PREPA mediation said to be dead as neither side will compromise

“No prospect” of a “mediated or consensual resolution” for the Puerto Rico Electric Power Authority bankruptcy exists, the PREPA mediation team told the court Monday, which an outside attorney said leaves the bankruptcy at a “critical juncture.”

It “has become clear that neither side is willing to compromise in any meaningful way,” the mediation team told U.S. District Judge Laura Taylor Swain.

At an omnibus hearing in July, the mediation team was bleak about prospects for successful mediation, but Swain said, effectively, they should continue with their efforts.

In November, Swain said she would consider resuming litigation on disputed issues after the U.S. Court for the First Circuit ruled on the bondholders’ lien if the issues were framed narrowly and there was a tight schedule that would advance the case.

The mediators said Monday they were not convinced that any proposed litigation paths would advance the case and any decision would likely be appealed.

“This is … at a critical juncture for PREPA,” Puerto Rico Attorney John Mudd said. “Swain may decide to dismiss the bankruptcy, which would mean the appointment of a receiver who will request an increase in the electricity rate from the Puerto Rico Energy Bureau, which is required by law to take the payment of debt into account.”

But even if the bankruptcy isn’t “dismissed, I doubt Swain can avoid sending the receiver appointment motion to another judge,” Mudd said. “In any event, we face years of litigation.”

The mediators agreed that a litigated result is “years away” and added, “This is nothing short of a tragedy for the people of Puerto Rico.”

The U.S. Court of Appeals for the First Circuit ruled in favor of a bondholder lien and the Puerto Rico Oversight Board and other parties subsequently appealed the decision.

In other Puerto Rico news, Gov. Pedro Pierluisi announced the resignation of Fermín Fontanés, the executive director of the Puerto Rico Public Private Partnership Authority Tuesday.

Fontanés oversaw the privatization of PREPA’s generation, transmission, and distribution systems, several highways operated by the Puerto Rico Highways and Transportation Authority, and the cruise ship ports authority.