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Oversight board addresses concerns over lack of participation in debt settlement process


By The Star Staff


The Financial Oversight and Management Board for Puerto Rico in a status report submitted to U.S. District Court Judge Laura Taylor Swain addressed concerns about a lack of participation in the mediation process to reach a debt settlement for the commonwealth this year.


The oversight board said it continues to participate in the mediation process with the goal of reaching a consensual plan of adjustment for some $35 billion in debt. Puerto Rico has to at least submit a term sheet for a debt deal to the court by Feb. 10.


“As per the Court’s directive, the Oversight Board will endeavor to meet with as many creditor groups as possible prior to the February 10, 2021 deadline set by the court for the submission of a plan of adjustment or a term sheet setting forth the general parameters for a plan of adjustment,” the oversight board said in the report, which was not read at an omnibus court hearing Wednesday. “The Oversight Board reserves its right to seek an extension of such deadline in the event that it (and the Mediation Team) are unable to meet with the requisite creditor groups in such timeframe or that circumstances indicate that an extension might facilitate reaching a consensual or, at least, a more comprehensive understanding among respective creditor interests.”


Swain started the hearing Wednesday by saying that matters related to the large amount in legal fees billed in Puerto Rico’s bankruptcy cases and described by the fee examiner in a report last week were not “far from the court’s mind” and urged all professional firms to be aware of concerns raised by Fee Examiner Brady Williamson, who said Puerto Rico’s legal fees and expenses totaled about $858 million. Williamson also complained about inefficient staffing that has resulted in unreasonable and unnecessary services and the duplication of efforts.


Regarding the status reports submitted in writing to the court by the oversight board on Tuesday, the federal entity said it has transferred about 17,000 claims into the Administrative Claims Reconciliation (ACR). About 179,066 claims were filed against Puerto Rico, asserting over $43.6 trillion, but most have been expunged or withdrawn or sent to mediation. More than 33,500 claims, asserting over $4 billion in liabilities, are subject to adjourned omnibus objections and will be resolved either at the upcoming February adjourned objection hearing or via notices of presentment.


On the general status of relations with the new administration of Gov. Pedro Pierluisi Urrutia, the oversight board said it was collaborative but expressed concern about ongoing government delays in publishing audited financial statements, which are two years behind, and the lack of compliance with the fiscal plan. The oversight board is in the process of drafting a new fiscal plan.


“In addition, the Oversight Board continues to remind the government of required compliance with PROMESA [the Puerto Rico Oversight, Management and Economic Stability Act] and the Certified Fiscal Plan. Specifically, the Puerto Rico Transport and Other Services Bureau recently enacted new regulations without first presenting them to the Oversight Board for approval, as required by PROMESA. The new regulations would increase certain tariffs the Certified Fiscal Plan seeks to eliminate to improve the ease of doing business, attract investment, and promote economic growth, and are thus inconsistent with the Fiscal Plan,” the oversight board said. “In addition, the Government recently passed Joint Resolution 82, which allows the Puerto Rico Treasury Department to grant emergency loans to address liquidity challenges arising from the pandemic. While the Oversight Board supports addressing challenges stemming from COVID-19 in a fiscally responsible manner, Joint Resolution 82 lacks details and Oversight Board approval for the loans, repayment terms, and related budgets, and was not certified pursuant to PROMESA.”


Luis Marini, the attorney for the commonwealth’s Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials), informed the court that claims against the government that were not subject to the filing of proof of claims will be handled in the ordinary course and not through an alternate claims dispute resolution mechanism, such as the ACR. A memo to that effect will be issued to government agencies, he said.


The AAFAF said in its report that as of Jan. 22, the government had disbursed some $1.6 billion of the $2.2 billion it has received under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and Coronavirus Relief Fund. Regarding the most recent appropriations act, as of Jan. 22, the island Treasury Department had disbursed $760 million to some 800,000 families. Regarding disaster funds, as of Jan. 11, about $67 billion had been appropriated by the U.S. Congress to Puerto Rico for disaster relief and recovery efforts. Of this amount, some $43.2 billion had been committed by federal agencies for distribution and $18 billion had been disbursed. Of the amounts obligated and disbursed, the Federal Emergency Management Agency had approved some $33.8 billion and disbursed some $14.2 billion of the total amounts.


The AAFAF praised the island’s vaccination efforts against COVID-19 in its report. As of this past Monday, Puerto Rico had received more than 352,000 doses of the Pfizer and Moderna COVID-19 vaccines, it said, adding that the island Department of Health, in coordination with the Puerto Rico National Guard, “has developed an effective and comprehensive COVID-19 vaccination and distribution plan, which has been commended by the international press.”


“According to the Financial Times, Puerto Rico is currently ranked sixth in the world in the number of vaccination doses administered per 100 residents,” the AAFAF said. “To date, Puerto Rico has administered 209,396 doses of the COVID-19 vaccine.”

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