Oversight board asks US District Court to approve bank accounts confidentiality
By The Star Staff
The federal Financial Oversight and Management Board for Puerto Rico and the Puerto Rico Fiscal Agency and Financial Advisory Authority want the U.S. District Court to approve a stipulation that would keep certain information about commonwealth bank accounts confidential.
The island government and its creditors are currently in negotiations toward a new plan of adjustment. Judge Laura Taylor Swain ordered the oversight board to come up with a plan of adjustment or a term sheet by Feb. 10.
In October 2019, bond insurer Ambac Assurance Corp. filed a motion seeking discovery on the commonwealth’s assets. More specifically, Ambac sought information concerning Puerto Rico’s cash restriction analysis. While the government has some $20 billion in bank accounts, it has said a huge portion of those accounts are restricted in their use. Ambac has said it wants to evaluate the analysis to determine whether the restrictions on some of the bank accounts are justified.
The order not to reveal the information would include other creditors including Aristeia Capital LLC, Aurelius Capital Management LP, Autonomy Capital (Jersey) LP, BlackRock Advisors LLC, BlackRock Financial Management Inc., Brigade Capital Management LP, Canyon Capital Advisors LLC, Davidson Kempner Capital Management LP, Emso Asset Management Limited, Farmstead Capital Management, FCO Advisors LP, First Pacific Advisors LP, Fir Tree Capital Management LP, GoldenTree Asset Management LP, Goldman Sachs Asset Management LP, Mason Capital Management LLC, Monarch Alternative Capital LP, OM Foundation Limited, Sculptor Capital LP, Silver Point Capital LP, Stonehill Capital Management LLC, Taconic Capital Advisors LP, VR Advisory Services Ltd. and Whitebox Advisors.
Ambac also last week requested a third-party discovery of Milliman, which has worked for at least 13 years as an adviser to the island’s pension systems, in order to ascertain if the government is telling the truth that there are $50 billion in pension liabilities.
“Milliman has acted as the Commonwealth’s actuarial consultant for over 13 years. In that role, Milliman conducts annual valuations of the Commonwealth pension liability. The analysis is published in a valuation report, which is the single source relied on by the Oversight Board for the pension obligation amounts included in the Commonwealth Fiscal Plan,” Ambac said.
“Understanding Milliman’s analysis is critical to any assessment of the amounts available for debt service included in the Commonwealth Fiscal Plan. Over the past three years, Ambac has diligently sought information from the Financial Oversight and Management Board for Puerto Rico and the Puerto Rico Fiscal Agency and Financial Advisory Authority concerning the Milliman actuarial valuation reports.”
After numerous meet-and-confers, the government parties have maintained that they are not in possession of key information needed to understand Milliman’s analysis, and refuse to obtain the relevant information from Milliman for production to Ambac, the bond insurer said.
“As [Milliman is] the sole party in direct possession of the relevant materials, Ambac believes it would be most efficient to subpoena materials and examine relevant witnesses directly from Milliman. The third-party discovery from Milliman, which would provide insight into Milliman’s calculation of the Commonwealth’s pension liability, is critical to creditors’ understanding of the Commonwealth’s financial condition,” Ambac said. “Without this information, the Commonwealth’s estimated $55 billion pension liability remains unsubstantiated and untested.”
“This is particularly troubling given the magnitude of the liability and the fact that a preliminary analysis of pension-related information that Ambac has obtained by experts in the field reveals that the pension liability, and in turn the PayGo obligations incorporated in the Commonwealth’s Fiscal Plan, may be substantially overstated,” the firm said.