Oversight board, committees ask for hearing on key pension bankruptcy disputes
By The Star Staff
The Official Committee of Unsecured Creditors, the Official Committee of Retired Employees of the Commonwealth of Puerto Rico and the Financial Oversight and Management Board for Puerto Rico asked U.S. District Court Judge Laura Taylor Swain to schedule oral arguments in March concerning several pending disputes crucial to Puerto Rico’s Employees Retirement System (ERS) bankruptcy process.
The disputes involve the petition for summary judgment in the so-called “Ultra Vires Issues,” the so-called lien scope motions and the parties’ Rule 12 motions concerning the ERS bondholder groups’ claims and administrative expense motions. The parties asked for 30 to 45 minutes to be able to talk on each dispute.
The ultra vires dispute contends that some $3 billion in ERS bonds issued in 2008 are invalid and unenforceable because ERS lacked statutory authority to issue such bonds. The lien scope motions seek a court declaration that ERS bondholders do not have an effective or perfected security interest in ERS’s pre-2008 assets or any proceeds, that ERS bondholders do not have an effective or perfected security interest in other employer payment obligations, that ERS bondholders do not have an effective or perfected security interest in employee loans or employee loan payments, and that bondholders do not have an effective or perfected security interest in any funds. The motions also seek a court declaration that ERS bondholders do not have any unsecured claims either.
The Rule 12 motions are those in which the oversight board seeks to dismiss all claims asserted against the commonwealth and ERS by the ERS bondholders. The claims allege liability arising from the enactment of the legislation that changed the system for funding pension payments.
ERS has been in bankruptcy under Title III of the Puerto Rico Oversight, Management and Economic Stability Act since 2017.
“Movants respectfully submit the court would benefit from oral argument on any ERS Motions pending as of the hearing date in view of the complexity and importance of the issues to the ERS Title III case,” the motion filed late Friday states.
Currently, the government and bondholders are in mediation to reach agreements on the different bankruptcy processes of the commonwealth, the Puerto Rico Electric Power Authority and ERS.
The government said the summary judgment motions concerning the ultra vires issues will determine the validity of approximately $3 billion in ERS bonds.
“If the ERS Bonds are valid, the summary judgment motions concerning the lien scope issues will determine the extent of the ERS Bondholders’ collateral,” the motion reads. “The determination of the summary judgment motions will affect the disposition of the Rule 12 Motions.”