Judge Swain rules against three commonwealth insurers

By The Star Staff

The Financial Oversight and Management Board for Puerto Rico on Thursday won three disputes with insurers of revenue bonds from the Puerto Rico Infrastructure Financing Authority (PRIFA), the Convention Center District Authority (CCDA), and the Puerto Rico Highways and Transportation Authority (PRHTA).

Judge Laura Taylor Swain, who is overseeing Puerto Rico’s bankruptcy-like process, found in three separate cases that insurers were not entitled to stay relief in bringing lawsuits related to more than $6 billion in revenue bonds.

CCDA bond insurers offered the strongest argument for lifting the stay because the revenue that backs $469 million in hotel occupancy tax debt was collected by the island Tourism Co. and never touched the commonwealth’s hands. The CCDA bondholders said the bankruptcy stay under Title III of the Puerto Rico Oversight, Management and Economic Stability Act did not apply.

But Swain was not convinced. The judge said the commonwealth did not have constitutional authority to delegate its tax collection authority to the Tourism Co., so it had an ownership stake in the taxes collected.

“The CCDA movants have failed to show a reasonable likelihood that the hotel taxes are not property of the commonwealth, and, consequently, they have not satisfied their burden to show that the automatic stay does not apply to the CCDA enforcement action, which would implicate hotel taxes collected by the tourism company pursuant to the commonwealth’s delegation of authority under the hotel tax act,” Swain ruled.

She also ruled against lifting the automatic stay for PRIFA and PRHTA bonds.

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