Commonwealth restructuring plan hits first major roadblock 5 days before implementation date
By The Star Staff
The commonwealth restructuring plan is slated to go into effect in five days but it has encountered its first major roadblock for implementation, according to a court document Thursday.
The Financial Oversight and Management Board on Thursday asked the Title III Bankruptcy Court to order the Bank of New York Mellon to release certain funds in Highways and Transportation Authority (HTA) accounts to certain monolines and other creditors that the bank refuses to distribute.
The bank contends it wants to deduct $2.6 million in expenses from the funds as payment for legal and fiscal fees it is owed.
In May of last year, an agreement was reached with certain holders of bonds issued by HTA, certain holders of bonds issued by the Puerto Rico Convention Center District Authority (CCDA), Assured, and National, which provided for, among other things, the terms of the resolution of litigation among the parties regarding the bonds issued by HTA, and the terms of securities to be issued pursuant to plans of adjustment for the Commonwealth and HTA.
On Jan. 18, the court entered the order and Judgment confirming the Modified Eighth Amended Title III Joint Plan of Adjustment of the Commonwealth of Puerto Rico, the Employees Retirement System of the Government of the Commonwealth of Puerto Rico, and the Puerto Rico Public Buildings Authority, which incorporates the terms of the HTA/CCDA agreement.
The document states that within 10 business days following satisfaction of the HTA Distribution Conditions, HTA shall make an interim distribution to holders of HTA 68 Bond Claims and HTA 98 Senior Bond Claims in the $184.8 million and $79.2 million in cash. The Financial Oversight and Management Board projects that the effective date of the plan will occur on or before next Tuesday, March 15.
The bank, which is the fiscal agent for the funds, asserts it has incurred fees and expenses in connection with the HTA Title III Case, including the filing of master proofs of claim on behalf of itself and HTA bondholders and participation as a defendant in multiple adversary proceedings and wants to deduct the payments from the funds.
“The Fiscal Agent asserts that, pursuant to the resolutions governing the HTA Bonds, in the event of a default by HTA, the Fiscal Agent has the right to deduct its reasonable compensation for all services rendered by it under the resolutions and also all of its reasonable expenses, charges and other disbursements and those of its attorneys, agents and employees incurred in or about the administration and execution of the trusts created by the resolutions, and the performance of its powers and duties under the resolutions, and any liabilities which the Fiscal Agent may incur in the exercise and performance of its powers and duties under the resolutions, from any moneys coming into its hands and shall be entitled to a preference in payment over any of the HTA Bonds outstanding under such resolutions,” the court document says.
The bank asserts that HTA has been in default in the payments since prior to filing for bankruptcy.