Puerto Rico Electric Power Authority (PREPA) v. Ad Hoc Group of PREPA Bondholders, No. 17-2079 (1st Cir. 2018)Annotate this Case
The First Circuit vacated the district court’s order denying the request for relief from a stay of actions against PREPA sought by holders of revenue bonds issued by PREPA (the bondholders), holding that the district court erred in concluding that the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) sections 305 and 306, 48 U.S.C. 2165, 2166, precluded it from granting such relief.
PREPA filed for bankruptcy under Title III of PROMESA, which triggered an automatic stay of most actions by creditors against PREPA. The bondholders, who accused PREPA of breaching a promise to seek a rate increase sufficient to cover debt payments, of failing to collect on customer accounts, and of mismanaging operations, asked for relief from the automatic stay in order to file suit to have a receiver appointed to manage PREPA and seek a rate increase sufficient to cover debt servicing. The Title III court denied the bondholders’ request for relief from the automatic stay. The First Circuit vacated the court’s order and remanded the matter for further proceedings, holding (1) the court erred in concluding that PROMESA sections 305 and 306 prohibited it from granting relief; and (2) the record was inadequate to find support upon which to rest the Title III court’s finding that “cause” did not exist under 11 U.S.C. 362(d)(1) to lift the stay.
The court issued a subsequent related opinion or order on August 10, 2018.