Court Limits Prepa Bonds to Secured Lien on Reserve Funds (2)

Holders of Puerto Rico Electric Power Authority bonds only have a secured claim to money the bankrupt utility has already deposited in a reserve fund, US District Court Judge Laura Taylor Swain said in a ruling released Wednesday.

While Swain limited bondholder repayment to reserve funds, she also granted them an unsecured claim to the utility’s net revenue, according to court documents. That could give investors additional money to be repaid beyond $16 million in a so-called sinking fund. Prepa, as the utility’s known, owes nearly $9 billion.

“It gives some to one side and some to the other,” John ...