Monday Update – November 19, 2018

Welcome to your weekly Title III update for the November 19, 2018. Last week’s developments all lead up to Tuesday’s hearing on the COFINA disclosure statement.

There were only five objections to the COFINA disclosure statement, two from individuals, one from the Bank of New York Mellon, one from Lehman Brothers Holdings and one from four local credit unions, albeit this one was filed a day late. The Board filed its answer to said objections, including the credit unions objection, essentially saying that the disclosure statement filed on Friday, November 16, gave the requested information that objectors found lacking. As to the objections of individuals, the Board swept them away, not surprising since they were rather scatterbrained and filed pro se. It remains to be seen what Judge Swain will say tomorrow but I doubt she will reject the disclosure statement. At most, she may require more information.

The rest of the week not much happened. Judge Swain ordered debtor to provide a report “regarding the anticipated filing of any omnibus objections to the proofs of claim filed against the Puerto Rico Sales Tax Financing Corporation (“COFINA”). Specifically, Debtors’ counsel must address the anticipated timing of the filing of any omnibus objections, the estimated number of claims that will be the subject of such omnibus objections and the anticipated impact, if any, of the filing of such omnibus objection(s) on the solicitation and tabulation of votes.”

The American Federation of Teachers and the American Federation of State, County and Municipal Employees International Union, AFL-CIO, filed an adversary complaint against the Board, governor and Banco Popular de Puerto Rico, claiming that pursuant to Law 106-2017, the government was to segregate the retirement contributions of employees and they would have control of how they would invest it. The complaint avers that the money is deposited with Banco Popular and there is no interest paid on it. Interesting complaint if the facts alleged are true.

In addition, the Unión de Empleados de Oficina y Profesionales de la Autoridad de Edificios Públicos, Unión Insular de Trabajadores Industriales y Construcciones Eléctricas Inc., Unión Independiente de Empleados of the Puerto Rico Water and Sewer Authority, Unión de Empleados de Oficina Comercio y Ramas Anexas, Puertos, Unión de Empleados del Banco de la Vivienda, Unión de Empleados Profesionales Independientes, Unión Nacional de Educadores y Trabajadores de la Educación, Asociación de Inspectores de Juegos de Azar, Asociación de Jubilados de la Autoridad de Energía Eléctrica, and VAMOS, Movimiento de Concertación Ciudadana Inc., filed an objection to the Commonwealth-COFINA settlement. In a separate motion, Service Employees International Union (“SEIU”) and International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) filed another objection to the same settlement. PROSOL-Utier also filed an objection and the Federación de Maestros joined the objection. The Official Committee of Retired Employees of the Commonwealth of Puerto Rico filed a limited objection to the aforesaid settlement.

The objections to the settlement rest on the idea that Puerto Rico will pay too much in the COFINA settlement. Three problems with this idea. One, the objections are not accompanied by any economic analysis/expert report evidencing this deficit and two, if Puerto Rico cannot pay the COFINA settlement, what can it pay for debt? The third problem is that this settlement was, I stated in last week’s report, approved by Judge Swain on November 9. The motivations for filing these objections this late in the game are unclear to me, but I doubt they will sway Judge Swain from reconsidering her decision on the issue.

In addition, the Board requested until December 31, 2018 to oppose Peaje’s request for certiorari from the SCOTUS. Interesting, since statistically petitions where an opposition is filed have a higher granting of cert than those that are not opposed. In any event, the likelihood of it being granted is very low since the SCOTUS grants around 80 certs of the over 10,000 petitions it receives. Let’s see what happens.

This summary is merely what I believe are the more salient motions and decisions in the cases. I receive an average of 20 filings each day so it would be impossible to summarize everything. If you have legal interest in these cases, I urge you to hire an attorney to represent you.