, and (ii) the Defendants have recourse as 

to any deficiency in the form of a general unsecured claim under 

section 101(5)(b) of the Bankruptcy Code arising from 

liquidation of the value of the Trust Agreement’s equitable 

remedies related to specific performance, and is denied in all 

other respects, without prejudice to proceedings to determine the 

amount of the unsecured claim. (Summary Judgment Order at 65-66

(emphasis added).)

The Court ordered the parties to return to mediation, and directed the parties to 

meet and confer and file a joint report addressing “the nature, scope, and scheduling of further 

proceedings that they may believe are necessary in connection with the further resolution of this 

adversary proceeding” and “what discovery issues, if any, remain to be resolved in light” of the 

Summary Judgment Order. (Summary Judgment Order at 70.)

After the Court issued the Summary Judgment Order, the Defendants filed the 

Trustee’s and PREPA Bondholders’ Urgent Motion for Limited Clarification (the 

“Reconsideration Motion”) (Docket Entry No. 150), as well as a Court-ordered joint report, the 

Amended Joint Informative Motion in Response to Summary Judgment Order (the “Informative 

Motion”) (Docket Entry No. 153). In the Reconsideration Motion, the Defendants sought 

“clarification” with respect to the phrase “over the remainder of the term of the Bonds,” 

requesting that the Court either replace the phrase with “at any time” or omit the phrase 

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230626 ORD RE CLAIM ESTIMATION VERSION JUNE 26, 2023 11

altogether. (Clarification Mot. ¶ 1.) On March 31, 2023, the Court issued its Order (I) Denying 

the Trustee’s and PREPA Bondholders’ Urgent Motion for Limited Clarification and the Urgent 

Motion for Expedited Consideration Thereof, and (II) Setting Deadlines and Providing Relief 

Concerning the Amended Joint Informative Motion in Response to Summary Judgment Order 

(Docket Entry No. 154) (the “Denial Order”). In the Denial Order, the Court denied the 

Bondholders’ request and directed the parties to file their “respective proposed procedures for 

estimation along with their respective proposed timelines to accomplish estimation[.]” (Denial 

Order at 5.) With respect to the Unsecured Net Revenue Claim, the Court stated:

• [T]he Court expects the parties to address the impact of the Trust 

Agreement, economic projections, relevant contingencies, and any 

relevant bankruptcy and nonbankruptcy law on the estimation 

of the claim. The Court will look to the parties to provide legal, 

factual, and methodological support for their valuation positions in 

any section 502 proceedings . . . . 

(Denial Order at 4-5 (emphasis added).) On April 13, 2023, the Court issued its Order 

Regarding Claim Estimation and Briefing (Docket Entry No.168) (the “502 Hearing Order”), 

setting a timeline and procedures for discovery and briefing with respect to a claim estimation 

hearing. (502 Hr’g Order ¶¶ 1-3.) With respect to the Unsecured Net Revenue Claim, the Court 

stated:

• First, the Court rejects Defendants’ contention that estimation of 

the Unsecured Net Revenue Claim under section 502(c)(2) [of the 

Bankruptcy Code] is unnecessary, as well as Defendants’ 

contention that the proper measure of the Unsecured Net 

Revenue Claim is the face value of the Bonds. (See Defs. 

Proposal ¶¶ 13, 19.) Defendants’ disagreement with the holdings of 

the Summary Judgment Order is noted, and they may argue any such 

matter at the appropriate time on appeal. As stated in the Summary 

Judgment Order, the Court will take into account for purposes of the 

section 502 determination the “payment restrictions and priorities of 

the Trust Agreement.” (Summary Judgment Order at 60 (emphasis 

in original).) Defendants’ proposed estimate(s) must address those 

matters. Second, in the [Informative Motion], the parties expressed 

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disagreement as to the meaning of the phrase “the term of the 

Bonds” as used in the Summary Judgment Order. (See Summary 

Judgment Order at 61.) Such disagreement led the Defendants to 

file the [Reconsideration Motion], which the Court thereafter 

denied. (Denial Order at 4-5.) Because further briefing of the 

parties’ extreme and irreconcilable proffered definitions of the 

phrase “the term of the Bonds” would not be helpful to the Court, 

the Court provides the following guidance: the Court did not use the 

term simply to refer to the stated maturity date of each Bond. Nor 

did the Court conclude that the Bonds have effectively no 

expiration because the ability to collect on the Bonds 

purportedly has no expiration. Non-bankruptcy law imposes 

functional time constraints on the ability to collect on debts. When 

formulating their positions as to the remainder of the term of the 

Bonds, the Court advises the parties to consider the period of time 

during which the Bondholders would be in a position to realize legal 

or equitable relief in aid of recovery, taking into consideration any 

limitations imposed by the terms of the Trust Agreement as well as 

applicable non-bankruptcy law, such as relevant statutes of 

limitations and limitations on the collectability of judgments. 

(502 Hr’g Order at 4-5 (emphasis added).) The Court further directed the parties once more to 

return to mediation. (502 Hr’g Order ¶ 4.)

The Bondholders also filed a motion requesting immediate certification of the 

Summary Judgment Order to the Court of Appeals for the First Circuit (the “First Circuit”), 

seeking review of, inter alia, the ruling that the Master PREPA Bond Claim is not a secured 

claim with respect to all present and future revenues of PREPA. (See generally Urgent Motion 

Requesting Certification of This Court’s March 22, 2023 Summary Judgment Order for 

Immediate Appeal Pursuant to PROMESA § 306(e)(3)-(4) (the “Defendants’ Certification 

Motion”) (Docket Entry No. 155).) The Defendants’ Certification Motion was joined in part by 

the Official Committee of Unsecured Creditors (the “Committee”), which sought review based 

on its position that the Unsecured Net Revenue Claim is payable solely from special revenues 

and therefore the Bondholders are barred from recourse by section 927 of the Bankruptcy Code. 

(See generally Intervenor-Plaintiff Official Committee of Unsecured Creditors’ (A) Partial 

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230626 ORD RE CLAIM ESTIMATION VERSION JUNE 26, 2023 13

Joinder in PREPA Bond Trustee’s and PREPA Bondholders’ Urgent Motion Requesting 

Certification of this Court’s March 22, 2023 Summary Judgment Order for Immediate Appeal 

Pursuant to PROMESA § 306(e)(3)-(4) and (B) Request for Certification of Such Order 

Pursuant to PROMESA § 306(e)(3)-(4) (the “UCC Certification Motion”) (Docket Entry 

No. 167).) In the certification motions, both the Bondholders and the Committee also argued 

that the Court should stay the estimation proceeding. (UCC Cert. Mot. ¶ 7; Defs. Cert. Mot. ¶ 8.)

On May 3, 2023, the Court issued its Order Denying Certification of the Court’s 

March 22, 2023 Summary Judgment Order for Interlocutory Appeal (Docket Entry No. 182) (the 

“Certification Denial Order”).

On May 18, 2023, the Court issued its Notice Concerning Section 502 Hearing 

and Omnibus Hearing (Docket Entry No. 215), setting the dates for the claim estimation hearing.

On May 24, 2023, the Court issued its Further Order Concerning Section 502 

Hearing (Docket Entry No. 234) (the “Further Order”) directing the parties’ expert witnesses to 

proffer their direct testimony for the hearing in the form of declarations. (Further Order at 1.) 

On May 30, 2023, the Court issued its Order Regarding Procedures for the 

June 6-8, 2023 Claim Estimation Hearing (Docket Entry No. 238) (the “502 Hearing Procedures 

Order”), defining the structure of the claim estimation hearing and topics to be addressed in the 

hearing. In the order, the Court designated time for oral argument of specified issues and 

directed the parties to address certain issues in cross-examination of certain witnesses. (502 Hr’g 

Procs. Order ¶¶ 5, 6(c).) 

The following parties filed briefs and/or reservation of rights in connection with 

the 502 Hearing: Plaintiffs, Defendants, the Committee, the Puerto Rico Fiscal Agency and 

Financial Advisory Authority (“AAFAF”), Cortland Capital Market Services LLC, as 

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Administrative Agent and SOLA LTD, Solus Opportunities Fund 5 LP, Ultra Master LTD, and 

Ultra NB LLC (together, the “Fuel Line Lenders”), Sistema de Retiro de los Empleados de la 

Autoridad de Energia Eléctrica (“SREAEE”); the Unión de Trabajadores de la Industria Eléctrica 

y Riego, Inc. (“UTIER”); and BlackRock.9

From June 6-8, 2023, the Court held a hearing on claim (the “502 Hearing”) 

comprising: a day of opening statements and oral argument (June 6, 2023 502 Hearing 

Transcript, the “June 6 Tr.”), a day of cross-examination and redirect of certain witnesses whose

declarations were received in evidence (June 7, 2023 502 Hearing Transcript, the “June 7 Tr.”), 

and a day of closing argument (June 8, 2023 Hearing Transcript, the “June 8 Tr.”). The 

following witnesses testified at the 502 Hearing: Mr. David Plastino on behalf of the Plaintiffs, 

Dr. Maureen Chakraborty on behalf of the Defendants, Dr. Susan Tierney on behalf of the 

Defendants, Mr. John Young on behalf of the Defendants, Ms. Julia Frayer on behalf of the 

Committee, and Mr. Scott Martinez on behalf of the Committee.10

9 BlackRock Advisors, LLC and BlackRock Financial Management, Inc. (together 

“BlackRock”) filed a reservation of rights with respect to the current proposed PREPA 

Plan. (Docket Entry No. 3700 in Case No. 17-4780.) BlackRock purports to reserve its 

right to argue that, if the claim is estimated at less than full face value plus interest, 

certain 2016 Bonds it holds should, by virtue of PREPA’s financial distress at the time 

they were issued, be analogized to postpetition Debtor-in-Possession financing and, 

through application of the Court’s equitable powers, be granted priority and paid in full, 

even if the other outstanding PREPA Bonds are not. The Court makes no limitation on 

its claim estimation ruling to accommodate this purported reservation of rights and notes 

that, in submissions raising this argument for consideration at the 502 Hearing that were 

later withdrawn, BlackRock had identified no legal authority or contractual basis for the 

treatment it sought. (See Docket Entry No. 204.)

10 The Plaintiffs filed the Declaration of David Plastino (Docket Entry No. 282-1) (the 

“Plastino Declaration”). The Defendants filed the following declarations: Direct 

Testimony Expert Declaration of Maureen M. Chakraborty, Ph.D. (Docket Entry 

No. 245-1) (the “Chakraborty Declaration); and Direct Testimony Expert Declaration of 

Susan Tierney, Ph.D. (Docket Entry No. 245-2) (the “Tierney Declaration”). The 

Committee filed the following declarations Declaration of Julia Frayer Pursuant to 

Order Regarding Procedures for the June 6-8, 2023 Claim Estimation Hearing (Docket 

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II.

DISCUSSION

Section 502(a) of the Bankruptcy Code provides that: “A claim or interest, proof 

of which is filed under section 501 of this title, is deemed allowed, unless a party in 

interest . . . objects.” 11 U.S.C.A. § 502(a) (Westlaw through P.L. 118-6). 

Section 502(b) of the Bankruptcy Code provides that, subject to certain 

exceptions, if an objection to the claim is lodged: “the court, after notice and a hearing, shall 

determine the amount of such claim in lawful currency of the United States as of the date of the 

filing of the petition, and shall allow such claim in such amount . . . .” Id. § 502(b). 

Section 502(c) of the Bankruptcy Code provides:

(c) There shall be estimated for purpose of allowance under 

this section—

(1) any contingent or unliquidated claim, the fixing 

or liquidation of which, as the case may be, would 

unduly delay the administration of the case; or

(2) any right to payment arising from a right to an 

equitable remedy for breach of performance.

Id. § 502(c).

A. Applicable Law

1. Procedures for Conducting a Claim Estimation Hearing Under 

Section 502(c) of the Bankruptcy Code

The Court’s estimation methodology follows from the conclusions reached in the 

Summary Judgment Order and the Court’s subsequent guidance, reproduced in relevant part 

above. In brief, the system revenues from which PREPA has pledged to repay the Bonds are 

Entry No. 243-1) (the “Frayer Declaration”) and Declaration of Scott R. Martinez 

Pursuant to Order Regarding Procedures for the June 6-8, 2023 Claim Estimation 

Hearing (Docket Entry No. 243-2) (the “Martinez Declaration). 

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collectable only through certain subaccounts (a “Sinking Fund” and certain other funds) in which 

PREPA has given a security interest, those accounts are funded only after the payment of certain 

other obligations and expenses, and the Bondholders would have to use the equitable remedies of 

specific performance and appointment of a receiver in accordance with the Trust Agreement and 

statutory provisions (significantly, the Puerto Rico Electric Power Authority Act, Act No. 83-1941, 

codified at 22 L.P.R.A. §§ 191-240) to enforce PREPA’s unsecured covenants to pay the 

Bondholders the net revenues in accordance with the payment provisions of the Trust Agreement. 

To estimate these rights to payment under Section 502(c) of the Bankruptcy Code, the Court 

considered evidence as to types and projections of future revenues and of other calls on the 

waterfall that would reduce the amounts payable to the accounts from which the Bondholders have 

a right to be paid, in order to arrive at an estimation of the Estimation Date value of the amounts 

likely to be available for Bondholder payment through these mechanisms.

Courts have recognized that “neither the Code nor the Federal Rules of 

Bankruptcy Procedure provides any procedures or guidelines for estimation, and a bankruptcy 

court has wide discretion in accomplishing it.” In re Chemtura Corp., 448 B.R. 635, 648 (Bankr. 

S.D.N.Y. 2011) (internal citations omitted). “In estimating a claim, the bankruptcy court should 

use whatever method is best suited to the circumstances.” Addison v. Langston (In re Brints 

Cotton Mktg., Inc.), 737 F.2d 1338, 1341 (5th Cir. 1984) (internal cites and quotation omitted). 

Courts may employ a variety of means, including a “summary trial, a full-blown evidentiary 

hearing, or the review of pleadings and briefs followed by oral argument of counsel,” In re AMR 

Corp., Case No. 11-15463 (SHL), 2021 WL 2954824, at *4 (Bankr. S.D.N.Y. 2021) (collecting 

cases), and have specifically recognized that it is often “inappropriate to hold time-consuming 

proceedings which would defeat the very purpose of 11 U.S.C. § 502(c)(1) to avoid undue 

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delay.” In re Adelphia Bus. Sols., Inc., 341 B.R. 415, 432 (Bankr. S.D.N.Y. 2003) (citation 

omitted). See also In re Lionel L.L.C., 2007 WL 2261539, at *5 (Bankr. S.D.N.Y. Aug. 3, 

2007). “Thus, a truncated process under Section 502(c) ‘has been found to be consistent with the 

dictates of due process of law.’” In re AMR Corp., 2021 WL 2954824, at *4 (internal citations 

omitted).

Here, the Court solicited input from the parties (see, e.g., Docket Entry Nos. 162, 

163) and adopted a process similar to the parties’ proposals with briefing, discovery, and a threeday hearing including oral argument and cross-examination, with few restraints on what the parties 

could argue or present. (See, e.g., Docket Entry No. 168.) The Court considered carefully each 

of the submissions and observed the demeanor and evaluated the credibility of the testifying 

witnesses.

2. The Burden of Proof in a Claim Estimation Hearing Under Section 502(c) 

of the Bankruptcy Code

Because the estimation of a claim is situated within the claim objection process, 

some courts have looked to the burden of proof that governs the claim objection process when 

addressing parties’ burden of proof in estimation.

11 See, e.g., In re Loucheschi LLC, 471 B.R. 

777, 779 (Bankr. D. Mass. 2012); In re FRG Ltd. P’ship, 121 B.R. 451, 456 (Bankr. E.D. Pa.

1990) (in holding that the allocation of the burden of proof in estimating a Rule 3018(a) claim 

allowance is the same as in deciding objections to proofs of claim, the court stated that “[w]e 

cannot imagine any reason for allocating the burdens of proof differently in a proceeding to 

estimate claims than in a proceeding to finally determine the merits of a proof of claim. The 

11 The Court notes that burden of proof has not been addressed specifically in most 

estimation cases, and it is not clear that the Court has to address evidentiary burden at all 

in the context of an estimation hearing where the prediction of hypothetical outcomes is 

committed to the Court’s discretion. 

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estimation process is merely a microcosm of the ordinary claims-determination process.”); In re 

Benanti, No. 15-71018, 2018 WL 1801194, at *6 (Bankr. C.D. Ill. Apr. 13, 2018) (holding that 

“the allocation of the burdens of proof in a proceeding to estimate a contingent claim [under 

section 502(c)] is the same as a proceeding to determine the allowability of a claim.”). The First 

Circuit has held that, in order to successfully challenge the prima facie validity of a proof of 

claim, the objecting party must proffer “substantial evidence.” In re Hemingway Transp., Inc., 

993 F.2d 915, 925 (1st Cir. 1993); see also In re Nelson, 621 B.R. 542, 553 (B.A.P. 1st Cir. 

2020). Thus, for purposes of this estimation, the Plaintiffs were required, in the first instance, to 

present substantial evidence “to overcome the presumption of validity” of the Bondholders’ 

claim that they are entitled to the full outstanding amount of the Bonds plus prepetition interest

in order to shift the burden to the Bondholders to “prove [their] claim.” In re Loucheschi LLC, 

471 B.R. at 779. 

Here, the Plaintiffs, in their evidentiary submissions and presentation in 

connection with the hearing, presented substantial evidence sufficient to meet their burden of 

rebutting through expert testimony the prima facie validity of Bondholders’ claim that they are 

entitled to allowance of the Unsecured Net Revenue Claim in the full face value amount of the 

outstanding Bonds plus outstanding prepetition interest, shifting the burden back to the 

Bondholders in the estimation proceeding. See In re Benanti, 2018 WL 1801194, at *1. The 

Court credits the testimony of the Oversight Board’s expert Mr. David Plastino and his 

estimation approach, including the assumptions he applied in reaching his opinion. Mr. Plastino 

has credibly predicted both that the net revenues which could be available to pay on the Bonds 

would be substantially less than predicted by the Bondholders’ expert and that significant risks 

could have existed creating obstacles for a receiver seeking to maximize funds available for debt 

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service, including immediate needs to make capital expenditures on infrastructure to keep 

PREPA operating and generating revenues well into the future. The Bondholders “therefore had 

the burden of proving the validity” of their claims by a “preponderance of the truncated evidence 

presented at the hearing.”12 In re FRG Ltd. P’ship, 121 B.R. at 456. “Generally, a 

preponderance of the evidence is that evidence which is of greater weight or more convincing.”

In re Empresas Omajede Inc., 537 B.R. 63, 92 (Bankr. D.P.R. 2015) (internal citations omitted). 

It was ultimately the Bondholders’ “burden to prove the amount of [their] claim in the face of 

evidence calling it into question.” In re Benanti, 2018 WL 1801194, at *12.

3. Applicable Legal Standard for Estimation of a Claim Under 

Section 502(c) of the Bankruptcy Code

(a) Standards

“The goal of estimation is to reach a reasonable valuation of the claim as of the 

date of the bankruptcy filing.” In re Texans CUSO Ins. Grp., LLC, 426 B.R. 194, 204 (Bankr. 

N.D. Tex. 2010) (emphasis added) (citing Owens Corning v. Credit Suisse First Bos., 322 B.R. 

719, 721-22 (D. Del. 2005)). In Bittner v. Borne Chem. Co., Inc., the Third Circuit held that, 

“Where there is sufficient evidence on which to base a reasonable estimate of the claim, the 

12 The Bondholders, at the 502 Hearing, argued that the Plaintiffs are relying on affirmative 

defenses, and thus the burden of proof as to these defenses lies with the Plaintiffs. (See 

June 6 Tr. 17:23-20:18). The Bondholders are correct that, to the extent an objecting 

party bases an objection to the claim on an affirmative defense, the objecting party carries 

the burden of proof. See In re Bavelis, 490 B.R. 258, 308 (Bankr. S.D. Ohio 2013). 

However, unlike in the cases cited by the Bondholders, which did not involve claim 

estimation, the Plaintiffs are not relying on affirmative defenses to defeat the claim in its 

entirety; rather, the Plaintiffs make arguments (as do the Bondholders) as to how any 

relevant statute of limitations and the like should be considered in this estimation 

proceeding to appropriately value the claim, not to expunge it. The Court therefore holds

that, notwithstanding the questions of law presented to the Court by virtue of arguments 

made by both parties, the burden of persuasion is with the Bondholders and the 

affirmative defense burden does not apply here.

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bankruptcy judge should determine the value. In so doing, the court is bound by the legal rules 

which may govern the ultimate value of the claim. For example, when the claim is based on 

an alleged breach of contract, the court must estimate its worth in accordance with accepted 

contract law. . . . However, there are no other limitations on the court’s authority to evaluate the 

claim save those general principles which should inform all decisions made pursuant to the 

[Bankruptcy] Code.” 691 F.2d 134, 135 (3d Cir. 1982) (emphasis added) (internal citation 

omitted). State law generally governs, and “claims are to be valued as of the petition date.” 

Owens Corning, 322 B.R. at 721-22 (emphasis added).

Bankruptcy courts have wide discretion in estimating claims. See In re Chemtura 

Corp., 448 B.R. 635, 648 (Bankr. S.D.N.Y. 2011); In re Windsor Plumbing Supply Co. Inc., 

170 B.R. 503, 520 (Bankr. E.D.N.Y. 1994) (“In determining exactly how to estimate the value of 

a claim, the bankruptcy court has broad discretion.”); In re Woodruff, 600 B.R. 616, 637 (Bankr. 

N.D. Ill. 2019) (“[W]hile the estimation of a contingent claim is a fact intensive analysis, the 

manner in which that analysis is done is generally left to the discretion of the court.”). “The 

court need not don the garb of the clairvoyant; rather, all that is required is a rough estimate.” In 

re Thomson McKinnon Sec., Inc., 191 B.R. 976, 989 (Bankr. S.D.N.Y. 1996). “An estimate 

necessarily implies no certainty; it is not a finding or a fixing of an exact amount. It is merely 

the court’s best estimate for the purpose of permitting the case to go forward and thus not unduly 

delaying the matter.” In re Windsor Plumbing Supply Co., Inc., 170 B.R. at 521 (quoting In re 

Nova Real Estate Inv. Tr., 23 B.R. 62, 66 (Bankr. E.D. Va. 1982)). Courts do not need to make 

traditional findings of fact in connection with estimation hearings. See In re Chemtura Corp., 

448 B.R. at 640. “An estimator of claims must take into account the likelihood that each party’s 

version might or might not be accepted by a trier of fact. The estimated value of a claim is then 

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the amount of the claim diminished by probability that it may be sustainable only in part or not 

at all.” Id. at 648.

(b) Amount vs. Value

The Bondholders argue that it is inappropriate for the Court to discount their 

claim to present value. Their argument is based upon In re Oakwood Homes Corp., wherein the 

Court of Appeals for the Third Circuit held that Bankruptcy Code section 502(b)’s direction to 

“determine the amount” of objected-to claims “as of the date of the filing of the petition” does 

not require that all claims involving a stream of payments be discounted to present value. (Defs. 

502 Br. ¶ 58 (citing 449 F.3d 588, 600-01 (3d Cir. 2006)).) They point out that, in Oakwood, the 

Third Circuit “noted that this language was ambiguous in light of the use of the word ‘amount’

rather than ‘value.’ ‘[W]here the Bankruptcy Code intends a court to discount something to 

present value, the Code clearly uses the term ‘value, as of’ a certain date.’” (Defs. 502 Br. ¶ 58 

(citing 499 F.3d at 597).) The Bondholders argue that the amount of their claim is properly set at 

the face value of the outstanding Bond obligations (without future interest, as provided by 

section 502(b)(2) of the Bankruptcy Code) plus interest on the Bonds due and owing as of the 

July 3, 2017 Estimation Date, that, accordingly, the section 502(b)(2) disallowance of unmatured 

postpetition interest constitutes a reduction of the claim to present value, and that to further 

discount the claim to reflect the time value of the future stream of payments on the Bonds would 

constitute a forbidden double-discounting. The Bondholders point to the Third Circuit’s 

statement that: “[W]hether a court applies § 502(b)(2) to disallow unmatured interest, or 

discounts the entire amount (i.e., principal plus interest) to present value—as long as the court 

performs only one such operation and not both, the result is the same.” Oakwood, 499 F.3d 

at 600.

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The concept is sound, but the Bondholders’ application of it in this instance 

misapprehends this Court’s guidance on how the claim is to be valued. With respect to the use 

of the words “amount” vs. “value,” the Bondholders argue that the allowed amount of a debtbearing instrument should be (can only be) the “full face amount” of unpaid debt. However, in 

the Summary Judgment Order, the Court did not hold that, based upon the terms of the Trust 

Agreement, the Bondholders have a claim amounting to the full face amount of the Bonds. As 

can be seen in the Court’s guidance to the parties, substantially reproduced above, the Court held 

that “the Defendants have recourse as to any deficiency in the form of a general unsecured claim 

under section 101(5)(b) of the Bankruptcy Code13 arising from liquidation of the value of the 

Trust Agreement’s equitable remedies related to specific performance,” which “equitable claim 

reduced to payment arising from the Trust Agreement must have no greater value than the value 

that could be achieved through the application of the equitable remedies to fulfill the Trust 

Agreement’s unsecured covenant to pay the Bonds from the Net Revenues of the System.” 

(Summary Judgment Order at 60, 65-66.) Further, the 502 Hearing Order explained that “the 

Court rejects Defendants’ contention that estimation of the Unsecured Net Revenue Claim under 

section 502(c)(2) is unnecessary, as well as Defendants’ contention that the proper measure of 

the Unsecured Net Revenue Claim is the face value of the Bonds.” (502 Hr’g Order ¶ 4.)

Counsel for the Bondholders correctly recognized that the Summary Judgment 

Order did not “make the bonds disappear.” (June 8 Tr. 76:4-5.) Nor, by defining the claim 

entirely by what could be collected through the equitable remedies and collection waterfall 

13 Section 101(5)(B) provides: “The term “claim” means— . . . (B) right to an equitable 

remedy for breach of performance if such breach gives rise to a right to payment, whether 

or not such right to an equitable remedy is reduced to judgment, fixed, contingent, 

matured, unmatured, disputed, undisputed, secured, or unsecured.” 11 U.S.C.A. 

§ 101(5)(B) (Westlaw through P.L. 118-6).

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provided by the Trust Agreement, did the Court in any way purport to render the Bonds 

irrelevant. As stated by counsel to the Committee at the 502 Hearing, the Unsecured Net 

Revenue Claim “results from the exercise of equitable remedies”: “[The Bondholders’] right to 

payment is not the amount of principal and interest on the bond, but, as your Honor has said, it’s 

the value of a future stream of cash flows represented by net revenues that might be generated by 

PREPA.” (June 8 Tr. 138:5-10.)

In other words, the value of the claim is calculated by reference to, and is capped 

by, the face amount of the financial undertaking in the Trust Agreement (subject to the 

unmatured interest limitation of section 502(b)(2) of the Bankruptcy Code), but its basis is the 

cumulative amount of payments the Court estimates could be recovered over time by the 

Bondholders through a receiver’s efforts to effectuate specific performance of PREPA’s 

undertaking to pay. The Court estimates the economic value, as of the Estimation Date, of that 

future stream of payments in determining the estimated value of the Unsecured Net Revenue 

Claim. That estimate will constitute the operative amount of the claim for purposes of these 

Title III proceedings.

(c) Valuation as of the July 3, 2017 Estimation Date

Certain opinions, briefs, and plans of adjustment (including the current proposed 

PREPA Plan) have perhaps not in practice observed the clear distinctions between “amount” and 

“value” drawn by the Third Circuit, while others have drawn certain distinctions. An earlier 

Third Circuit holding, in Bittner v. Borne Chem. Co., stated that at an estimation proceeding the 

“bankruptcy judge should determine the value” of the claim. 691 F.2d at 135. The Bankruptcy 

Court for the Southern District of New York held that an estimation determines the “estimated 

value of a claim” which is the “amount of the claim diminished by probability that it may be 

sustainable only in part or not at all.” In re Chemtura Corp., 448 B.R. at 648. Most helpfully, 

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the Honorable Barbara J. Houser, then the Chief Judge of the Bankruptcy Court for the Northern 

District of Texas, has put forward the following definition, which the Court adopts as its goal in 

the estimation process: “a reasonable valuation of the claim as of the date of the bankruptcy 

filing.” In re Texans CUSO Ins. Grp., LLC, 426 B.R. at 204 (emphasis added). 

(d) No Double-Discounting

As explained above and in the Summary Judgment Order, the Unsecured Net 

Revenue Claim will be determined by quantifying the cumulative amounts of net revenues that 

the Court estimates could be channeled through the Sinking Fund and Specified Funds through 

use of the equitable remedies provided for under the Trust Agreement. Because the revenue 

stream would necessarily be paid out over time, the Court will also apply an appropriate present 

value factor in determining the estimated value of the Unsecured Net Revenue Claim. The 

Bondholders are correct that it would be improper to impose a double discount by presentvaluing a claim whose amount is determined solely by the terms of an interest-bearing debt 

instrument whose unmatured interest has already been disallowed pursuant to section 502(b)(2) 

of the Bankruptcy Code. The Court takes this concern very seriously and has considered 

carefully the Bondholders’ argument that discounting for present value as part of the process of 

quantifying the Unsecured Net Revenue Claim would constitute double-counting. However, the 

concern is inapposite here. With respect to valuing the Unsecured Net Revenue Claim, the 

Bondholders confuse their theory of their claim with the claim as defined by the Summary 

Judgment Order and the Court’s subsequent statements as to the nature of the estimation process, 

as quoted above. 

As explained above, the Unsecured Net Revenue Claim will be valued based upon 

an estimated revenue stream. That revenue stream is not determined by the face value of the 

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Bonds and a stated interest rate.14 Accordingly, to avoid a windfall to the Bondholders, the 

application of a present value factor to the projected future net revenue stream is appropriate. 

4. Choice of Law and Relevance of Statutes of Limitations

(a) New York vs. Puerto Rico Law

The parties disagree as to whether New York or Puerto Rico law governs the 

equitable remedies provided by the Trust Agreement. Section 804 of the Trust Agreement 

(Enforcement of remedies) provides that the Trustee may enforce its rights and the Bondholders’ 

rights under applicable laws or under the Trust Agreement by “such suits, actions or special 

proceedings” either for “the appointment of a receiver as authorized by the Authority Act or for 

the specific performance of any covenant or agreement contained” in the Trust Agreement. (TA 

§ 804.) The Oversight Board, citing section 1301 of the Trust Agreement, argues that these 

remedies are governed by New York law. (See June 6 Tr. 51:15-20, 52:13-17, 53:18-20; FOMB 

502 Br. ¶ 23.) Section 1301 provides that: “The laws of the Commonwealth of Puerto Rico shall 

govern the construction of this [Trust] Agreement, except that the rights, limitations of rights, 

immunities, duties and obligations of the Trustee shall be governed by the laws of the State of 

New York.” 

The Oversight Board argues that section 1301 should be read to mean that the 

14 With this in mind, the Bondholders’ argument that the claim is not contingent because 

there is no dispute as to liability or amount (the amount being the full face value of the 

claim), is inapposite. (Defs. 502 Br. ¶ 52.) The Bondholders’ arguments might pertain to 

a circumstance where the amount of the claim was set by the Court at face value. Here, 

however, Court has stated clearly that it is not estimating the claim under 

section 501(c)(1) of the Bankruptcy Code (estimating a contingent claim), but instead 

under section 501(c)(2) (right to payment arising from equitable remedies). Accordingly, 

the value of the estimated claim is entirely determined by the contingencies that would 

reasonably affect the ability of PREPA or a receiver to generate and pay over net 

revenues, which, when run through the payment waterfall of the Trust Agreement, would 

be rendered collateral upon deposit into the Sinking Fund and Specified Funds.

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Trustee’s remedies are governed by New York law. (See June 6 Tr. 51:15-20, 52:13-17, 

53:18-20; FOMB 502 Br. ¶ 23.) Under New York law, a money judgment is a prerequisite to 

obtaining a receiver, and money judgments are presumed to be paid and satisfied after the 

expiration of twenty years after the last written acknowledgment or voluntary payment made by 

the judgment creditor. See N.Y. C.P.L.R. §§ 211(b), 5228. The Oversight Board contends that 

receiver-directed payments through the waterfall provisions would not constitute written 

acknowledgements or voluntary payments by PREPA, and therefore that a receiver would 

remain in place for no more than twenty years. (See June 6 Tr. 69:12-19; FOMB 502 Br. ¶ 23 

n.10.) The Bondholders argue, among other things, that section 1301 selects New York law to 

govern only the Trustee’s obligations as a trustee and the Trustee’s protections against liability in 

carrying out such obligations, and that Puerto Rico law governs the rights and obligations of the 

parties, including the appointment and powers of a receiver. (See June 6 Tr. 63:16-25, 64:1; 

Defs. Resp. ¶ 14.) The Court finds the Bondholders’ arguments more persuasive for the 

following reasons.

Because the laws of Puerto Rico govern the construction of the Trust Agreement, 

the Court must look to Puerto Rico law when interpreting the contractual terms of the Trust 

Agreement. Article 1233 of the Puerto Rico Civil Code provides that, “[i]f the terms of a 

contract are clear and leave no doubt as to the intentions of the contracting parties, the literal 

sense of its stipulations shall be observed. If the words should appear contrary to the evident 

intention of the contracting parties, the intention shall prevail.” 31 L.P.R.A. § 3471. The Court 

finds the language of section 1301 to be clear in stating that Puerto Rico law governs the parties’ 

rights and remedies in enforcing the terms of the contract and that New York trustee law governs 

the Trustee’s rights and obligations as a trustee. 

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To the extent that the section is considered ambiguous, the same interpretation 

would result. When construing a contract under Puerto Rico law, the stipulations “should be 

interpreted in relation to one another, giving to those that are doubtful the meaning which may 

appear from the consideration of all of them together.” 31 L.P.R.A. § 3475; see also Rishell v. 

Med. Card Sys., Inc., 982 F. Supp. 2d 142, 153 (D.P.R. 2013); Entact Servs., LLC, 

526 F. Supp. 2d 213, 221-22 (D.P.R. 2007). In light of the Trust Agreement’s various references 

to the Authority Act, particularly in section 804, which speaks of the appointment of a receiver 

“as authorized by the Authority Act,” even if the stand-alone meaning of section 1301 were

unclear, section 1301’s language read in the context of the agreement as a whole points to its 

invocation of New York law as governing only the rights, limitations of rights, immunities, 

duties and obligations of the Trustee in that capacity. Thus, the Court holds that Puerto Rico law 

governs the equitable remedies provided by the Trust Agreement and rejects the Oversight 

Board’s contention that New York law imposes procedural and temporal limits on the projected 

revenues that can be taken into consideration in estimating the value of the Unsecured Net 

Revenue Claim.

(b) Puerto Rico Statute of Limitations

The Oversight Board also argues that, if Puerto Rico law governs the PREPABondholder relationship, 31 L.P.R.A. section 5294, in light of the case F.D.I.C. v. Talleres 

Industriales De P.R., supplies a fifteen-year statute of limitations for both bringing an action and 

enforcing an action, including equitable actions, that would apply to the duration of an order 

appointing a receiver. (See June 6 Tr. 54:15-21, 55:9-11, 56:9-18; FOMB 502 Br. ¶ 25 (citing 

Civ. No. 87-1484(JP), 1994 WL 577882 (D.P.R. Oct. 18, 1994).) The Oversight Board therefore

argues that a receiver’s appointment could last for no more than fifteen years. The Bondholders, 

on the other hand, argue that 31 L.P.R.A section 5294 only governs the time to commence an 

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enforcement action, and that it has nothing to do with the duration of a receiver’s power to set 

and collect rates once appointed. (See June 6 Tr. 65:22-25, 66:1-3; Defs. Resp. ¶ 16.) The

Bondholders contend that 22 L.P.R.A section 207 allows a receiver to remain in place until all 

amounts due on the Bonds are paid. (See June 6 Tr. 39:19-21, 41:1-5, 13-14, 44:8-17, 65:19-24; 

Defs. Resp. ¶ 16.) 

The Court is not persuaded by the Oversight Board’s argument that section 5294 

imposes a strict fifteen-year time limit on the duration of a receivership. Indeed, the Court has

found, and the parties have cited, no legal basis for the proposition that an order under 

22 L.P.R.A section 207 appointing a receiver would require a money judgment triggering the 

applicability of 31 L.P.R.A section 5294. Thus, as Puerto Rico supplies the substantive law 

governing the estimation of the claim, no party has identified a statute of limitations that 

specifically limits the potential duration of a receivership.

B. Estimating the Unsecured Net Revenue Claim

1. Defining the Unsecured Net Revenue Claim

After hearing extensive argument from all parties on how to properly define the 

Bondholders’ claim, the Court defines the Unsecured Net Revenue Claim for the purposes of 

estimation as the Bondholders’ right to payment in an amount equal to the present value, as of 

the Estimation Date, of the future revenues (net of operating and other expenses properly payable 

before service of the Bond debt) that a receiver could reasonably and foreseeably have directed

to the Sinking Fund and Specified Funds in carrying out specific performance of PREPA’s 

undertakings, set forth in the Trust Agreement, as to the application of System Revenues.

Here, both the Oversight Board and the Bondholders undertook to project net 

revenues that would become available over time, beginning from the July 3, 2017 Estimation 

Date and looking forward, for application to the reduction of the outstanding Bond debt through 

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the specific Funds in which the Bondholders have a security interest. Mr. Plastino and Dr. 

Chakraborty utilized competing methodologies to calculate the projected incremental revenue a 

receiver could reasonably raise by charging rate increases to residential, commercial, and 

industrial customers. In particular, Dr. Chakraborty’s calculation was based on a volumetric 

charge rate using a load forecast model created by Dr. Susan Tierney. The load forecast model 

contemplated various factual assumptions and data points to determine the earliest available year 

when the Unsecured Net Revenue Claim could be paid in full. Mr. Plastino’s model was based 

on a formula that used a fixed charge rate to determine rate increases that all customers would 

pay over time. Mr. Plastino created system analyses that include calculations from FY 2018-

2118 (100 years) (Plastino Decl. Ex. A, App. 3-1) and Dr. Chakraborty created system analyses 

that included calculations from FY 2018-2069 (51 years) (Chakraborty Decl. Ex. C6A).

2. Scope of Equitable Remedies Under the Bonds

At the 502 Hearing, the Bondholders’ expert Dr. Chakraborty stated that she 

extended her analysis for fifty-one years because it would “theoretically capture the length of a 

term of a long-term bond.” (June 7, 2023 Hr’g Tr. 128:21.) Of course, under each of the several 

scenarios Dr. Chakraborty presented, the Bonds were fully paid within that time. (June 7 

Tr. 128:25-129:2.) Dr. Chakraborty acknowledged that the Bonds were trading at a high yieldto-maturity of 10.3% as of July 2017 because of the market’s assessment of a heightened risk of 

non-payment, but disagreed with using this yield-to-maturity as a present value discount rate in 

the estimation process in the absence of an adjustment for the expected risk of default to properly 

reflect the cost of capital; instead, Dr. Chakraborty added together the yield as of 2017 on a 

BAA-rated bond and a “risk premium to reflect the fact that under receivership, the credit rating 

of PREPA would be higher than a BAA-rated bond[,]” arriving at a 5.05% discount rate. (June 7 

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Tr. 100:5-14, 108:1-15.)15 Despite the nuances and perhaps philosophically divergent views

expressed with respect to the use of yield-to-maturity for discounting or not in this instance,

16 it 

appears more likely that Dr. Chakraborty’s disagreement with factoring the risk of default into 

the discount rate for the Bonds stems from her assumption that full payment on the Bonds was an 

inevitability. 

Dr. Chakraborty’s assumption of predictable full payment appears to rest to a 

significant extent on predicate assumptions that (a) appointment of a receiver would have been 

an inevitability, and (b) a receiver in Puerto Rico would be not be bound by constraints imposed 

on PREPA by the Authority Act, including the requirement to charge “just and reasonable rates” 

and to bring rate cases before the Puerto Rico Energy Bureau (“PREB”) for approval. See, e.g., 

22 L.P.R.A. § 196. Her starting point was based not upon an analysis of the Bonds and the 

realities faced by Puerto Rico that would have affected collection on the Bonds, but rather the 

instruction of counsel “to assume that the receiver would be able to raise rates” without 

functional constraint. (June 7 Tr. 97:24-98:4, 99:14-20.) The failure to account for 

contingencies that could impede collection undermines all of the Bondholders’ projections.

15 Mr. Plastino arrived at his proposed present value discount rate by considering the cost of 

debt for several other regulated mainland electric utilities. (See Plastino Decl. Ex. A 

¶ 28.) While Mr. Plastino described this comparison as yielding a “conservatively low” 

rate, Ms. Frayer persuasively argued that both experts’ proposed rates were 

inappropriately low for valuing the claim, based upon her “last two and a half decades 

working on these issues, and knowledge of what is appropriate for cost-to-capital for an 

island utility, for what kind of returns investors might be able to get in lieu of investing in 

an instrument that’s composed of these types of risky cash flows[.]” (June 7 Tr. 194:24-

195:4.)

16 The Court also puts aside the parties’ dispute as to whether Dr. Chakraborty arrived at her 

calculations by referencing data that was only available in 2023. (See, e.g., June 7 

Tr. 100:21-101:19.)

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(a) Swift and Unbridled Appointment of a Receiver Was Not 

Inevitable as of the Estimation Date

Responding to the Court’s guidance, the parties have proposed valuations of the 

equitable remedies for specific performance available under the Trust Agreement. The 

Bondholders and Oversight Board have both assumed the swift appointment of a receiver as an 

inevitability, but have not convinced the Court that this would necessarily be the case. A 

receiver would not be appointed in a vacuum without any opposition or litigation, and the Court 

explicitly instructed the parties to account for the impact of actual foreseeable risks and 

impediments arising from “any relevant bankruptcy and nonbankruptcy law on the estimation of 

the claim.” (Denial Order at 4.) The Committee and its expert Ms. Frayer have pointed to 

several of these contingencies, as has AAFAF. The extreme and unlikely speed with which the 

Oversight Board accounts for a receiver’s appointment was assumed by the Oversight Board in 

order to give the Bondholders the benefit of the doubt wherever possible (FOMB 502 Br. ¶ 27), 

but the Committee, UTIER, and SREAEE have aptly noted that the benefit of the doubt in equity 

is not deserved where the Bondholders assert that their desired receiver would not be bound 

by equitable restraints and considerations. As explained below, the Court has, in reaching its 

estimate, taken into account a factor that recognizes the risk that the parties’ experts’ 

assumptions that a receiver could be in place and channeling the projected net revenue amounts 

into Bondholder payments within as little as twelve to eighteen months could be, in a 

word, wrong.

(b) A Receiver Would Have No Greater Powers than PREPA

Further, and importantly, a receiver would operate subject, once appointed, to 

legal constraints. It would not have, as the Committee characterized them, “superpowers”—

instead, as stated by counsel to the Oversight Board and AAFAF, a receiver would step into the 

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shoes of PREPA and have “no greater powers” but would instead be “bound by the same laws 

and agreements as PREPA” and would have “to live as AAFAF has and as the government has 

in applicable non-bankruptcy law under the Board.” (June 6 Tr. 28:2-3, 94:13-14.)

In the Summary Judgment Order, the Court, acknowledging the terms of the 

Authority Act, stated that a receiver could charge only “reasonable” rates (Summary Judgment 

Order at 60), but the Bondholders have read this statement out of the Order as something the 

Court “posited” or “suggested.” (Defs. 502 Br. ¶¶ 34, 42.) Alternatively, the Bondholders read 

the requirement to set “just and reasonable” rates solely to mean rates sufficient to pay their 

debts and read out any responsibility to the citizenry. (Defs. 502 Br. ¶ 34 n.6 (asserting a “lack 

of legal impediments to the receiver increasing rates as necessary to pay the debt”).) The Court 

now states clearly, for the avoidance of doubt, that, if appointed pursuant to 22 L.P.R.A. § 207, a 

receiver would be subject to the rest of the Authority Act, including section 196 thereof, which 

includes no exceptions relating to the party in control of PREPA’s operations and provides that: 

[PREPA] shall offer and provide services at the lowest reasonable 

cost, through just and reasonable rates, consistent with sound 

fiscal and operational practices that provide for a reliable, adequate, 

and nondiscriminatory service that is consistent with the protection

of the environment, as well as nonprofitable, and focused on citizen 

participation and its customers. . . . .

Its undertakings as a public corporation shall be characterized 

by efficiency, the promotion of renewable energy use, energy 

conservation, and efficiency, excellence in customer service, and the 

conservation and protection of the economic and environmental 

resources of Puerto Rico. PREPA shall be responsible for acting 

consistent with the public policy on energy of the Commonwealth 

of Puerto Rico, the public interest, and for complying with all the 

applicable rules and regulations of the Energy Commission and 

CEPPO. . . . . PREPA shall be required to coordinate any 

necessary efforts with the Commission, CEPPO, and any other 

entity or person to achieve the purposes of §§ 191-217 of this title 

and of any statute related to the public policy on energy of 

Puerto Rico . . . .

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The remedies available by law to require the Authority’s compliance 

with the mandates of §§ 191-217 of this title, the well-being of 

Puerto Rico, and the protection of customers shall not be limited in 

any way. [PREPA] is hereby granted and shall have and may 

exercise all rights and powers necessary or convenient to carry out 

the aforementioned purposes, including (but without limiting the 

generality of the foregoing) the following: . . . .

(d) complete control and supervision of any undertaking built or 

acquired by it, including the power to determine the nature of and 

the need to incur all expenditures and the manner in which such 

expenditures shall be incurred, authorized, and defrayed; Provided, 

That all actions of PREPA’s management and employees and its 

Governing Board shall be subject to the provisions of the 

Government Ethics Act, and its highest fiduciary duties with the 

People of Puerto Rico. . . . .

(l) PREPA shall be responsible for providing reliable electric 

power, contributing to the general well-being and sustainable 

future of the People of Puerto Rico, maximizing benefits, and 

minimizing the social, environmental, and economic impact. It 

shall offer and provide services at the lowest reasonable cost, 

through just and reasonable rates, consistent with sound fiscal 

and operational practices that provide for a reliable, adequate, 

and nondiscriminatory service that is consistent with the 

protection of the environment, as well as nonprofitable, and 

focused on citizen participation and its customers.

22 L.P.R.A. § 196 (emphasis added).

The Bondholders argue that, under section 207 of the Authority Act, an appointed 

receiver of PREPA’s undertakings that “enter[s] into and take[s]” control of such undertakings 

“deems” what is “reasonable,” to the exclusion of any other limitations in the Authority Act 

simply because a receiver would be appointed pursuant to “a different section of the Authority 

Act[.]” (Defs. 502 Br. ¶ 42, 44.) This is a misreading of the statute; there is nothing in the text 

of the Authority Act that exempts a receiver acting in PREPA’s stead from PREPA’s mandates 

under the Authority Act and the Bondholders have presented no reasonable argument that a 

Puerto Rico court would attempt to abrogate such fundamental obligations of PREPA in any 

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order appointing a receiver. The relevant portion of the Authority Act’s receivership provision 

provides in pertinent part that, following appointment of a receiver of the undertakings:

(b) The receiver so appointed shall forthwith, directly or by his 

agents and attorneys, enter into and upon and take possession of

such undertakings and each and every part thereof, and may 

exclude the Authority, its Board, officers, agents, and employees

and all persons claiming under them, wholly therefrom and shall 

have, hold, use, operate, manage, and control the same and each and 

every part thereof, and, in the name of the Authority or otherwise, 

as the receiver may deem best, shall exercise all the rights and 

powers of [PREPA] with respect to such undertakings as 

[PREPA] itself might do. Such receiver shall maintain, restore, 

insure, and keep insured, such undertakings and from time to time 

shall make all such necessary or proper repairs as such receiver may 

deem expedient, shall establish, levy, maintain, and collect such 

rates, fees, rentals, and other charges in connection with such 

undertakings as such receiver may deem necessary, proper and 

reasonable, and shall collect and receive all income and revenues 

and deposit the same in a separate account and apply the income 

and revenues so collected and received in such manner as the 

court shall direct.

22 L.P.R.A. § 207(b) (emphasis added).

The receivership remedy provided by the Authority Act is a powerful tool, 

certainly. But any receiver would be constrained to manage and control PREPA’s undertakings 

“as the Authority itself might do” and apply income and revenues in such manner as an 

appointing “court shall direct[.]” Id. The Bondholders have provided no legal basis for their 

contention that the equitable considerations, requirements to set the lowest reasonable cost, and 

fiduciary duties established by the Authority Act would not bind the receiver as well.

Finally, the Bondholders suggest that the distinction is without a difference 

because, under Dr. Chakraborty’s calculations, and because it is improper for the Court to 

consider anything except the unimpeded best-case scenario, PREPA will be creating a 

remarkable excess of net revenues within a few years. (See, e.g., Defs. 502 Br. ¶ 34 n.6.) As 

explained below, the Court finds Mr. Plastino’s methodology persuasive. Nor does the Court 

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find credible the Bondholders’ hypothesis that a receiver would immediately have been able to

revolutionize PREPA and achieve never-before-seen synergies. And, as explained above, the 

Bondholders’ assumption that the existence of equitable duties would be immaterial to a court 

appointing a receiver in equity is erroneous.

(c) A Receiver Would Have Faced Extreme and Possibly Successful 

Opposition Were it to Attempt to Proceed as the Bondholders 

Contemplate

The Court instructed the parties “to address the impact of the Trust Agreement, 

economic projections, relevant contingencies, and any relevant bankruptcy and 

nonbankruptcy law on the estimation of the claim.” (Denial Order at 4 (emphasis added).) The 

parties were free, even after the Court provided subsequent guidance, to argue that different 

factors should predominate, and the Court did not foreclose any argument to that effect. 

However, at the 502 Hearing, the Bondholders not only denied, at least some of 

the time, that a receiver would be required to behave equitably, but stated, incorrectly, that the 

Court had directed the parties that the existence of PROMESA should not be considered when 

estimating the claim. (June 8 Tr. 72:14-20 (“It is clearly not what the Court had in mind when it 

set up this estimation hearing, and so we need to treat this estimation as if PROMESA did not 

exist and as if the Board did not exist. We are supposed to look at what a receiver would be able 

to accomplish in a non-bankruptcy environment with respect to the collection of net revenues 

under the trust agreement. That is our mission here.”).) Counsel to Assured stated: “This is 

about what a receiver, acting under the trust agreement, would have been able to accomplish 

without the Board being around.” (June 8 Tr. 80:11-13.) 

But the Oversight Board was around, and PROMESA, enacted well in advance of 

the July 3, 2017 Estimation Date, is a relevant law that would have affected what rates could 

have been charged and net revenues collected thereafter. 

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The Bondholders have also urged the Court to ignore efforts that would have 

certainly been undertaken under Act 2-2017, the law authorizing AAFAF to enforce compliance 

with fiscal plans enacted by the Oversight Board, characterizing any potential such legal

challenges as “lawless behavior.” (June 8 Tr. 124:24.) As counsel to AAFAF noted at the 502 

Hearing: “when you get the receiver in place, the receiver steps into the shoes of PREPA, no 

greater powers. What does that mean? That means the receiver has to live as AAFAF has and as 

the government has in applicable non-bankruptcy law under the Board. And the Board gets to set

a budget every year.” (June 6 Tr. 28:1-6.) The Court notes, in addition, that many unsuccessful 

attempts have been made to evade compliance with the Oversight Board’s certified fiscal plans. 

Several other legal risks were discussed that the Court cannot ignore, including the effect of a 

prepetition moratorium act,17 which, by limiting dedication of funds, might have crippled the 

channeling of net revenues, the only revenues to which the Bondholders are entitled, into 

payment accounts in accordance with the Trust Agreement. (FOMB Resp. ¶ 32.) Importantly, 

government action limiting revenue generation, or mandating capital expenditures, could have 

depressed or eliminated entirely net revenue cash flow that could be directed to Bond payments. 

In other words, the risk is not only that payment to the Bondholders would be proscribed, the risk 

is also that, for legitimate and legal reasons, net revenues would not be generated.

Any receiver would also have been required to litigate lengthy and contentious 

17 In 2018, this Court held that the Puerto Rico Financial Emergency and Fiscal 

Responsibility Act (Act No. 5-2017) (the “Amended Moratorium Act”) was not 

preempted by PROMESA, despite section 303(1) of PROMESA’s requirement that 

“territory” moratorium laws may not bind creditors nonconsensually. (See Docket Entry

No. 156 in Adv. Proc. No. 17-00159 (the “Moratorium Order”) at 31-36.) See 48 U.S.C. 

§ 2163(1). The Amended Moratorium Act authorized the Governor of Puerto Rico to 

declare a state of emergency and prioritize payment of “essential services” over “covered 

obligations.” (Moratorium Order at 7-8.)

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rate cases before Puerto Rico Energy Bureau, which it would not necessarily win. The concept 

that the main or sole priority of PREB would be, or is statutorily mandated to be, to meet Bond 

payment obligations (as the Bondholders urge (Defs. 502 Br. ¶ 44)) is contradicted by, for one, a 

2015 resolution, wherein PREC18 denied a rate increase requested by National19 because the 

information presented was “mostly focused on PREPA’s obligations to its bondholders and 

creditors, which does not provide the complete information of PREPA’s operational condition.” 

Resolution, No. CEPR-QR-2015-0002, available at 

https://energia.pr.gov/en/dockets/?docket=cepr-qr-2015-0002. The Court finds no reason to

believe that the priorities imposed by the Authority Act would have changed after the Estimation 

Date and notes that PREC stated, closer in time to the July 3, 2017 Estimation Date, that

“Raising PREPA’s rates sufficiently to pay the principal and interest currently due on that debt 

would burden Puerto Rico’s economy intolerably.” (UCC Resp. ¶ 26 (quoting PREC Ruling, 

dated Jan. 10, 2017 ¶ 17 (filed at Docket Entry No. 1707-7 in Case No. 17-4780)).)

Accordingly, the effect of, inter alia, the Oversight Board’s discretionary 

budgeting authority and public policy with respect to PREPA’s obligation to update its aging 

infrastructure are proper factors for consideration in estimating the claim. Any factor that 

reasonably could have affected the claim’s value as of the Estimation Date is proper for 

consideration in estimating the claim. The Bondholders can argue that legal challenges to 

18 The Puerto Rico Energy Commission (“PREC”) became the Puerto Rico Energy Bureau 

(“PREB”) and was consolidated with other governmental entities under the Public 

Service Regulatory Board.

19 National Public Finance Guarantee Corporation (“National”) is a monoline insurer of 

insured Bonds and a defendant in this adversary proceeding. After National entered into 

a plan support agreement with the Oversight Board as sole Title III representative of 

PREPA, this Court stayed this adversary proceeding and certain other matters with 

respect to National pending further order of the Court. (See Docket Entry No. 148.)

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placing a receiver or to the receiver’s exercise of authority would have been unsuccessful, but the 

Court will not ignore their likelihood, and the Bondholders cannot make the risk of any 

challenge’s success improper for consideration by calling it “lawless.”

(d) The Bondholders Have Not Supported their Prediction that a 

Receiver Would (or Could) Take the Actions Necessary to Pay the 

Bonds in Full

As noted above, the Bondholders argue that there would not have been any legal 

or practical impediments to the receiver increasing rates as necessary to pay the Bonds. (Defs. 

502 Br. ¶ 34 n.6.) However, Mr. John Young, the Bondholders’ expert on receiverships, 

presented a very different picture, one contradictory to the assumptions underlying 

Dr. Chakraborty’s projections. Mr. Young presented a picture of a receiver bound to consider all 

stakeholders, pay all debts, and take reasonable steps towards those goals in conformance with 

applicable law. Furthermore, in response to thorough questioning by the Oversight Board, 

AAFAF, and the Committee, Mr. Young acknowledged a complete lack of familiarity with the 

legal and practical circumstances of PREPA and Puerto Rico, except to say that “the components 

of expense of all the utilities are basically the same.” (June 7 Tr. 174:3-4.) 

The relevant gravamen of Mr. Young’s testimony was that he did not know what 

powers a court order appointing a PREPA receiver could or could not grant, legally or 

practically. At the same time, Mr. Young’s testimony concerning his tenure as the receiver of 

the Environmental Services Department of Jefferson County, Alabama, shows that in his actual, 

and unfortunately unsuccessful, efforts to keep the department out of bankruptcy, he did not take 

the radical actions or achieve the remarkable efficiencies of the Bondholders’ hypothetical 

receiver. Despite being unconstrained by a regulator such as PREB and the obligation to bring 

rate cases, Mr. Young testified that he adopted a gradual and responsible approach based upon 

affordability concerns that did not result in an immediate turnaround. (June 7 Tr. 162:25-

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164:14.) Rather than serving at the behest of one constituency, a responsible receiver would, in 

Mr. Young’s words, “develop a plan, and prioritize where the current resources go, and 

hopefully generate enough future resources to meet all its obligations.” (June 7 Tr. 168:11-13.) 

Mr. Young’s testimony, as was illustrated by a helpful chart used by the 

Committee at closing, substantially undermined Dr. Chakraborty’s projections by countering her 

assumptions of an entirely unrestrained receiver, or a receiver who would act without restraint 

even in the absence of regulatory strictures. (June 8 Tr. 52:7-54:4, 55:16-56:22.) 

 The effect of these contradictions and unknowns in connection with the potential 

ability of a receiver to raise rates meaningfully and at the rapid pace posited by Dr. Chakraborty 

renders the Bondholders’ scenarios manifestly unlikely and unreasonable. Given the dire 

financial condition of PREPA at the time of the Title III filing and the circumstances surrounding 

the appointment, installation, and subsequent herculean tasks necessary to achieve the required 

outcomes, the Court is not persuaded PREPA would ever have generated sufficient net revenues 

to pay off the Bonds in a reasonably foreseeable time frame—much less in five years as was 

proffered in Dr. Chakraborty’s most unrestrained model. Accordingly, the Bondholders have 

failed to support their proposed claim estimation by a preponderance of the evidence.

(e) A Receiver May Not Have Been in Place Forever 

Although the Authority Act implies that a receiver appointed under 22 L.P.R.A. 

section 207 can remain in place for as long as the debts on the Bonds are due, the Court notes, 

and considers generally in connection with its estimation determination, the possibility that a 

Puerto Rico court might have imposed some form of temporal limit. See, e.g., In re Pac. Gas & 

Elec. Co., 295 B.R. 635, 642-43 (Bankr. N.D. Cal. 2003) (court limited its predictions as to what 

a judge or jury might have concluded from the evidence presented where application of the 

parties’ legal theories to the unique facts of the case went beyond the reported cases). A Puerto 

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Rico court would ultimately have discretion and control over the degree to which, and how, an 

equitable remedy could be deployed to serve the interests of the Bondholders and the people of 

Puerto Rico. See, e.g., Irizarry Rivera v. WEUC FM. 88.9, JPE2000-0119, 2004 WL 2419011, 

at *5 (P.R. Cir. Aug. 25, 2004) (stating, with respect to a contract that did not have a fixed term 

but provided that it would continue until further notice, that “We are of the opinion that, in these 

circumstances, the Tribunal [lower court] could fix a limit for the obligation, and validate its 

termination[].”)

The possibility that a court might have imposed a temporal limit on the tenure of a 

receiver is heightened by the fact that the entire purpose of the enforcement of the equitable 

remedy of a receiver in this scenario is to satisfy a debt, which, as discussed above, is only one of 

the objectives imposed upon PREPA or any receiver by the Authority Act. The Court considers 

this possibility in estimating the Unsecured Net Revenue Claim, and notes that is well within its 

discretion to do so. 

(f) Conclusions With Respect to a Hypothetical Receiver

For the reasons stated above, the Court concludes that the Bondholders’ experts 

have failed to accord the appropriate weight to the legal and practical risks attendant upon the 

appointment of a receiver and the ability of a receiver to ever—under the confines of the Trust 

Agreement and Authority Act, or in the responsible performance of its duties—raise rates 

sufficiently to pay off the Bonds in full. The Bondholders objected to the Oversight Board’s 

expert’s valuation of the majority of these risks at 1% or less as being arbitrary, overstated, and 

double-counted. (Defs. Resp. ¶ 52.)20 Mr. Plastino explained that, by including a one-percent 

20 The Court attaches no significance to the Oversight Board’s non-inclusion of these 

factors in the filed PREPA Best Interest Test (which was taking very different 

considerations into account in connection with confirmation requirements for the 

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factor for such risks in his computations, he was identifying as important considerations, rather 

than quantifying, such risks, because the occurrence of any of them could materially, if not 

wholly, eliminate Bondholder recoveries. (See FOMB 502 Br. ¶ 62.) The Court’s incorporation 

of relevant risks and contingencies into the estimation of a claim need not be precise: “An 

estimate necessarily implies no certainty; it is not a finding or a fixing of an exact amount.” In re 

AMR Corp., 2021 WL 2954824, at *4 (citations omitted). “The estimated value of a claim is 

then the amount of the claim diminished by probability that it may be sustainable only in part or 

not at all.” In re Chemtura Corp., 448 B.R. at 648. 

The Oversight Board has further argued that the Unsecured Net Revenue Claim

“should be discounted based on the [risks] unique to PREPA and not modeled into PREPA’s 

revenues and expenses nor included in the present value discount[.]” (FOMB 502 Br. ¶ 62.) 

Accordingly, the Court has separated out the risks discussed above, and has considered and 

disagrees with each of the Bondholders’ counterarguments, including that risks have been 

double-counted, and indeed believes that both the Bondholders and the Oversight Board have 

significantly understated the challenges and limitations that a receiver would face in being 

appointed and effecting the changes urged by the Bondholders as inevitable. 

The Court, having considered thoroughly the record, the parties’ arguments, and 

its knowledge of the legal and experiential contours of Puerto Rico’s debt crisis, takes the risks 

of legal and Oversight Board and other government action impediments to a receiver’s net 

revenue production efforts into account in estimating the value of the Unsecured Net Revenue 

Claim by applying a significant—but nonetheless conservative—flat 20% reduction to the 

proposed plan of adjustment), and applies its own independent analysis. (See, e.g., Defs. 

Resp. ¶ 9 (citing Docket Entry No. 23412).)

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computed present value of the Unsecured Net Revenue Claim to reflect the material uncertainties

that a receiver would be appointed, could act as the Bondholders propose under the Trust 

Agreement and Authority Act or any order issued by a Puerto Rico court, or would adopt the 

views of and take the actions urged by the Bondholders if appointed. 

C. The Court’s Value Estimate is Based on a One Hundred-Year Projection of 

Receiver Activity and Net Revenue Collections

Even putting aside the possibility that a court in Puerto Rico would impose some 

form of temporal limit on a receivership, the Court finds that much uncertainty exists as to years 

far into the future, and therefore the Court does not find it proper to entertain extensive 

speculation as to net revenue forecasts beyond the one hundred years for which Mr. Plastino has 

provided calculations.

21 See, e.g., In re Oldco M Corp., 438 B.R. 775, 787 (Bankr. S.D.N.Y. 

2010) (discussing United States v. LTV Corp. (In re Chateaugay Corp.), 944 F.2d 997 (2d Cir. 

1991)), in which court indicated that costs underlining administrative expense claims under 

section 503 of the Bankruptcy Code that are not “merely speculative” can be estimated under 

section 502(c)); see also In re Pac. Gas & Elec. Co., 295 B.R. at 643 (acknowledging that, 

because the court’s decision in estimation depended on its predictions as to future circumstances, 

court found the process too uncertain and therefore limited its predictions). The Oversight Board 

has argued that looking to models utilizing projections of more than twenty-five years may be 

excessively speculative, and additionally noted that in an ordinary business case under 

Chapter 11 predicting beyond five years is seen as too speculative. (See June 8 Tr. 42:6-8, 

19-22, 43:7-15.) The Bondholders’ expert, Dr. Chakraborty, testified that fifty years 

21 Mr. Plastino has provided projected Bondholder recoveries spanning FY 2018-FY 2118 

(Plastino Decl. Ex. A, App. 3-1), Dr. Chakraborty provided forecasts spanning FY 2018-

FY 2069 (Chakraborty Decl. Ex. C6A).

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theoretically captures the length of a term of a long-term bond and that modeling past fifty years 

would have meant going beyond the maturity of such a bond. (See June 7 Tr. 128:20-24.) 

The Court finds that, in light of the many assumptions, risks, and variables the 

parties’ experts have sought to account for in order to arrive at reasoned forecasts, calculating 

beyond fifty years is significantly speculative. It is uncertain, so far into the future, what 

PREPA’s cash flow would be, and whether PREPA would, across that time period, evade impact 

from major natural disasters or other critical disruptions including fundamental changes to 

energy consumption, political structure, and the island’s economic stability.

Importantly, the Bondholders, and their experts, have not convinced the Court that 

PREPA, as it existed on the July 3, 2017 Estimation Date, would ever have succeeded in paying 

off the Bonds. However, the Court will give the Bondholders the benefit of an appropriately 

contingency-adjusted valuation based on twice Dr. Chakraborty’s fifty-year length of a long-term

bond—Mr. Plastino’s one hundred-year net revenue forecast, from FY 2018-FY 2118.

D. Value of the Unsecured Net Revenue Claim as of the Petition Date

The Owens Corning court stated: “The Court’s task at this juncture is to decide 

how well the expert witnesses have accorded appropriate weight to the various factors discussed 

above. In undertaking this comparative assessment, however, I prefer to avoid specific 

mathematical calculations: since mathematical precision cannot be achieved in the prediction 

being undertaken, it is important that we not pretend to have achieved mathematical accuracy.” 

322 B.R. at 725. These remarks capture well the challenge at hand and the appropriate approach 

to quantifying the estimate.

At the 502 Hearing, the Court heard testimony from witnesses proffered by the 

Oversight Board, the Bondholders, and the Committee. (See June 7 Tr.) The Oversight Board 

presented the testimony of Mr. David Plastino, an economist who specializes in valuation and

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financial econometrics. (Plastino Decl. Ex. A ¶ 2.) The Bondholders presented the testimony of

Dr. Maureen Chakraborty, an economist who specializes in economics, finance, accounting, and 

valuation. (Chakraborty Decl. ¶ 1.) The Committee presented the testimony of Ms. Julia Frayer,

an economist who specializes in conducting economic analyses and evaluations of infrastructure 

assets. (Frayer Decl. ¶ 2.) While additional witnesses testified at the 502 Hearing, Mr. Plastino, 

Dr. Chakraborty, and Ms. Frayer were the expert witnesses who had formulated holistic

estimation models and proffered comparative assessments to defend certain disparities 

among them. 

Although the methodologies employed by each of the experts to develop their 

models are divergent in some respects, there are several key areas where Mr. Plastino, 

Dr. Chakraborty, and Ms. Frayer agree. These points of agreement provide the Court with a 

sufficient analytical framework to estimate the Unsecured Net Revenue Claim. The experts 

agree that the claim should be valued as of the Estimation Date. (Plastino Decl. ¶ 3; Chakraborty 

Decl. ¶ 3.) The estimation should be “forward-looking” and only rely on information reasonably 

available as of the Estimation Date. (June 7 Tr. 63:5-9, 72:18-22). While the experts disagree 

on whether a fixed charge, volumetric charge, or a blend of the two charges should be applied by 

way of supplement to address the liability on the outstanding Bonds, the experts agree that a rate 

increase formula is necessary to project the incremental revenue a receiver could reasonably 

raise from changes in the amounts charged to residential, commercial, and industrial customers. 

(Plastino Decl. Ex. 1 ¶¶ 35-36; Chakraborty Decl. ¶ 7.) Mr. Plastino and Dr. Chakraborty

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generally agree that expenses22 detailed in the 2017 PREPA Fiscal Plan23 should be deducted

from the revenues PREPA could have reasonably collected from incremental rate increases. 

(June 7 Tr. 38:2-5; Chakraborty Decl. ¶ 8.) Mr. Plastino and Dr. Chakraborty both extend 

PREPA’s revenue and expense projections to estimate future streams of cash flows a receiver 

may be able to recover. (Plastino Decl. Ex. A, App. 3; Chakraborty Decl. App. C3.) Lastly, the 

calculations conducted by the experts include a discount rate to be applied to the future streams 

of cash flow. (Plastino Decl. ¶ 28; Chakraborty Decl. ¶¶ 16-17.) Dr. Chakraborty applies a 

5.05% discount rate and Mr. Plastino applies a 6.5% discount rate. (June 7 Tr. 46:6-13, 

100:5-8.) Ms. Frayer agrees that a discount rate should be applied; however, she suggests that a 

higher discount rate in the range between 8.46% to 16.65% is appropriate.

24 (June 7

Tr. 194:18-20, 198-199; Frayer Decl. ¶ 9.) 

The Court has determined, after consideration of the evidence and expert 

testimony, that Mr. Plastino’s model is the most appropriate model as it contemplates a net 

revenue stream that is set to be derived and paid through a method that should be relatively 

affordable for ratepayers, reflects the impact of system maintenance and improvements that will 

22 While the experts debate the exact costs of certain operational expenses, capital expenses, 

and the definition of Current Expenses, the Court need not settle these issues in the 

context of claim estimation. Mr. Plastino and Dr. Chakraborty provide sensitivity 

analyses that contemplate scenarios ranging from no payment to full payment of capital 

expenses associated with long-term operational capacity (i.e., the financing the Aguirre 

Offshore Gas Plant (“AOGP”)). (Plastino Decl. Ex. 1, App. 3-1; Chakraborty Decl., 

Figure 1.) The record contains sufficient evidence to identify appropriate estimates of 

operational expenses for consideration in the Court’s Section 502(c) determination. 

23 (Plastino Decl. Ex. 3.) 

24 The discount rate selected by the Court is not based on Ms. Frayer’s analysis. Rather, the 

Court’s conclusion is drawn from evidentiary submissions and testimony identifying 

market rates at the relevant time for securities with similar risk profiles that were 

compiled by a consultant as reasonable guideposts for a discount rate to be applied to the 

projected future streams of cash flows a receiver may be able to recover. 

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be required to keep the system generating revenues over a lengthy period, and includes a present 

value discount factor for the time value of money and general market perceptions of risk. The 

Court is not persuaded, however, that the discount rates proposed by Dr. Chakraborty (5.05%) 

and Mr. Plastino (6.5%) are adequate. Ms. Frayer provided persuasive testimony and evidentiary 

support for a finding that the discount rates proposed would be “unrealistic” given PREPA’s 

financial distress and the existing market conditions in 2017. (June 7 Tr. 198:19-25, 199:1-15, 

19-25.) Additionally, Ms. Frayer pointed to contemporaneous data from similarly situated 

Caribbean islands with investor-owned electric utilities to show that a rational investor would 

have had explored “other opportunities” for investment given PREPA’s significant risk profile. 

(June 7 Tr. 199:1-15, 19-25.) In sum, the discount rates proposed by Dr. Chakraborty and Mr. 

Plastino do not adequately represent certain economic risk factors associated with the projected 

cashflows that could be generated by ratepayers. While the Court declines to adopt the discount 

rates proffered by Dr. Chakraborty and Mr. Plastino, the record does not support Ms. Frayer’s

proposed discount rate in the range of 8.46% to 16.65%,

25 as a reasonable substitution. The 

Court instead concludes that a discount rate of 7% should be applied to determine the present

value of the net revenue cash flow projected out over the 100-year period. That discounted cash 

flow, using Dr. Plastino’s base-case incremental revenues over a period of one hundred years and 

a discount rate of 7%, would be $2,985,000,000.00 before Dr. Plastino’s placeholder reduction 

of 4% for additional types of risks. (Plastino Decl. Ex. A, App. 3-1.) 

Having determined that a receiver would likely have faced significant legal 

opposition and regulatory roadblocks (supra section II.B.2), the Court notes that the statistical 

models proffered by the Oversight Board, the Bondholders, and the Committee do not

25 (Frayer Decl. ¶ 9.)

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adequately account for these additional risk factors that could impair the receiver’s ability to 

carry out certain duties. Dr. Plastino’s computations reflect them only as part of a 4% 

placeholder reduction and the others do not treat them at all. The Court, as explained above, 

finds a 20% reduction for risk of success in achieving the projected cash flow through the actions 

of a receiver and other equitable remedies appropriate. Accordingly, the Court will apply an 

additional 20% reduction for risks associated with the appointment of a receiver. 

CUMULATIVE 

CASH FLOW, 

USING 7% 

DISCOUNT RATE 

AFTER 

ADDITIONAL 

20% 

REDUCTION 

FY 2018 – FY 2118 $2,985 million $2,388 million

Accordingly, the Court’s estimation of the value of the Unsecured Net Revenue 

Claim is $2,388,000,000.00.

E. Conclusion

For the above stated reasons, the Court estimates the value of the Unsecured Net 

Revenue Claim as $2,388,000,000.00. 

SO ORDERED.

Dated: June 26, 2023

 /s/ Laura Taylor Swain 

LAURA TAYLOR SWAIN 

United States District Judge

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