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,

PROMESA

Title III

No. 17-BK-3283 (LTS)

(Jointly Administered)

In re:

THE FINANCIAL OVERSIGHT AND

MANAGEMENT BOARD FOR

PUERTO RICO, as a representative of

PUERTO RICO ELECTRIC POWER

AUTHORITY,

Debtor.

PROMESA

Title III

No. 17-BK-4780 (LTS)

OBJECTION BY AHIMSA FOUNDATION TO DISCLOSURE STATEMENT 

FOR FIRST AMENDED TITLE III PLAN OF ADJUSTMENT OF THE 

PUERTO RICO ELECTRIC POWER AUTHORITY

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TABLE OF CONTENTS

Page(s) 

PRELIMINARY STATEMENT ................................................... Error! Bookmark not defined.

OBJECTIONS..................................................................................................................................2

CONCLUSION................................................................................................................................7

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TABLE OF AUTHORITIES

 Page(s) 

Cases

In re Am. Capital Equip., LLC, 

688 F.3d 145 (3d Cir. 2012).......................................................................................................3

In re Ferretti, 

128 B.R. 16 (Bankr. D.N.H. 1991) ............................................................................................2

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

637 B.R. 223 (D.P.R. 2022) .......................................................................................................4

In re Unichem Corp., 

72 B.R. 95 (Bankr. N.D. Ill. 1987) ............................................................................................2

Statutes

11 U.S.C. §§ 1125(a)(1) & (b) .........................................................................................................2

11 U.S.C. § 1125(b) .................................................................................................................2, 3, 4

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Ahimsa Foundation (“Ahisma”), a non-profit foundation and creditor and party-in-interest 

herein, respectfully submits this objection to the Motion of Puerto Rico Electric Power Authority 

for Order (I) Approving Disclosure Statement, (II) Fixing Voting Record Date, (III) Approving 

Confirmation Hearing Notice and Confirmation Schedule, (IV) Approving Solicitation Packages 

and Distribution Procedures, (V) Approving Forms of Ballots and Voting Procedures, (VI) 

Approving Notice of Non-Voting Status, (VII) Fixing Voting and Confirmation Deadlines, and 

(VIII) Approving Vote Tabulation Procedures [ECF No. 3111] (the “Motion”) and the related 

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

Power Authority filed by the Financial Oversight and Management Board for Puerto Rico (the 

“Oversight Board”) on February 9, 2023 [ECF No. 3201] (the “Disclosure Statement” or “DS”), 

and states as follows.1

PRELIMINARY STATEMENT

1. Ahimsa is a non-profit foundation dedicated to the principle of nonviolence toward 

all living beings. Ahimsa’s mission is to promote a sustainable and ethical shift in our food system 

away from animal proteins to healthier and more sustainable vegan options, and it invests in 

projects that further this mission. Ahisma is the beneficial owner of approximately $12 million of 

Uninsured PREPA Revenue Bonds. 

2. Ahisma objects to the Disclosure Statement proposed by the Oversight Board – and 

the Settlement Agreement Notice2 incorporated by reference therein – because they lack critical 

information necessary for Ahimsa and other Holders of Uninsured PREPA Revenue Bonds to 

1

 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the 

Amended Disclosure Statement.

2

 See Notice of Distribution of Settlement Offer Notice to Uninsured Bondholders [ECF No. 3171] (the “Settlement 

Agreement Notice” or “Notice”).

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make an informed judgment about the proposed Plan. Most critically, the Disclosure Statement 

and Settlement Agreement Notice fail to adequately detail or explain key material aspects of the 

settlement and the legal and financial characteristics of the Series B-1 Bonds and CVI that are to 

be distributed to Settling and Non-Settling Bondholders under the proposed Plan. Not only does 

the Disclosure Statement fail to provide adequate information with respect to the treatment and 

recoveries of Uninsured PREPA Revenue Bonds under the Plan, but the Settlement Agreement 

Notice previously disseminated to Holders is materially misleading and constitutes an improper

solicitation under Bankruptcy Code section 1125. 11 U.S.C. § 1125(b).

3. For these reasons, the Motion should be denied and the Court should direct the 

Oversight Board to provide proper and meaningful information to the Holders of Uninsured 

PREPA Revenue Bonds regarding the proposed Plan settlement and the treatment and recoveries 

of their Claims before undertaking an approved solicitation.

OBJECTIONS

4. Section 1125(b) of the Bankruptcy Code requires that a disclosure statement 

contain “adequate information,” which the Code defines as “information of a kind, and in sufficient 

detail ... that would enable ... a hypothetical investor of the relevant class to make an informed 

judgment about the plan.” 11 U.S.C. §§ 1125(a)(1) & (b). To satisfy the requirements of section 

1125(b), a disclosure statement must provide each creditor with all material information, including 

“what it is going to get, when it is going to get it, and what contingencies there are to getting its 

distribution.” In re Ferretti, 128 B.R. 16, 19 (Bankr. D.N.H. 1991). See also In re Unichem Corp., 

72 B.R. 95, 97 (Bankr. N.D. Ill. 1987) (“The primary purpose of a disclosure statement is to 

provide all material information which creditors and equity security holders affected by the plan 

need in order to make an intelligent decision whether to vote for or against the plan.”). The 

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Oversight Board bears the burden of establishing that the Disclosure Statement contains “adequate 

information” in accordance with section 1125. See, e.g., In re Am. Capital Equip., LLC, 688 F.3d 

145, 155 (3d Cir. 2012). The Oversight Board has not met its burden.

5. Here, the Disclosure Statement fails to provide even the most basic information 

needed to evaluate the Plan, including (i) the material aspects of the Uninsured Bond Settlement 

Agreement (such as termination rights, the inclusion and scope of releases, etc.), (ii) the legal and 

financial characteristics of the Series B-1 Bonds and CVI that are to be distributed to both Settling 

and Non-Settling Bondholders under the proposed Plan, and (iii) how the cap on the total 

distributable value under the Plan was computed and why it continues to be a moving target.

6. The Settlement Agreement Notice and related documents were disseminated to the 

Holders on January 27, 2023, prior to any approval of the Oversight Board’s Disclosure Statement 

(which has since been substantially modified). The Settlement Agreement Notice purports to 

require Holders to elect their treatment under the proposed Plan on or before February 24, 2023 –

i.e., four (4) days before the scheduled Disclosure Statement hearing. This disjointed timeline is 

a transparent attempt by the Oversight Board to force Holders of Uninsured PREPA Revenue 

Bonds to make a hasty decision about their classification, treatment and recoveries under the

proposed Plan, without the benefit of an approved disclosure statement. This forces Holders, most 

of whom have not been involved in the underlying Amended Lien & Recourse Challenge and may 

not have even a rudimentary understanding about the litigation, to make a premature and 

uninformed determination regarding, inter alia, (i) the Holders’ rights and claims against PREPA, 

(ii) the likely outcomes in the Amended Lien & Recourse Challenge, and (iii) the effect those 

likely outcomes may have on the treatment of their Claims and hypothetical recoveries under the 

proposed Plan. These details are material, and they fall squarely within the ambit of “adequate 

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information” which must be provided to Holders pursuant to an approved Disclosure Statement 

pursuant to Bankruptcy Code Section 1125. 

7. The dissemination of the Settlement Agreement Notice and related documents, 

including the abridged and inadequate description of the Plan terms and classification schemes 

therein, constitutes an improper solicitation under Bankruptcy Code section 1125(b). The 

Oversight Board has asserted that the dissemination of the Notice was not a solicitation because 

Holders who opt to join the settlement are still entitled to vote for or against the proposed Plan.3

 

However, this purported voting right is purely ephemeral because the electing holders are bound 

by their classification and treatment under the Plan even if they vote against it.

4

 In this respect, 

the Holder’s election to settle does not “remain[] executory until the creditor file[s] its accepting 

ballot.” In re Fin. Oversight & Mgmt. Bd. for Puerto Rico, 637 B.R. 223, 284-85 (D.P.R. 2022) 

(quoting In re Heritage Org., L.L.C., 376 B.R. 783, 793 (Bankr. N.D. Tex. 2007)). Instead, the 

Settling Bondholders are immediately and irreparably locked-in to the Plan settlement regardless 

of how or whether they vote.

8. Even if the Court determines that the dissemination of the Settlement Agreement 

Notice does not constitute an improper solicitation, the issue of whether the Disclosure Statement 

satisfies the requirements under Section 1125(b) must nonetheless be evaluated in conjunction 

with the Settlement Agreement Notice transmitted to Holders. This is because both the Disclosure 

Statement and the proposed Plan directly reference and incorporate the Settlement Agreement 

3

 See Omnibus Reply of the Puerto Rico Electric Power Authority to Objections to the (I) Adequacy of the Disclosure 

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

Discovery Procedures Motion [ECF No. 3206] at 46-47.

4

 Notice, Exhibit B at § 5.03 (Settling Bondholders covenant to “support, and not otherwise object to ... confirmation 

of the Plan”).

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Notice (sometimes referred to in those documents as the “Settlement Offer Memorandum”).

5 For 

example, the proposed Plan describes the “settlement offer memorandum and settlement 

agreement” as being “made to all Holders of Uninsured PREPA Revenue Bond Claims, describing 

the terms of the settlement offer being made to such Holders pursuant thereto, including the 

proposed treatment of PREPA Revenue Bond Claims pursuant to Article IV of the Plan ... 

pursuant to which a Holder of Uninsured PREPA Revenue Bonds may accept the proposed 

classification and settlement for such Claim.” Plan 26. In short, the Settlement Agreement Notice 

and the Uninsured Bond Settlement Agreement is integrated with the Disclosure Statement and 

the Plan; it is an integral component of the Plan which dictates the classification and treatment of 

the Holders’ Claims thereunder. Because the Disclosure Statement and accompanying Plan both 

reference and incorporate the Settlement Agreement Notice and Uninsured Bond Settlement 

Agreement, these documents are part of the Disclosure Statement solicitation regime and must be 

evaluated as providing adequate – and not misleading – information. 

9. Although incorporated by reference in the Disclosure Statement and the Plan, the 

Settlement Agreement Notice contains inadequate and, in some cases, materially misleading 

information. For example, the Notice states on the first page that, although Insured Bonds are not 

eligible to participate in the Uninsured Bond Settlement Agreement, the monoline insurers “will 

be provided with a similar proposal separately.” Notice 1 (emphasis added). This suggestion of 

similar treatment for Insured Bonds as an inducement for the Holders of Uninsured Bonds to settle 

is clearly misleading; as we now know, National was not offered a “similar” treatment. National 

was offered a settlement that is materially higher and substantively superior to the settlement 

offered to the Holders of Uninsured PREPA Revenue Bonds. 

5

 See, e.g., DS 4, 47, 51 & 259.

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10. In addition, material information is lacking with respect to the legal and financial 

characteristics of the Series B-1 Bonds and CVI that are to be issued to Holders of Uninsured 

PREPA Revenue Bonds under the proposed Plan, such as (i) when the Series B-1 Bonds and CVI 

will be issued, (ii) what the fair market value of the securities will be, and (iii) whether that market 

value equates to the 50% recovery represented in the Plan and the Uninsured Bond Settlement 

Agreement. At a minimum, draft copies of the operative documents governing the terms, 

conditions and covenants of the Series B-1 Bonds and CVI should be included with the Disclosure 

Statement and solicitation package in order to ensure that Holders have adequate information about 

the fundamental characteristics of the securities.

11. The Term Sheet attached to the Settlement Agreement Notice suggests that Settling 

Bondholders are required to provide third party releases. Notice, Appendix A at 6 (“the Settling 

Bondholder shall release any other party in interest that may be liable on account of the Uninsured 

Bonds”). However, the scope, nature and rationale for such third party releases is not addressed, 

adequately or at all, in the Notice or the Disclosure Statement, nor are the beneficiaries of such 

third party releases clearly identified. Given the extraordinary nature of the third party releases in 

bankruptcy jurisprudence, the omission of adequate information about the purported releases is 

material.

12. Even though the Uninsured Bond Settlement Agreement is a key component of the 

proposed Plan, the Disclosure Statement does not apprise Holders that the Oversight Board may 

unilaterally terminate the settlement, at will, even after Holders of Uninsured PREPA Revenue 

Bond Claims have accepted it and elected to receive the treatment provided under Class 1 of the 

Plan. See Notice, Appendix B at 8-9 (sections 10.02(a)(ii), (iii) & (xi)). This makes the settlement 

completely illusory and non-binding on the part of the Oversight Board. The Disclosure Statement 

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merely notes that “Settling Bondholders may only terminate the Settlement Agreement in 

limited circumstances” and that, if “agreements with Settling Bondholders or Settling Monolines 

are terminated, the ability of the Debtor to confirm the Plan may be materially and adversely 

affected.” DS, 343. But the Disclosure Statement does not advise Holders that the Uninsured 

Bond Settlement Agreement is essentially an option contract for the benefit of the Oversight Board, 

which it may unilaterally terminate, thereby cancelling the treatment promised to Settling 

Bondholders.

13. The Disclosure Statement also fails to provide adequate information to Holders 

with respect to the quantum of creditor recoveries. The initial iteration of the Plan was premised 

upon a $5.4 billion cap on total distributable value to creditors, but no meaningful explanation for 

that figure was provided in the Disclosure Statement. Under the recently amended iteration of the 

Plan, the cap has apparently been raised to accommodate the settlement with National, but once 

again with no detail or explanation of its formulation. The Disclosure Statement does not describe 

how the cap on the total distributable value under the Plan was computed and why it continues to 

be a moving target. At a minimum, the Disclosure Statement should explain to Holders why 

PREPA cannot at least pay the amount of the Oversight Board’s final mediation offer which 

contemplated approximately $7.8 billion of total distributable value.

CONCLUSION

14. Both the Disclosure Statement and the Settlement Agreement Notice incorporated 

therein (and in the Plan, itself) fail to provide adequate information to Holders of Uninsured 

PREPA Revenue Bonds on a variety of issues that are of critical importance to their proposed 

treatment and recoveries. In fact, certain of the disclosures provided to Holders are materially 

misleading. Accordingly, the Motion should be denied and the Court should direct the Oversight 

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Board to provide proper and meaningful information to the Holders of Uninsured PREPA Revenue 

Bonds regarding the proposed Plan settlement and the securities to be provided before authorizing 

the Oversight Board to undertake a proper solicitation.

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Dated: February 17, 2023 

Respectfully submitted,

SEPULVADO, MALDONADO & COURET 

By: /s/ Elaine M. Maldonado-Matías 

Elaine M. Maldonado-Matías

USDC-PR No. 217309 

Telephone: (787) 765-5656 

Email: emaldonado@smclawpr.com 

By: /s/ Walter Lebrón Ramírez

Walter Lebrón-Ramírez

USDC-PR No. 305901 

Telephone: (787) 765-5656 

Email: wlebron@smclawpr.com

By: /s/ Lee R. Sepulvado Ramos

Lee Sepulvado Ramos 

USDC-PR No. 211912 

Telephone: (787) 765-5656 

Email: lsepulvado@smclawpr.com

304 Ponce de León 

Suite 990 

San Juan, PR 00918

MINTZ, LEVIN, COHN, FERRIS, 

GLOVSKY AND POPEO, P.C.

William W. Kannel (subject to pro hac vice) 

One Financial Center

Boston, Massachusetts 02111 

Facsimile: (617) 542-2241 

Email: WKannel@mintz.com

Nathan F. Coco (subject to pro hac vice) 

919 Third Avenue 

New York, New York 10022 

Office No.: (713) 234-6477 

E-mail: NFCoco@mintz.com

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