By The Star Staff
The judge overseeing Puerto Rico’s Title III bankruptcy has ruled against a Puerto Rico business that sought to disqualify the law firm O’Neill & Borges, the legal representative of the Financial Oversight and Management Board, in an Economic Development Bank (EDB) loan sale dispute.
U.S. District Judge Laura Taylor Swain ruled that R&D Master Enterprises does not have standing to challenge the oversight board’s retention of O’Neill & Borges as local counsel. She also said the Title III court does not have jurisdiction to rule on the sale of an EDB loan.
“It is perhaps due to this legal separation between the commonwealth and the EDB that the motion and reply are devoid of facts that would demonstrate that the loan sale transaction has financially harmed the commonwealth, or that the nullification of the sale agreement would financially benefit the commonwealth,” Swain said in a ruling last week.
R&D argued that O’Neill & Borges had conflicts of interest and could not represent the oversight board because it also represented a group of funds that acquired a $384 million commercial loan portfolio from the EDB. R&D is one of the borrowers whose loans were the subject of that transaction.
O’Neill & Borges denied that it represented the purchasers or that it represented the oversight board with any matters involving the sale. The portfolio was allegedly sold at a discount and the EDB has since sued to invalidate the sale agreement. The oversight board said the suit contained baseless allegations.
“[R&D] appears to contend that the consideration paid by the purchasers under the sale agreement represented a substantial discount from the true value of the loan portfolio and that the unwarranted discount created a windfall for the purchasers at the EDB’s expense, but movant has not explained how any such windfall has harmed the commonwealth,” Swain said in her order.
The EDB loan, she ruled, is not tied to Puerto Rico’s Title III for the bankruptcy court to rule directly on the matter.