Lawmakers, FOMB clash with holdout creditors over PREPA deal; board proposes $2.6 billion settlement

Lawmakers, the Financial Oversight and Management Board (FOMB), federal analysts and Puerto Rico officials debated how to resolve the Puerto Rico Electric Power Authority’s (PREPA) remaining debt and who should cover the cost of repairs and modernization to the island’s failing grid.

Robert Mujica, executive director of the FOMB, said the board has reached agreements with creditors representing 44% of PREPA’s debt but that a group of nonconsenting bondholders — led by GoldenTree Asset Management — is demanding full recovery claims totaling about $12 billion, including pre‑ and post‑petition interest. “We will identify $2,600,000,000 for the creditors. That’s how much we think is affordable,” Mujica said, adding that the board believes net revenues are insufficient to satisfy the higher demands without imposing untenable rate increases.

Members warned of consequences if holdouts succeed. Representative Alexandria Ocasio‑Cortez (appearing as a permitted participant in the hearing) and Representative Torres said a $12 billion recovery would force large rate increases and divert money from service repairs. “They would pay an additional 8¢ to fund the $12,000,000,000,” Mujica testified when describing rate estimates; Representative Torres added that an additional 2.5¢ would be needed to cover underfunded pensions, for a combined roughly 10.5¢ per kilowatt‑hour increase on top of current rates.

Witnesses and members cited operational and structural problems that make the PREPA restructuring unusually complex: generation assets more than 50 years old; island‑wide outages in the prior year unrelated to storms; deferred maintenance and limited capital investment; private operators LUMA (distribution/operations) and Genera (New Fortress Energy unit) in roles for generation and operations; and slow or partial investment of federal disaster recovery funds. Attorney and investor positions were discussed in testimony and questioning but not resolved at the hearing.

Members repeatedly criticized so‑called vulture funds that purchased distressed PREPA bonds after defaulting and now seek large recoveries. Representative Nydia Velázquez and others singled out GoldenTree, noting public filings and reported profits. Mujica said the board’s plan prioritizes preserving PREPA’s ability to attract contractors and finance improvements without placing unsustainable cost burdens on ratepayers.

The subcommittee heard that the First Circuit Court of Appeals has limited nonconsenting bondholders’ recourse to PREPA’s net revenues, and that FOMB and debtors are in court‑ordered mediation. No settlement was announced; the FOMB and several members urged further mediation and stressed that any deal must protect grid reliability and affordability for Puerto Rico’s residents.