Puerto Rico Industrial Development Co. (PRIDCO) creditors, in a lawsuit filed late last week, made some 14 claims that include payment of over $92 million in debt and legal fees, the appointment of a receiver for PRIDCO, and an order to stop the sale of PRIDCO properties.
By THE STAR STAFF
Puerto Rico Industrial Development Co. (PRIDCO) creditors have sued the Financial Oversight and Management Board and the Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials), alleging abuse of power and refusal to pay their debt.
The creditors, including Crown Managed Accounts, Ginkgo Tree LLC and several Goldentree funds, made some 14 claims that include payment of over $92 million in debt and legal fees, the appointment of a receiver for PRIDCO, and an order to stop the sale of PRIDCO properties.
“The Oversight Board and AAFAF have worked in concert for over six years to stall any resolution of PRIDCO debt while hiding behind invalid local laws that have no legal effect as a ‘sword and shield’ against creditors,” the creditors said in a suit filed last Thursday. “While PROMESA [the Puerto Rico Oversight, Management and Economic Stability Act] was passed by Congress with the goal of improving the flow of capital to Puerto Rico, when it comes to PRIDCO, the Oversight Board has shown it is just not up to the task.”
According to PRIDCO’s most recent audited financials, its commercial real estate portfolio, land, and available cash are worth far in excess of $700 million, while it has a fraction of that in debt, the lawsuit says.
“PRIDCO is demonstrably solvent, by any measure, as reflected even in the Oversight Board’s own certified fiscal plan,” the creditors said.
PRIDCO issued its bonds in 1997 and 2003 to purchase, develop and lease commercial and industrial real estate to private business interests. At the time of the last bond issuance, PRIDCO was projected to be debt-free upon the final maturity of its bonds in 2028, they pointed out.
“In issuing the bonds, PRIDCO pledged security and agreed that principal of and interest on the bonds are payable from the gross revenues received by PRIDCO from certain of its revenue-producing real properties, machinery, equipment, first mortgages on real property, or first mortgage bonds, which are specified by PRIDCO to be Trusteed Properties pursuant to the terms of the Trust Indenture,” the creditors said.
While refusing to pay debt service on the bonds, PRIDCO has paid all other creditors, stockpiled rental revenues, made plans to divest pledged properties, and otherwise spent money on advisors and consultants in search of any reason to justify their behavior after-the-fact, the creditors said.
They said the oversight board has ignored calls for payment contending that it is too distracted with efforts to litigate or restructure Puerto Rico’s electrical utility to waste its time on PRIDCO.
“Therefore, it refused to even respond to Plaintiffs’ proposal based on public financial information that demonstrates PRIDCO’s wherewithal to repay its Bonds in full,” they said.
The annual required payments on the PRIDCO bonds amount to only $18 million, while PRIDCO currently has $87.4 million in its coffers and steadily generates over $60 million in annual rental revenues, the creditors said.