Court expected to hear debt status reports from oversight board, AAFAF today

By The Star Staff

The U.S. District Court will hear status reports today from the federal Financial Oversight and Management Board and from the Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials) on Puerto Rico’s debt restructuring. By Feb. 10, the oversight board must submit to the court at least a term sheet for a plan of adjustment of the commonwealth debt.

The oversight board is slated to report on its general status and activities, including measures taken in response to the COVID-19 pandemic, the general status of relations between the island and federal governments, the general status of work toward plans of adjustment, the general status of alternate dispute resolutions, and the general status of the claims objection process. AAFAF will also discuss the status of its activities.

Gov. Pedro Pierluisi Urrutia recently declared a fiscal emergency through one of six executive orders that he signed on Jan. 2 after he was officially sworn into office that day. Executive Order 2021-03 instructs all agencies to control spending. Among other measures, the need to fill every vacant government position will be reviewed, while new commonwealth employees cannot be hired without prior authorization from the head of the island’s Office of Management and Budget. Still, the governor has said he wants the oversight board to negotiate a debt deal that does not include cuts to pensions and that is affordable enough to allow the commonwealth to avoid filing for bankruptcy again.

The court postponed to March 10 a discussion on certain matters related to the bankruptcy. These include a Puerto Rico Sales Tax Financing Corp. (COFINA by its Spanish acronym) objection to proofs of claim filed by the Internal Revenue Service (IRS). On April 10, 2019, the IRS filed claims against COFINA for the return of $4 million in direct subsidy after COFINA filed for bankruptcy with respect to certain 2010 bonds. The IRS says COFINA was not entitled to the credit after filing for bankruptcy.

A motion for an order allowing a Puerto Rico Infrastructure Financing Authority (PRIFA) guarantee claim was also postponed to March. The commonwealth wants an order approving the terms of the compromise and settlement among the commonwealth, AAFAF on behalf of PRIFA and bondholders of PRIFA bond anticipation notes, Series 2015 issued by PRIFA, and resolving certain disputes and litigations. Also left for March was a discussion of the Puerto Rico Electric Power Authority’s rejection of certain contracts for renewable energy projects.