Lawsuit may complicate HTA’s path out of bankruptcy
By The Star Staff
The Government Development Bank (GDB) Debt Recovery Authority (DRA) has sued Puerto Rico Highways and Transportation Authority (HTA) bond insurers, creditor Peaje Investment and Bank of New York Mellon seeking a declaratory judgment stating that DRA has first priority lien on certain HTA revenues.
The suit appears to complicate HTA’s ability to exit bankruptcy. HTA has been in bankruptcy under Title III of The Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) since 2017.
The GDB, which restructured its debt under Title VI of PROMESA in 2017, is claiming first priority over Act 30-31 revenues, which collateralize obligations under 23 loans made by the GDB to HTA. These revenues overlap with certain revenue streams that the bond insurers allege secure obligations under the 1968 and 1998 HTA bonds. Those revenues consist of motor vehicle license fees collected by the commonwealth and taxes on gasoline, diesel, crude oil, cigarettes, and other special excise taxes collected by the commonwealth.
Suing on behalf of the GDB are Cantor-Katz Collateral Monitor LLC, a Delaware limited liability company, and AmeriNational Community Services, as servicer of the DRA. The bond insurers are Ambac Assurance Corp., Assured Guaranty Corp., Assured Guaranty Municipal Corp., National Public Finance Guarantee Corp. and Financial Guaranty Insurance Co. Peaje Investment holds 1968 and 1998 HTA bonds while the Bank of New York Mellon is a fiscal agent for HTA.
The DRA was created as a vehicle to give effect to the terms of the consensual restructuring under Title VI of PROMESA. Under the framework agreed to by the GDB, the GDB bondholders, the federal Financial Oversight and Management Board, and the Puerto Rico Fiscal Agency and Financial Advisory Authority, the DRA issued new bonds to the GDB bondholders in exchange for their existing GDB bonds. The new DRA bonds have a face amount equal to 55% of the GDB bondholders’ claims.
On Nov. 29, 2018, the DRA and the GDB entered into the Master Transfer Agreement, pursuant to which the GDB transferred substantially all its assets to the DRA, the suit says.
HTA issued bonds and other obligations under a 1968 resolution and in February 1998. The DRA holds $200 million in aggregate original principal amount of HTA bonds.
The GDB transferred the obligations under the 23 loan agreements and the 1998 Bond Resolution to the DRA pursuant to the GDB’s Title VI restructuring. under PROMESA and Puerto Rico laws.
The DRA said it is charged with liquidating them to pay debt service under new bonds issued pursuant to GDB’s Title VI restructuring.
The DRA says the HTA bonds claimed by the bond insurers are limited recourse obligations to be satisfied solely from bond revenues that do not include the Act 30-31 Revenues, and are secured by only the Bond Revenues and other moneys deposited in the Bond Revenue Accounts.
“The DRA Parties seek to establish that the DRA is the only creditor with a valid, perfected, first priority lien on and right to collect from the Act 30-31 Revenues,” the suit says.