Two Puerto Rico Electric Power Authority bondholders—GoldenTree Asset Management and Syncora Guarantee—have filed a notice of appeal, challenging U.S. District Judge Laura Taylor Swain’s decision to maintain a litigation stay that has blocked creditors from pursuing key remedies in the power utility’s long‑running bankruptcy.
The appeal, filed with the U.S. Court of Appeals for the First Circuit, seeks review of Judge Swain’s May 20 bench ruling and the May 26 written order denying the bondholders’ renewed motion for relief from the litigation stay. The stay, first imposed in 2022, prevents creditors from advancing motions to appoint a receiver, enforce alleged collateral rights, or seek dismissal of PREPA’s Title III case.
During the May 20 omnibus hearing, attorneys for Assured Guaranty, GoldenTree, Syncora, and the PREPA Ad Hoc Group argued that PREPA is spending their collateral—net revenues—every day without providing adequate protection. They warned that continued delay violates both the Fifth Amendment and due process, citing First Circuit precedent that creditors cannot be forced to “stand by helplessly” while their collateral is depleted.
Miguel Estrada, arguing for Assured, told the court that bondholders have been “extremely diligent” since 2017 but have never received a full hearing on their stay‑relief motions. “At some point a stay becomes immoderate,” he said, urging the court to allow litigation on the merits.
PREPA Ad Hoc Group counsel Eric Brunstad added that the utility’s regulator, the Puerto Rico Energy Bureau, recently approved a rate structure that allows PREPA to fund capital expenditures—evidence, he argued, that PREPA is using revenues beyond current expenses and therefore consuming collateral.
The Financial Oversight and Management Board countered that the court has already lifted the stay for the accounting counterclaim, which will determine whether net revenues exist, how they should be calculated, and the size of any secured claim. Until that record is complete, the Board argued, stay‑relief litigation would be premature and disruptive.
The Board also asserted that bondholders had waived the expedited hearing protections of Bankruptcy Code §362(e) by failing to properly notice hearings in prior years.
Swain denied the renewed motion, ruling that the accounting litigation—already underway before Magistrate Judge Judith Dein—must proceed before any stay‑relief hearing. She emphasized the court’s authority to sequence litigation to avoid chaos and duplication and noted that First Circuit precedent allows the court to maintain or condition the stay rather than terminate it outright.
Swain urged all parties to continue mediation and move the accounting case forward, stressing that “failure is not an option” for Puerto Rico’s electrical system.
With the notice of appeal filed, the First Circuit will now determine whether Swain’s refusal to lift the litigation stay was an abuse of discretion. Meanwhile, the accounting counterclaim litigation continues, and the stay remains in effect for all other bondholder motions.
