Appeals hearing on POA stay request filed by teachers’ groups set for Wednesday
By The Star Staff
The U.S. First Circuit Court of Appeals has scheduled a hearing for a stay on the central government’s plan of adjustment (POA) for Wednesday following a petition from several teachers’ organizations.
Last week, U.S. District Court Judge Laura Taylor Swain, who oversees Puerto Rico’s bankruptcy cases, rejected two requests for a stay on enacting the POA on March 15 filed by teachers’ groups and credit unions.
However, the teachers’ groups filed an appeal and on Friday, the appeals court scheduled a hearing for Wednesday. The teachers have said the plan hinders their retirement benefits.
In rejecting the requests from the teachers and the credit unions, Swain said last week their interests are outweighed by the harm resulting from a delay in the March 15 date. On Jan. 18, the Title III court approved the POA for the commonwealth, the Puerto Rico Public Buildings Authority (PBA), and the Employees Retirement System (ERS) after a long negotiation.
If the POA is implemented, the commonwealth’s general obligation and guaranteed debt will total about $7.4 billion, which represents reduction of the commonwealth’s approximately $30.5 billion of prepetition debt associated with those borrowings, the judge said. Further, implementation of the POA will eliminate all ERS and PBA debt. The plan also preserves the accrued pension rights of Puerto Rico’s current and former public servants.
“The herculean task of the formulation of the confirmable Plan of Adjustment was accomplished with the substantial aid of the extraordinary efforts of the team of judicial mediators who facilitated negotiations among key stakeholders to resolve numerous complex disputes,” Swain said.
She noted that failure to permit consummation of the long-sought plan could condemn the commonwealth to a prolonged and injurious search for other solutions while its economic prospects deteriorate.
“To call such a risk to the Plan a potential setback would be a gross understatement,” the judge said. “Even if the only consequence of the stay were a delay in the Plan’s implementation, such a delay in the Commonwealth’s financial recovery would not be inconsequential: preserving the ‘status quo’ would prolong the state of emergency that the Plan addresses and delay new investments in the Commonwealth and the access of the Commonwealth to capital markets, stunting economic growth for as long as appeals remained pending.”
As for other creditors, the cooperatives argue that there is no risk that the debtors will deplete or lose any sources of payment under the POA if a stay is imposed pending appeal, and that the payments to be paid in cash are already segregated from the debtors’ operational budgets. Most of the other risks identified are also at play, the cooperatives note. A stay would delay the distribution of about $10.8 billion to creditors and the debt instruments that will replace the currently outstanding bonds, causing creditors to lose the opportunity to earn investment income on cash that would otherwise be distributed to them under the POA, and accruals of income on the new instruments.