Puerto Rico bankruptcy judge Laura Taylor Swain threatened to drop the case and ordered the bankrupt parties to go to mediation.
âMy patience is running out,â Swain said, noting that the affair has lasted 4.5 years so far.
Puerto Rico could lose its bankruptcy protection from lawsuits by bondholders, she said, as it could “be forced to consider” rejecting the protections in Titles III and VI.
The situation came to a head after the Puerto Rican legislature failed to pass the legislation the Supervisory Board wanted for the adjustment plan before the board’s deadline of 2 p.m. Friday, even after the board responded to demands from lawmakers on key issues such as pensions.
Supervisory Board chief executive Natalie Jaresko asked the judge to postpone the 72-hour bankruptcy deadlines, offering to âwithdrawâ the adjustment plan if the postponement was not allowed.
Instead, Swain ordered the board of directors, governor, legislative leaders, and lawyers representing bondholders, retirees, and the unsecured creditors committee to meet in confidential mediation with the chief of the ‘Barbara Houser Mediation Team. Houser is due to submit a report by 5 p.m. Nov. 2 to see if the confirmation hearing scheduled for Nov. 8 can go ahead as planned.
If Houser says he cannot move forward, the board should explain whether the proposed adjustment plan can be upheld without local legislation allowing for the new obligations and offer a detailed timeline on how the board is proposing to. advance to a modified confirmable plane.
Second, it should come up with alternative measures the council could take to confirm the plan without the support of local law. As an alternative, the board would have to explain whether it considered dismissing the Title III and VI bankruptcy proceedings over the central government’s $ 33 billion debt.
“The court may reserve the right to order justify why such a termination should not be considered,” Swain said.
The missouri bankruptcy deadlines remain in place for the time being.
The rejection of the bankruptcies of Titles III and VI would open the door to bondholders claiming full payment of what would normally be due for their obligations. In some cases, in the event of a default, they could seek expedited payment and bring an action for immediate and full payment of the obligations missouri bankruptcy
Those with government guaranteed debt in Puerto Rico would be in the best position because Puerto Rico’s constitution states that this debt must be paid before all other expenses. The adoption of the Puerto Rico Surveillance, Management and Economic Stability Law in the summer of 2016 replaced it, and central government obligations have not been paid since then.
The council, through its lead lawyer Martin Bienenstock and Jaresko, said ahead of Monday’s hearing it reviewed the amendments prepared by the local legislative branch and found them unacceptable. If they were passed, “we wouldn’t be able to move the plan forward because we wouldn’t be able to say it’s doable,” Bienenstock said.
âI can’t stress enough how concerned the board is at this point,â Jaresko said.
“We really think this is a waste of time,” Bienenstock said of Governor Pedro Pierluisi’s request for 36 hours of overtime for the legislature to pass new legislation.
Puerto Rico House Speaker Rafael HernÃ¡ndez MontaÃ±ez and Puerto Rico Senate Speaker JosÃ© Luis Dalmau also urged the judge to give the legislature a day or two more to pass a version of the bill. which would authorize the bonds.
The board’s concerns center on proposed wording on pensions that would be added to the bills, Jaresko said.
As a condition of issuing the new bonds, the changes would not allow any reduction in pensions, she said. Although the board has not promised any pension cuts for those currently receiving pensions, it is possible that Swain will need pension cuts, Jaresko said. If that happened, the bonds would not be issued.
This is also an amendment removing the explicit authority to end the cost of living adjustment found in the bill approved by the Puerto Rico House, Jaresko said. If the new amendment were to pass, the board is concerned that the bonds will not be issued as the cost-of-living adjustment would be seen as a âreduction in pensionsâ.
The board wants the Puerto Rican Senate to pass the House version, but the Senate, at least last week, lacked the votes to do so.
Advocate for the bondholder plan support agreement, Susheel Kirpalani, said her group retained the right to seek rejection of Title III and called on the legislature to approve the new bonds. His group opposed the board’s request for an adjournment of the deadlines.