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Judge Decides Handling of the Controversies of Government and COFINA Bankruptcy

Laura Taylor Swain

Damaris Suárez / Eric De León Soto
17/05/2017 03:50 pm

Judge Laura Taylor Swain has determined to consolidate the central government’s and Puerto Rico Urgent Interest Fund Corporation (COFINA) bankruptcy cases, but only for administrative matters. The judge's determination should address the legal issues separately to avoid affecting the interests of all parties.

Taylor Swain presided over the first hearing of the restructuring of Puerto Rico's debt today, Wednesday, where she established the basis on the handling of the procedures.

The federal magistrate approved with amendments the administration’s plan for the case proposed by the Fiscal Control Board (FCB), but did not act on the request to transfer the money from COFINA funds to the general fund and/or whether to continue its payments. The next payment to COFINA expires on June 1st.

For his part, the governor's representative in the FCB, Elías Sánchez Sifonte, said that the objections raised in the courtroom about the risk of disrupting the disbursements made to the COFINA bondholders does not necessarily compromise the structure of that entity. He emphasized that the fiscal plan separates about $900 million in cash available for the payment of the debt, to which that group of creditors must accommodate itself to.

"What is being asked is a space to negotiate an agreement with COFINA bondholders with some concessions from them that fits the reality of what we have in the fiscal plan. That does not contemplate destroying structure. One thing is structure and another is the amount of money," Sánchez Sifonte said, emphasizing that the parties will be notified in case that disbursement is altered.

Regarding the statements made in the room regarding the possibility that the government may enter a title III process for other entities covered by the PROMESA law, Sanchez Sifonte indicated that they are currently in negotiations with creditors from the Highway Authority (ACT by its Spanish initials), the Puerto Rico Aqueduct and Sewer Authority (Prasa), the Convention Center District Authority (ADCC by its Spanish initials), the Infrastructure Financing Authority (AFI by its Spanish initials) and the University of Puerto Rico (UPR), in search of reaching an agreement under Title VI.

However, he acknowledged that in the case of ACT, ADCC and AFI there is a probability that they will enter into a title 3 process, whereas for Prasa and UPR it is possible to reach an agreement through title 6.

Meanwhile, the bankruptcy trustee must submit to Judge Taylor a recommendation on how to set up the creditors' committees.

The judge anticipated that in her work agenda it is proposed to make hearings in June, August, September, November and December.

Meanwhile, Sánchez explained that the expressions of the judge put in context the complex situation the state, its creditors and the court face, taking into account the different rights and claims of all parties. However, she emphasized that any action determined to cause harm to the citizenry will not be an option.

Likewise, he commented that Taylor Swain wants to establish that this particular process is unique. "I think what she was demonstrating is the knowledge of what the case is all about. Because this is not a chapter 11 case, this is not a chapter 9 case, this is something else. In the sense that PROMESA provides for a reform and government restructuring and provides for a debt restructuring as well, which typically there isn’t in Chapter 9," said the governor's representative on the FCB.

Stay tuned to NotiCel for further updates.

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