Fiscal board seeks delay of DAP confirmation hearings
Insists it doesn’t need enabling bill to complete debt deal
By The Star Staff
After legislation enabling the debt adjustment plan was “shelved” by the island Legislature late last week, the Financial Oversight and Management Board requested a postponement of the hearings slated to start Nov. 8 to confirm the seventh debt adjustment plan in order to sit down with creditors, but insisted it does need the enabling bill to execute the debt deal.
The oversight board’s request came Friday, hours after Title III Bankruptcy Judge Laura Taylor Swain ordered a hearing for today where the oversight board and government officials are to discuss the fate of the debt deal.
Swain ordered the hearing following reports that House Bill 1003, the legislation enabling the debt adjustment plan that would restructure some $33 billion in central government debt, had not been approved.
The Senate and House approved different versions of HB 1003 earlier this month. After working in a conference committee to create a single version of the bill, the House approved the legislation again but it does not have the votes in the Senate. The oversight board had given the government until Friday at 2 p.m. to enact the legislation before seeking a delay in the confirmation hearings.
“The reported ‘shelving’ of House Bill 1003 by the Senate and the recess of the House until Oct. 26, 2021, appears to make it unlikely that the deadline announced yesterday by the Financial Management and Oversight Board will be met,” Swain said.
A few hours later, the oversight board sought a postponement of the Nov. 8 hearing to sit back with creditors and modify the plan with regards to the enabling legislation. The board said the enabling bill is not needed to execute the debt deal but that it was sought by the creditors.
“The debt adjustment plan currently requires legislation authorizing new debt issuances and contingent value instruments because certain creditors requested that legislation to potentially enhance the trading value of the new debt, and not because legislation is required to issue debt in a Title III plan of adjustment,” the oversight board said.
“Therefore, the Oversight Board believes it should re-engage with creditors and determine how it will modify the plan,” the board said. “Depending on the ultimate modification adopted, there may be a need for a supplement to the disclosure statement and a hearing thereon.”
The nature of the oversight board’s negotiations is not clear, but Swain in the past has agreed with the board that it does not need the enabling legislation to execute the debt deal under the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA).
In a footnote to her ruling annulling the Dignified Retirement Act earlier this month, Swain wrote “PROMESA contemplates a primarily interactive process of development of fiscal plans and budgets and forbids certain actions by Puerto Rico governmental entities.”
“Of relevance to the instant dispute, PROMESA gives the Oversight Board authority to seek judicial relief thwarting actions that the Oversight Board has determined frustrate or impair the purposes of PROMESA, and provides that the statute preempts inconsistent local laws and regulations,” the judge wrote.
As the oversight board made clear in its statement last Thursday, the “Oversight Board and a diverse group of stakeholders ranging from unions, retirees, bondholders and other creditors, and bond insurers agreed on a plan that is the best possible outcome given the difficult circumstances that Puerto Rico has had to manage for the past several years.”
So far, some creditors have informed the court that they will be attending today’s court hearing. They are Financial Guaranty Insurance Co.; Ambac Assurance Corp.; Assured Guaranty Corp. and Assured Guaranty Municipal Corp.; the Ad Hoc Group of Constitutional Debtholders; Cantor-Katz Collateral Monitor LLC; the International Union; United Automobile, Aerospace and Agricultural Implement Workers of America (UAW); the Lawful Constitutional Debt Coalition; the QTCB Noteholder Group; National Public Finance Guarantee Corp.; and Amerinational Community Services.
Meanwhile, the Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials) asked the court for an extension to the deadline to submit its objections to the debt deal. The AAFAF did not submit the objections by the Oct. 19 deadline.