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  • Writer's pictureThe San Juan Daily Star

Fiscal board panel still trying to identify banks responsible for island’s bankruptcy

By The Star Staff

Years after bond issuances that took Puerto Rico to bankruptcy court, the Financial Oversight and Management Board’s Special Claims Committee is still trying to identify the underwriters and financial professionals responsible for the fiscal debacle.

A filing in the Special Claims Committee et al v Barclays Capital et al case in U.S. District Court highlighted the problem.

On May 2, 2019, the Special Claims Committee and the Official Committee of Unsecured Creditors of the Debtors (except the Public Buildings Authority [PBA] and the Puerto Rico Sales Tax Financing Corp. [COFINA by its Spanish acronym]) sued some 19 banks and financial institutions for their role in contributing to Puerto Rico’s estimated $74 billion debt.

The adversary proceeding, which was amended in September of this year, alleges that underwriters and other financial professionals looked the other way when the Government Development Bank acted in breach of its duty as fiscal agent. The banks issued for their own profit and unjust enrichment portions of the commonwealth’s $74 billion debt knowing the government could not afford it, the suit said.

This week, Merrill Lynch, Pierce, Fenner & Smith acknowledged it underwrote municipal bond issuances while doing business as Merrill Lynch & Co for some of the issuances and as BofA Merrill Lynch for others, according to a notice.

BofA Entities has asked Drivetrain, the Trustee for the Commonwealth Avoidance Action Trust, to remove Bank of America as a defendant and to replace it with BofA Securities, which is already named in the adversary proceeding, as the successor to Merrill Lynch, Pierce, Fenner & Smith.

The Trustee requested that “the court enter an [...] permitting the removal of Bank of America as a defendant and the attribution of the allegations and counts against Bank of America to BofA Securities, which is already a defendant in this adversary proceeding.”

Meanwhile, the Puerto Rico Electric Power Authority mediation team extended the termination date for mediation to Jan. 31 from Dec. 31, 2022, according to a legal notice last week, even though there are no negotiations.

The team had the authority to extend the mediation by one month at its discretion, but further extensions will require a court order.

“While there are no active negotiations taking place at the present time in which the mediation team is involved, the mediation team believes it is in the best interests of all stakeholders for the mediation team to remain available to assist should such negotiations resume,” the notice said.

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