Special Update – January 22, 2019

Welcome to your weekly Title III update for January 22, 2019.  Due to the Martin Luther King holiday and developments below, I decided to do the update on Tuesday. This week Judge Swain presided over the COFINA confirmation hearing during January 16-17. There were surprises galore during the hearing.  

Before the drama of the COFINA hearing, on Monday January 14, the Board and the UCC filed an objection to three GO issuances of the PR Government. The issuances include two 2012 bonds and one 2014 bond. The objectors argue that the PBA bonds should be counted as part of the Article VI,section 2 of the PR Constitution, which would mean that these emissions exceeded the constitutional debt limit.  In the objection, they call for the nullification of the debt and for no debt payments to be made. They also claim the 2014 issuance is illegal even if the PBA bonds are not to be added to the calculation, since PR reserved $425 million to pay interests. The complaint avers this should have been added but it was not.  In addition, the UCC (the Board does not aver it but reserved the right to do so) claims that the 2014 issue was illegal since it violated the balanced budget requirement of Article VI, section 7 of the Puerto Rico Constitution.

This is a well-written complaint that depends on the facts of the PBA bonds and the debt service calculation. If one examines the complaint, however, one notices that this objection depends exclusively on the Court’s interpretation of the Commonwealth’s Constitution.

But I fail to see the federal issues in this challenge. Moreover, I disagree with the claim that PR would not have to pay a penny if the 2012 and 2014 were illegally issued. Article 1247 of the Puerto Rico Civil Code, sec. 3496, which I believe is applicable here, states the parties have to give back what they received in the transaction, but the debt would not be bond debt pursuant to Article VI, section 8 of the PR Constitution. Procedures for this objection will be discussed during the January 30, 2019 Omnibus hearing.  One final point, the motion says that this is a gating issue for the Commonwealth Plan of Adjustment. Ominous words indeed.

On the 16th, Judge Swain started the hearing by saying that she could reach “no decision that can reconcile the peoples’ concern.” First, the 9019 objections were discussed and the UAI argued against the approval, as did PROSOL-Utier. UAI exhorted the Judge to reject the plan, give the parties clear instructions on what type of deal to arrange and presto, it would be done. As if COFINA bondholders were willing to lose more money on what they consider a secure credit. After that, Judge Swain asked the persons selected at random from the public to speak. In general, they did a good job arguing overwhelmingly against the deal. Judge Swain then asked if there was an agreement as to PROSOL-Utier and others alleged lack of standing.

After lunch, when it was obvious that no agreement could be reached, Judge Swain decided PROSOL-Utier and the other unions were not COFINA creditors so they had no prudential standing to object the Plan of Adjustment. Nothing new on this, but Judge Swain also decided not to consider the declaration of Dr. Alameda, PROSOL-Utier’s expert, because it did not conclude that COFINA wouldn’t receive 5.5% of SUT, irrespective of the Commonwealth’s situation. For Swain, this did not match with the feasibility of the Plan. Hence, the unions were not allowed to cross-examine witnesses or present evidence. The Board, in a clever move, said it would not object to the unions arguing against the plan.

That left the GMS Group, Mr. Hein, Mr. Dvoras and Mr. Emmet to cross-examine the witnesses since the declarations would be considered as direct examination. After some negotiations, it was decided that no cross-examination would be done except for Mr. Rodrigue.

I will not bore you with the back and forth. Suffice it to say that the objectors, all subordinate COFINA holders, gave good reasons for not approving the deal but I doubt it will do them any good. Judge Swain did not ask them any questions, a bad sign in this case. Moreover, after the presentations were done and she started asking questions to the Board and the COFINA Ad Hoc group, none were about the numbers of the COFINA deal. Surprisingly, her questions were directed on the Supremacy Clause and her power to rewrite the PR Constitution.

In the Plan of Adjustment and the ensuing order, what the COFINA bondholders want from Judge Swain is for her to federalize several documents that in essence would mean that forever and ever, the SUT would not be “available resources” as per Article VI, section 8 of the Puerto Rico Constitution. Because Judge Swain reads everything, she realized that the COFINA deal requires her to make that determination, effectively rewriting the PR Constitution. I have no doubt that Congress has the power to rewrite the PR Constitution, but I see nowhere in PROMESA where it gives this authority to the Board or the Court. Not even section 108(a)(2) of PROMESA, that states that PR cannot “enact, implement, or enforce any statute, resolution, policy, or rule that would impair or defeat the purposes of this Act, as determined by the Oversight Board.” But here there is no such claim. On the contrary, both section 201(b)(1)(N) and 314(b)(6) and (7) seem to require compliance with PR law as to lawful priorities and lawful liens as may be applicable in the constitution or laws of the territory.

Due to this, I believe, the GO bondholders informed Judge Swain that they did not believe that she had to reach 314(b)(6)(review if creditors could get better recovery outside PROMESA) in order to approve the COFINA deal. This issue will be very important in the Commonwealth Plan of Adjustment.

The issue of the Judge’s power over the PR Constitution is important for two reasons. Five years from now, the new PR government administration could go to court and claim that the settlement is illegal since constitutionally (Article VI, section 2) it could not surrender its power to tax by surrendering part of the SUT to COFINA. This argument was made by the UCC in the COFINA litigation, but there was no judgment on the issue. Also, if in the future GO’s bonds are issued by PR, they could claim that COFINA is available resources for payment of said bonds.

Judge Swain gave the COFINA Ad Hoc Group and the Board until Monday January 21 to revise the Findings of Fact and Law they had submitted. Before 4 pm on Monday, the Board filed said documents, with red-line of the changes. In the [Proposed] Findings Of Fact And Conclusions Of Law Regarding Confirmation Of The Third Amended Title Iii Plan Of Adjustment Of Puerto Rico Sales Tax Financing Corporation the changes are interesting. At page 63 of the red-line, it states:

As a separate debtor with its own Title III case, its own certified fiscal plan, and its own plan of adjustment, COFINA is a separate covered territorial instrumentality that is legally distinct from the Commonwealth. See 13 L.P.R.A.§ 11a(a) (“A public corporation and instrumentality of the Commonwealth of Puerto Rico, is hereby created, which constitutes a corporate and political entity independent and separate from the Commonwealth of Puerto Rico to be known as the Corporacion del Fondo de Interes Apremiante de Puerto Rico(‘COFINA’), Spanish acronym), whose name in English shall be Puerto Rico Sales Tax Financing Corporation.”); New Bond Legislation art. 2.1 (providing that Reorganized COFINA “shall be recognized for all purposes as an independent and separate legal entity from the Government of Puerto Rico and any other Government Entity.”). The Court has previously held, in connection with the Commonwealth-COFINA Dispute, that the nature of each debtor’s interest in the Pledged Sales Taxes, for purposes of PROMESA, is a mixed question of federal and Commonwealth law.The Plan, however, provides for an agreed upon allocation of the Pledged Sales Taxes premised upon this Court’s approval of the Settlement and confirmation of the Plan, and, upon such approval, the COFINA Revenues shall be the sole and exclusive property of COFINA, and shall not be property of the Commonwealth or available to the Commonwealth. The Settlement and the allocation of the Pledged Sales Taxes are necessary for the implementation of the Plan, and, pursuant to Bankruptcy Code section 1123(a)(5), made applicable to COFINA’s Title III Case pursuant to PROMESA section 301(a), are self-executing and preemptive notwithstanding otherwise applicable non bankruptcy law, including otherwise applicable Commonwealth law. See 11U.S.C. § 1123(a)(5) (“Notwithstanding any otherwise applicable non bankruptcy law, a plan shall . . . provide adequate means for the plan’s implementation,such as (A) retention by the debtor of all or any part of the property of the estate . . . .”); PROMESA § 301(c)(5) (“The term ‘property of the estate’, when used in a section of title 11, United States Code, made applicable in a case under this title by subsection (a), means property of the debtor.”); see also In re Irving Tanning Co., 496 B.R. 644, 664 (B.A.P. 1st Cir. 2013) (“[O]nly those means may preempt state law that are sufficient for the implementation of the plan: they must be sufficient to implement the plan, equal to what is required, but also not more than is required.”). Furthermore, pursuant to the Settlement Order and the Plan, and subject to the terms of the plan, claims of COFINA’s creditors are released as against the Commonwealth and the Commonwealth itself shall not be liable for the repayment of the COFINA Bonds,nor will the COFINA Bonds have any recourse to any property of the Commonwealth.See New Bond Legislation art. 3.1(c).

Pursuant to PROMESA, including 171. section 4 there of, as well as sections 944 and 1123 of the Bankruptcy Code, and in accordance with the Confirmation Order, the Settlement, the Plan,and Act 241, the Court determines that the COFINA Bonds are legal, valid, binding and enforceable obligations of Reorganized COFINA benefitting from the following protections, each of which are is legal, valid, binding, legal, and enforceable against Reorganized COFINA, the Commonwealth, and other persons and entities, as applicable, under Puerto Rico and federal law.

Later at pages 75-76:

Pursuant to Bankruptcy Code sections 1123(a), 1123(b), and 944(a) as well as genera principles of federal supremacy, the provisions of this Confirmation Order, and the Plan, and related documents or any amendments and modifications thereto shall apply and be enforceable notwithstanding any otherwise applicable non-bankruptcy law. The documents contained in the Amended Plan Supplement (as such documents may be further modified and filed with the Court prior to the Effective Date), including, without limitation, Reorganized COFINA By-Laws, the COFINA Bonds, the New Bond Indenture, the Instructions Agreement, the Ambac Trust Agreement, the National Trust Agreement, the Standard Terms to National Trust Agreement, the Remarketing Agreement, and the Continuing Disclosure Agreement provide adequate means for implementation of the Plan pursuant to Section 1123(a)(5) of the Bankruptcy Code, and, as of the occurrence of the Effective Date, shall constitute valid legal obligations of COFINA and the Commonwealth, as applicable, and valid provisions to pay or secure payment of the COFINA Bonds pursuant to section 944(b)(3) of the Bankruptcy Code, and be enforceable in accordance with their terms.

In addition, footnotes 4 and 5 were added. Footnote 4 states:

Adversary Proceeding. ECF No. 483, Decision and Order, dated May 24, 2018, at 5-6,Exhibit DX-TT (“the Court must decide what the relevant property rights are within the context of these Title III proceedings, under PROMESA and federal bankruptcy law provisions that Congress has incorporated into PROMESA . . . .[T]he Commonwealth-COFINA Dispute presents a mixed question of federal and Puerto Rico law”). See also Abboud v. Ground Round, Inc. (In re Ground Round,Inc.), 482 F.3d 15, 17 (1st Cir. 2007) (“The label … that state law affixes to a particular interest in certain contexts is not always dispositive.” (citingIn re Nejberger, 934 F.2d 1300, 1302 (3d Cir. 1991)).

Footnote 5 states:

Section944(b)(3) requires the Court, as a condition to providing a discharge, to determine the validity of obligations imposed under a plan of the debtor and of any provision made to pay or secure payment of such obligations. 11 U.S.C. §944(b)(3). See generally In re City of Stockton, 526 B.R. 35, (Bankr. E.D. Cal.2015) (“The structure of the federal-state relationship . . . regarding restructuring of municipal debt is dictated by the U.S. Constitution. . . .[T]he Supremacy Clause operates to cause federal bankruptcy law to trump state laws, including state constitutional provisions, that are inconsistent with the exercise by Congress of its exclusive power to enact uniform bankruptcy laws”(citing Ass’n of Retired Employees of the City of Stockton v. City of Stockton(In re City of Stockton, CA), 478 B.R. 8, 14–16 (Bankr. E.D. Cal. 2012); U.S.CONST. art. VI, cl. 2; Int’l Bhd. of Elec. Workers, Local 2376 v. City of Vallejo (In re City of Vallejo), 432 B.R. 262, 268–70 (E.D. Cal. 2010), aff’g403 B.R. 72, 76–77 (Bankr. E.D. Cal. 2009) (additional citations omitted)). As set forth in the leading bankruptcy treatise: “The requirement of a court determination of validity is extra assurance for those who might be skittish about the nature of the bonds being issued . . . . It has the added feature of removing any doubt concerning the matter, because the determination of the court on that issue should be binding in the future.” 6 COLLIER ON BANKRUPTCY §944.03[1][b] ((16th ed. 2013). See, e.g., Order Confirming Third Amended Plan for the Adjustment of Debts of the City of San Bernadino, California, as Modified by the Court, dated February 7, 2017, ¶ 22 (“In accordance with Section 944(a) and notwithstanding any otherwise applicable law, upon the occurrence of the Effective Date, the terms of the Plan and this Confirmation Order shall be binding upon . . .”); Order Confirming Eighth Amended Plan for the Adjustment of Debts of the City of Detroit, dated November 12, 2014, ¶ 86(“ in accordance with section 944(a) of the Bankruptcy Code and notwithstanding any otherwise applicable law, upon the occurrence of the Effective Date, the terms of the Plan and this Order shall be binding upon, and inure to the benefit of . . .”); Findings of Fact, Conclusions of Law, Order Confirming the Chapter 9 Plan of Adjustment for Jefferson County, Alabama, dated November 6,2013, ¶ 37, (“Pursuant to Bankruptcy Code sections 1123(a), 1123(b), and 944(a), as well as general principles of federal supremacy, the provisions of this Confirmation Order, the Plan, and related documents or any amendments or modifications thereto shall apply and be enforceable notwithstanding any otherwise applicable nonbankruptcy law”).

In essence, the COFINA bondholders and the Board are legalizing the COFINA bond issues, the COFINA ownership of part of the SUT and changing the Constitution by making this portion not available resources pursuant to Article VI, section 8 of the PR Constitution. Judge Swain saw this and as a former bankruptcy judge, is well aware of the case law cited by them.Moreover, the problem I see with this attempt is that there has been no actual adjudication of a case or controversy as to COFINA. Rather, it is all done via settlement. Furthermore, the U.S. Supreme Court in Raleigh v. Illinois Dept of Revenue, 530 U.S. 15, 20 (2000), held that “[t]he basic ‘federal rule’ in bankruptcy is that state law governs the substance of claims, Congress having ‘generally left the determination of the property rights in the assets of bankrupts estate to state law.’” Will Judge Swain refuse to sign the agreement because she cannot change PR’s Constitution or will just shrug and do it? If she does not sign it,what will the Board and COFINA Ad Hoc bondholder do? Judge Swain cannot change the Plan of Adjustment but she does not have to approve it either. The alternative is dismissal via 11 U.S.C. § 930. I have no idea what Judge Swain will do but this is something to ponder.

Also of interest is proposed Order And Judgment Confirming The Third Amended Title Iii Plan Of Adjustment Of Puerto Rico Sales Tax Financing Corporation, which states at pages 27-28:

Releases by COFINA  and Reorganized COFINA. Except as otherwise expressly provided in the Plan, this Order, or the Settlement Agreement, on the Effective Date, and for good and valuable consideration, each of COFINA and Reorganized COFINA, the Disbursing Agent and each of COFINA’s and Reorganized COFINA’s Related Persons (other than any former elected or appointed officials, directors, or officers of any of the Government Parties and the Commonwealth, in each case acting in his or her capacity as such prior to January 1, 2017)3 shall be deemed to have and hereby does irrevocably and unconditionally, fully, finally and forever waive, release, acquit, and discharge the Released Parties from any and all Claims or Causes of Action that COFINA, Reorganized COFINA, and the Disbursing Agent, or any of them, or anyone claiming through them, on their behalf or for their benefit, have or may have or claim to have, now or in the future, against any Released Party (other than any former elected or appointed officials, directors, or officers of any of the Government Parties and the Commonwealth, in each case acting in his or her capacity as such prior to January 1, 2017) that are Released Claims or otherwise are based upon, relate to, or arise out of or in connection with, in whole or in part, any act, omission, transaction, event or other circumstance relating to COFINA taking place or existing on or prior to the Effective Date, and/or any Claim, act, fact, transaction, occurrence,statement, or omission in connection with or alleged or that could have been alleged in the Actions, the Related Actions, including, without limitation, any such Claim, demand, right, liability, or cause of action for indemnification,contribution, or any other basis in law or equity for damages, costs or fees; provided, however, that, notwithstanding anything contained in the Plan to the contrary, “Related Persons” shall not include any financial advisors, investment bankers, underwriters, attorneys, accountants, agents and professionals of the Commonwealth and COFINA, solely to the extent of services provided in connection with the issuance of the Existing Securities; and,provided, further, that the plaintiffs in that certain adversary proceeding before the Title III Court, captioned Cooperativa de Ahorro y Credito AbrahamRosa, et al. v. Commonwealth of Puerto Rico, et al., Adv. Proc. No. 18-00028,shall be entitled to continue pursuit of such litigation against all parties other than COFINA and Reorganized COFINA, subject to all available rights and defenses with respect to claims and causes of action asserted therein.

This is interesting because Judge Swain questioned during the hearing why she had to give officials a waiver. The Board and AAFAF changed it and they are now NOT immune. Interesting. Also, the Cooperativas mentioned above had objected to the COFINA deal because it affected their case. Now, it will not affect it, especially since the Board has already filed a motion to dismiss. 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.

Monday Update – January 14, 2019

Welcome to your weekly Title III update for January 14, 2019.  This week all eyes are on the COFINA confirmation hearing on January 16 and 17. The future of the COFINA settlement and the COFINA Title III, hang on the balance.

The Board has the burden of proof as to the Plan of Adjustment. Confirmation of the plan is not regulated by the Bankruptcy Code but rather by section 314(b) of PROMESA, which states:

CONFIRMATION.—The court shall confirm the plan if—

(1) the plan complies with the provisions of title 11 of the United States Code, made applicable to a case under this title by section 301 of this Act;

(2) the plan complies with the provisions of this title;

(3) the debtor is not prohibited by law from taking any action necessary to carry out the plan;

(4) except to the extent that the holder of a particular claim has agreed to a different treatment of such claim,the plan provides that on the effective date of the plan each holder of a claim of a kind specified in 507(a)(2) of title 11, United States Code, will receive on account of such claim cash equal to the allowed amount of such claim;

(5) any legislative, regulatory, or electoral approval necessary under applicable law in order to carry out any provision of the plan has been obtained, or such provision is expressly conditioned on such approval;

(6) the plan is feasible and in the best interests of creditors, which shall require the court to consider whether available remedies under the non-bankruptcy laws and constitution of the territory would result in a greater recovery for the creditors than is provided by such plan; and

(7) the plan is consistent with the applicable Fiscal Plan certified by the Oversight Board under title II.

These requirements mirror those of 11 U.S.C. sec. 943(b) except for 6 and 7.

PROMESA, however, adds a twist to this. The feasibility of the plan, which usually is limited to whether the municipality may fund the changes it has made, added a twist not found in the bankruptcy law, to wit, “whether available remedies under the non-bankruptcy laws and constitution of the territory would result in a greater recovery for the creditors than is provided by such plan.” The Board’s position has been that the Court has only to look at said law—not give it any weight—but it has not put forward any precedent or legislative history to back this up. If one were to interpret it as written, the Court would have to consider whether creditors would be better off going to the state and federal courts instead of a bankruptcy like procedure.

In addition, the plan must comply with 11 U.S.C. sections 1129(b)(1), 1129(b)(2(A) and 1129(b)(2)(B), which state:

(1) Notwithstanding section 510(a)of this title, if all of the applicable requirements of subsection (a) of this section other than paragraph (8) are met with respect to a plan, the court, on request of the proponent of the plan, shall confirm the plan notwithstanding the requirements of such paragraph if the plan does not discriminate unfairly, and is fair and equitable, with respect to each class of claims or interests that is impaired under, and has not accepted, the plan.

(2)For the purpose of this subsection, the condition that a plan be fair and equitable with respect to a class includes the following requirements:

(A)With respect to a class of secured claims, the plan provides—

(i)(I) that the holders of such claims retain the liens securing such claims, whether the property subject to such liens is retained by the debtor or transferred to another entity, to the extent of the allowed amount of such claims; and

(II) that each holder of a claim of such class receive on account of such claim deferred cash payments totaling at least the allowed amount of such claim, of a value, as of the effective date of the plan, of at least the value of such holder’s interest in the estate’s interest in such property;

(ii) for the sale, subject to section 363(k)of this title, of any property that is subject to the liens securing such claims, free and clear of such liens, with such liens to attach to the proceeds of such sale, and the treatment of such liens on proceeds under clause (i) or (iii) of this subparagraph; or

(iii) for the realization by such holders of the indubitable equivalent of such claims.

(B) With respect to a class of unsecured claims

(i) the plan provides that each holder of a claim of such class receive or retain on account of such claim property of a value, as of the effective date of the plan,equal to the allowed amount of such claim; or

(ii) the holder of any claim or interest that is junior to the claims of such class will not receive or retain under the plan on account of such junior claim or interest any property, except that in a case in which the debtor is an individual, the debtor may retain property included in the estate under section 1115, subject to the requirements of subsection (a)(14) of this section.

Not only are these requirements difficult to achieve, but section 1129(a)(3) requires that the Plan of Adjustment be filed in “good faith and not by any means forbidden by law.” The case law on this is extensive and contradictory and cannot be discussed in this brief analysis. The same can be said of the requirement that the Plan of Adjustment be fair and equitable.

To date,there are 9 objectors to the Plan of Adjustment and they will be given a chance to argue their objections. In addition, the Board filed a motion stating that it will cross examine Dr. Alameda, Utier’s expert witness. On Saturday, the Board filed declarations by Ms. Jaresko and Mr. Brownstein from Citi. Objectors have until Monday to notice whether they are going to cross examine them. I don’t know what they will do but I would definitely do it. I must note that Mr.Brownstein’s declaration states as to the objection that subordinate bondholders were not present during mediation:

I understand that Assured, an insurer of approximately $274 million in “First Subordinate”Existing Securities, is aligned with the economic interest of the holders of“First Subordinate” Existing Securities and has no exposure, either through insurance coverage or beneficial ownership, to “Senior” Existing Securities. I am aware that Assured participated fully in litigation from the perspective of“First Subordinate” Existing Securities. Assured participated in Plan mediation and was a party to the A&R Plan Support Agreement.12 Additionally, retail COFINA bondholders were represented throughout the process by retail or mutual funds, representing the interests of mainland and “on-island” bondholders, and Bonistas, advocating for the interests of Puerto Rico resident bondholders, all signatories to the A&R Plan Support Agreement that included terms for the treatment of the holders of “Senior” and “First Subordinate” Existing Securities to settle the issues of the relative rights between such holders. This settlement was also subsequently incorporated into the Plan.

Although by no means is the Plan of Adjustment approved, it is clearly a done deal. Judge Swain already ordered the following:

In connection with the hearing to consider approval of the Third Amended Title III Plan of Adjustment of Puerto Rico Sales Tax Financing Corporation (Docket Entry No.4652 in Case No. 17-3283, and as may be further amended), counsel to the Financial Oversight and Management Board for Puerto Rico is hereby directed to file the form of proposed order, findings of fact and conclusions of law by Monday, January 14 at 3:00 p.m. (Atlantic Standard Time).

Enough said.

With the COFINA Plan of adjustment approved, it will make all other deals much easier to accomplish. Moreover, the Board filed an Omnibus answer to all objections, just 84 pages, where it provides Judge Swain with sufficient legal cover to approve the deal. I don’t agree with some of the Board’s arguments but without a doubt they are “plausible.” Also, the alternative to confirming the plan is the dismissal of the Title III via 11 U.S.C. § 930. Food for thought.

WARNING: Anyone thinking of appealing said approval of the COFINA Plan of Adjustment should be very familiar with the doctrine of Equitable Mootness.

As I mentioned last week, on January 7, 2019, at 9:30 am, the First Circuit held oral arguments on Altair Global Credit Opportunities Fund (A), LLC, et al. v. The Employees Retirement System as to liens. I listened to the oral argument and it seems Altair has the advantage, but not by much. If there is a reversal, it will be with specific instructions for findings. As to the Aurelius decision, it has not been announced yet, but the First Circuit states in its website that the Federal Court system has enough money to operate regularly until January 18, 2019. Hopefully, the decision will come out before that date but we don’t know. It would be stunning if it came out before the January 16th hearing, especially if it reverses Judge Swain and there is a stay of proceedings. The waiting continues.

In the PREPA Title III, the Puerto Rico Central Recovery and Reconstruction Office and the Puerto Rico Public Private Partnership Authority retained Cleary Gottlieb Steen & Hamilton, LLP (the previous Governor’s law firm) “to provide legal representation in connection with the above-captioned case now pending before the United States District Court for the District of Puerto Rico.” Does this mean that the PREPA sale will accelerate?

After Mr. Bienestock dropped the bomb that the Commonwealth Plan of Adjustment would probably be handled as a “cram down,” I decided to do some research on Board members publications and found that David Skeel has published Reflections on Two years of P.R.O.M.E.S.A.,87 Revista Jurídica de la Universidad de Puerto Rico 862-883, num 3 (2018). At page 880, he states: “[w]e are hopeful we can propose Plans of Adjustment for the Commonwealth and P.R.E.P.A. by early 2019, though we cannot yet tell if that is realistic.” Given the possibility of the First Circuit reversing Judge Swain in Aurelius and the expiration of the appointment of the current Board members, it seems they want to leave these two major plans in place before they leave. We will see.

In addition, the Board sent a letter to the Commonwealth and stated:

The Oversight Board is deeply concerned about the continued delays in the Commonwealth of Puerto Rico’s completion of its audited Basic Financial Statements and Required Supplementary Information.

On April 30, 2018, the Oversight Board asked that you provide a timetable for the issuance of the audited financial statements for FY2015, FY2016, and FY2017,respectively. On May 7, 2018, you provided the following estimated dates for completion of the audited financial statements: FY2015 by June 8, 2018; FY2016 by August 17, 2018; and FY2017 by December 31, 2018. While the FY2015 audit was completed in June 2018, both the FY2016 and FY2017 audit remain outstanding,despite your May 7, 2018 letter projecting that both would be completed by now.

Accordingly,pursuant to Section 104(c)(2) of PROMESA, please provide the following information by January 18, 2019:

an explanation for thedelays in issuing the 2016 and 2017 audits;

a detailed description of the pending items for completion of the 2016 audit;

updated estimated dates for completion of the 2016 and 2017 audits; and

an estimated date for completion of the 2018 audit

The Commonwealth has flaunted the Board’s deadlines on this issue before. What will happen if it does again? The Board has shown great reluctance in forcing the Commonwealth to do anything. In fact, the Commonwealth has been much more willing to take the Board to Court than the other way around. This year the pensions have to be reduced and that promises to be another big fight between the Board and the Commonwealth. Let’s see who takes who to Court first.

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.

Monday Update – January 7, 2019

Welcome to your weekly Title III update for January 7, 2019.  After a two-week hiatus to give my readers a respite during the holidays, unfortunately we must now face the realities of PROMESA, Title III and the Board.

On December 19, 2018, Judge Swain granted the Board’s motion to reject the Debt Service Deposit Agreement with Lehman Brothers Special Financing Inc., which was to be expected. In addition to the Omnibus objections to duplicative proofs of claim, the Board started to file individual objections to specific proofs of claim. Important to remember that those specific objections must be answered quickly.

On December 21, 2018, the parties in the PREPA bondholders’ request for lifting of the stay to allow for the appointment of a receiver again amended the schedule of the case in the following manner:

The Revised Scheduling Order is amended to revise existing deadlines as follows:

a. January 7, 2019: Parties to exchange preliminary will/may call witness lists (identifying whether witnesses will appear live or via designated deposition testimony);

b. January 29, 2019:Respondents to file opposition brief and supporting declarations;

c. February 20, 2019:Parties to exchange final will/may call witness lists (identifying whether witnesses will appear live or via designated deposition testimony);

d. February 25, 2019:Movants to file reply brief and supporting declarations;

e. March 1, 2019:Parties to complete expert discovery and depositions;

f. March 5, 2019:Parties to file exhibit lists;

g. March 5, 2019:Parties to designate deposition testimony; and

h. March 8, 2019: Parties to cross-designate deposition testimony.

In addition, the Court will hold a hearing on the motion on March13, 2019, at 2 pm to be continued on March 14, in San Juan. Seems to me that the requested extensions pertain more to negotiations to end this issue as well as to bringing the monolines to the prospective settlement of the PREPA claims,which may include the Boards agreement to the lifting of the stay for said appointment. In addition to this, on December 21, 2018, the Board issued a new directive that states, inter alia:

This FOMB Policy (the “Policy”) is established pursuant to Section 204(b)(4) of PROMESA to require prior FOMB approval of certain rules, regulations, administrative orders, and executive orders proposed to be issued by the Governor (or the head of any department or agency) to assure that they “are not inconsistent with the approved fiscal plan.” This Policy shall also apply as provided in Section 204(b)(5). . .

Any rule,regulation, administrative order, or executive order that is issued in connection with the PREPA Transaction, whether by the Public-Private Partnership Authority or the Partnership Committee, as contemplated by Act No.120-2018.

Seems that the Board is very concerned about governance in PREPA and a receiver upon which they would have input, could be of use. It must be remembered, however, that any receiver appointed by the Court would substitute both PREPA’s governing Board and its Executive Director, but would still be subject to the Board’s directives. Balancing this, the receiver would still respond to the Judge that appoints him. Interesting turn of events if it were to happen.

On December 21, 2018, the Service International Union filed an objection to the COFINA Plan of Adjustment that simply says they adopt the objection they made to the settlement in COFINA. Since this objection does not deal with PROMESA sec. 314 of Bankruptcy section 1129, it is unlikely it will have any impact.

On December 21, 2018, the Board and the UCC filed an adversary proceeding challenging the PBA bonds as invalid. It argues:

PBA is an instrumentality of the Commonwealth created to issue bonds (the “PBA Bonds”) to finance the acquisition, construction and/or improvement of office space and other facilities (collectively, the “PBA Facilities”) used by departments,agencies, instrumentalities, authorities, public corporations, and municipalities of the Commonwealth (the “Public Occupants”) for government operations and providing essential services to the public. Currently, more than $4 billion in aggregate principal amount of PBA Bonds remain outstanding. PBA also enters into purported leases (the “Leases”), pursuant to which it ostensibly leases the PBA Facilities to the Public Occupants (the “Lessees”). In reality, however, the Leases are not arm’s length rental transactions designed to grant the Public Occupants temporary use of the PBA Facilities; rather, the sole purpose of the Leases is to provide a vehicle for the Commonwealth to repay the PBA Bonds through the Lessees’ purported “rent” payments. . .

Consistent with the economic reality of the Leases, this adversary proceeding seeks a declaratory judgment that the Leases are not “true leases,” but, rather, disguised financing transactions. As a result, PBA has no right under PROMESA or the Bankruptcy Code to receive post-petition rent payments from the Debtors or administrative claims against the Debtors. In addition, this adversary proceeding seeks a declaratory judgment that certain of the Leases do not give rise to administrative claims against the Debtors because the Lessees are non debtor entities.

As I have said many times, the audit of Puerto Rico’s debt is being done in federal court, not a kangaroo commission as the island’s left favors.

On December 26, 2018, the GMS Group, LLC, who had objected to the COFINA Plan of Adjustment and had latter withdrawn it, filed an amended objection. It claims the Plan of Adjustment violates the takings clause, that the plan has not been proposed in good faith, the plan improperly releases non-debtors, and that the plan is unfair and inequitable and thus fails to comply with section 1129. With one exception, this objection has little chance of succeeding. More on this latter.

 The Department of Justice requested an extension to file objections to the COFINA deal but the Court only gave it until January 4, 2019. No objection was filed.

On December 27, 2018, Luskin, Stern & Eisler LLP, the law firm selected by the Board to investigate McKinsey & Company, Inc., filed a motion informing the Court of the following:

At the November 7, 2018 omnibus hearing, LS&E informed the Court that the FOMB had retained LS&E to (i) investigate certain allegations concerning potential conflicts of interest of McKinsey & Company, Inc., Washington D.C. (“McKinsey”) and(ii) issue a written report detailing its findings. At the hearing, LS&E stated it would attempt to complete its investigation and to issue its written report by December 31, 2018. LS&E has determined that it will not be able to complete the investigation by that date and submits this informative motion to provide the Court an update on the status of its investigation.

Since the November 7,2018 hearing, LS&E has completed its initial round of interviews and its initial review of documents and has begun to draft its report. However, based on information obtained to date, LS&E has determined that follow-up(additional document requests and additional witness interviews) will be necessary, and its investigation will, therefore, continue into January 2019.

LS&E will provide an update to the Court in advance of the January 30, 2019 omnibus hearing.

In other words, we will know nothing on McKinsey’s conflicts of interest but it continues advising the Board. Makes no sense to me but I just report the facts, I don’t make policy.

On December 28, 2018, Peter C. Hein, who claims to own COFINA bonds, wrote a very cogent pro se objection to the plan of adjustment. He claims the Plan of Adjustment discriminates against non-Puerto Rican residents, that the plan cannot be confirmed unless the issue of the validity of COFINA is decided (not very likely), that there is no justification to give subordinate COFINA bondholders less than seniors, that it violates the contracts (it does not), that it violates the takings clause (maybe), violates due process, equal protection and immunities clauses of the US Constitution, and that the objection process violates due process and fairness, etc. Good job for someone who says is not a lawyer.

On December 31, 2018, the Board filed supplemental documents for COFINA, but the date for objections remained the same. Interesting.

On January 2, 2019, PRO SOL-Utier, filed an objection to the COFINA Plan of Adjustment, and included an expert report by a doctor in economics who is a professor in UPR at Mayagüez. Well done by Utier. The only problem is that I don’t think the union has standing. However, as their attorney Mr. Rolando Emmanuelli told me, the Board did not raise standing when it replied to the objection filed to the COFINA deal. Irrespective of the objection, this means that the Board will have to sit its own experts to say the deal is a good idea.

On January 2, 2019, Mark Elliot, individually and D/B/A/ Elliot Asset Management, claiming to be a COFINA bondholder also filed an objection pro se. He claims that the plan ignores the threshold question of what is available resources, that there are better remedies for creditors pursuant to 314(b)(6)(important in my opinion), the plan deprives Jr. bondholders of important rights without compensation, Jrs. and Seniors are treated differently although there is money to pay both, the Senior COFINA mediating team that allegedly mediated for Jrs. was conflicted (maybe), and that the plan will have bad consequences for the muni market, etc.

Lawrence B. Dvores also filed a pro se objection (so many people do not want to hire a lawyer). His objection basically says that the settlement is grossly unfair to Jr. bondholders and repeats the issue of preferential treatment to locals and that Jrs were not involved in negotiations. Except for the discrimination claim, it will not go far.

Cooperativa de Ahorro y Crédito de Rincón, Cooperativa de Ahorro y Crédito Dr. Manuel Zeno Gandía, Cooperativa de Ahorro y Crédito del Valenciano and Cooperativa de Ahorro y Crédito de Juana Díaz also filed an objection. This group has an adversary proceeding which includes COFINA as a defendant and they complain that the Plan of Adjustment does not mention their complaint. Of course it does not, they are getting nothing. Again, very unlikely this will succeed.

Puerto Rico Representative Natal, who has left the PDP, joined forces with several groups and unions requesting that the COFINA plan hearing be postponed or that the approval be rejected. Their claim is that Mr. Natal was not given a chance to debate one of the measures in the House and therefore it is unconstitutional as per the case filed in the island’s courts. Also, they claim COFINA is unconstitutional. Not very likely this claim will have any impact.

Given the fact that by the time of the January 16, 2019 hearing on the Plan of Adjustment we will have the vote tally and it very likely be in favor, there are a couple of objections that I think have merit. As long as COFINA is valid, all bondholders have a lien on the SUT. Undoubtedly, you can alter a lien if the lienholders agree, but doubt it can be done if the decision is not unanimous. A couple of the objections claim this. Also, there are claims that the Plan of Adjustment discriminates between Puerto Rico and US bondholders, hence violating the Equal Protection clause of the US Constitution. These two are difficult to circumvent, although I am sure the Board has thought of an answer. In addition, PROMESA 314(b)(6) states that the Court must find, in order to approve it, that “the plan is feasible and in the best interests of creditors, which shall require the court to consider whether available remedies under the non-bankruptcy laws and constitution of the territory would result in a greater recovery for the creditors than is provided by such plan.” Although the Board claims that the Court only needs to look at the available resources, not consider them, I think otherwise. In any event, I am sure Judge Swain will bend over backwards to approve the plan of adjustment since otherwise the Title III would have to be dismissed as per 11 U.S.C. § 930. Which by the way, those in the left in Puerto Rico have not explained what will be done if the Title III is dismissed. Food for thought.

Also, the Court issued an order where individuals may request time to be heard and up to 24 persons, selected by the Judge, will be given supposedly 5 minutes, to voice their frustration. It is great for venting these frustrations but that will lengthen the hearing. Oh well. This could mean that the hearing may extend over to January 17 and it is unlikely Judge Swain will immediately rule on the plan and may take a few days to write the opinion. We will see.

In other news, on December 27, 2018, the Board essentially put on hold the new PR Tax law by requesting more information that had to be provided by January 4, 2019. Hopefully this week we will know if this tax law will be put into effect or not.

Governor Rosselló now claims he wants new Board members, which he will get either sooner (Aurelius appeal reverses Judge Swain) or later when the three year period expires. In any of the two events, it is unlikely he will get what he wants. As to the Aurelius appeal, we are still waiting for a decision, which may come next week since the website for the First Circuit states they will continue working until January 11, 2019. Finally, on January 7, 2019, at 9:30 am, the First Circuit will hold oral arguments on Altair Global Credit Opportunities Fund (A), LLC, et al. v. The Employees Retirement System as to liens. Let’s see what comes out.

The new Democratic majority in the House is making noises that it will make changes to PROMESA, just like Congressman Bishop did for two years. Doubt much will be done but there will be hearings upon hearings filled with hot air. Oh well.

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.

Special Update – December 19, 2018

Today, Judge Swain held the December Omnibus hearing. The first order of business was Martin Bienestock giving a status report on the cases. As we know, the GDB Title VI was finished and the COFINA Plan of Adjustment confirmation hearing will be heard on January 16-17, 2019. He also announced that the PREPA RSA is under way but no mention was made of the bondholders’ request for a receiver for the utility.

Mr. Bienestock also announced that the Commonwealth Plan of Adjustment was the subject of mediation. This is the first time this is mentioned. He stated that there are issues with the PBA bonds (whether they are leases) and that there will be claim challenges based on the Kobre & Kim report. Also, for the first time, we were told that the Commonwealth Plan of Adjustment could proceed with a cramdown, depending on the objections that are raised, presumably during mediation. If the objections are legal, we were told they would be keyed up to the Court. If they are monetary, then there could be a cramdown. There was no mention of GO’s or any other bondholder group.

What does this mean? In the last Omnibus hearing,there was no mention of the Plan of Adjustment of the Commonwealth and there was a mention that the Highways Plan of Adjustment was intimately related to the Commonwealth’s. I think the Board feels that its time is running out. The Board members term of service expires in August 2019 and it is imperative they get this Plan of Adjustment under way before Trump appoints seven new members.Also, the Governor needs to get this underway before election year 2020,especially if the cramdown is very favorable (as it probably would be) to the Commonwealth. Finally, if the Aurelius decision is reversed by the First Circuit, it is likely that a certiorari will be granted by the U.S. Supreme Court and a decision would come down near the end of their term, on June 30,2019. Timing is everything. Mr. Bienestock said we would know more by March-April but Judge Swain said she would probably want further update on January 30. Let’s see what happens.

Mr. Bienestock also mentioned that the Board was working on the PRASA and UPR cases, but did not provide any details. Very difficult to have the union contracts or pensions modified without a Title III though. More waiting. The Teachers Union had requested lifting of the stay. The hearing was today but the parties postponed it to January 30 since they are still discussing the issues.  

The Board told Judge Swain that it would address many of the concerns of the persons that had sent letters and emails to the Court about the COFINA deal and the Plan of Adjustment. Judge Swain mentioned that she would like to give persons selected at random 5 minutes to vent their concerns either to the settlement or the Plan of Adjustment. She said it would take between 1-2 hours.

Also, the Board announced that it would file three more Omnibus objections to the COFINA proofs of claim and would also file some individual objections. Finally, a supplemental plan will be filed by COFINA at the end of the month.

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.

Monday Update – December 17, 2018

Welcome to your weekly Title III update for December 17, 2018.  Again, not much happened and it seems as if everyone is waiting for the Aurelius decision.

On Monday, Judge Swain issued an apparently innocuous order but I think it is very important. She said:

The Court has learned that a financial advisor has disseminated incorrect information regarding the submission of objections to the proposed plan of adjustment for the Puerto Rico Sales Tax Financing Corporation (“COFINA”). Parties who wish to lodge objections to the proposed plan of adjustment should refer to the Court’s order approving,among other things, the proper procedures for the submission of such objections(the “Order,” Docket Entry No. 375 in Case No. 17-3284). Only objections that have been filed and served in accordance with those procedures will be recognized in connection with the motion for confirmation of the proposed plan of adjustment. Communications sent to the Court by email or made through any other method that does not comply with the procedures established in the Order will not be recognized as objections to the confirmation motion.

Although the Court reviews all materials submitted to its correspondence inbox, as well as all physical letters received by chambers, such materials do not constitute formal submissions in the proceedings that are before the Court. As such, such email correspondence and letters concerning the proposed plan of adjustment for COFINA will not be considered or included in the Court’s analysis of the legal issues associated with the motion for confirmation of the proposed plan. The Court will only consider legal submissions that are properly filed on the docket and served on other parties in interest, as required by the Order.

Experienced lawyers know this is the way things are done in Court,  but too many radio show talking heads keep insisting that sending letters to the judge is the way to persuade her to act according to their whims. Last week, Judge Swain denied the Puerto Rico Civil Rights Commission leave to file a brief of amicus curiae regarding the COFINA settlement, saying it did not discuss the factors in PROMESA section 314 or the Bankruptcy Code. Judge Swain has shown time and again she is a by the book judge and will not consider that which was not properly put before her. That is the way it should be.

Stephen T. Mangiaracina, Esq., a retail COFINA junior bondholder, submitted objections to the COFINA Plan of Adjustment, which are unorthodox, to say the least. His first statement:

The proposed Plan of Adjustment had its origin beginning on or about May 5, 2017 with the filing of a voluntary Title III Petition for Bankruptcy Protection for the solvent COFINA. This Objectant on November 26, 2018 made a referral to the Office of the United States Trustee for investigation of the filing of the Voluntary Petition by the Commonwealth of Puerto Rico Governor Richard Russello, the Financial Oversight Management Board (FOMB) and the COFINA Executive Board.

My claim with supporting submission should show the Petition was filed for the sole purpose of fraudulently using the U.S. Bankruptcy Code to wrongfully take the property rights of COFINA bondholders and transfer them to the Commonwealth. I believe on or about May 5, 2017 was the birth of a criminal enterprise which has grown to where it is today, with the addition of new participants.

These type of conspiracy theory arguments will not go far as Judge Swain is very unlikely to even consider this objection.

In addition, the UCC got permission to conduct Rule 2004 discovery as to potential avoidance actions. Let’s see what comes of this.

The payment of the Christmas bonuses continues to be discussed in the news. Allegedly, PRASA received permission to hire 100 new employees but the money earmarked for this was spent on the Christmas bonus. In addition to that, the Board mentioned that the Christmas bonus paid to the police came from an $8 million allocation earmarked for salary increases. At this point, I have no idea who is right but the Board has repeatedly said that the Commonwealth, by paying the Christmas bonus, risks running out of money for the payroll at the end of fiscal year. We will know in 6 months.

Also, El Nuevo Día reported that Trump’s new Chief of Staff and former OMB director, Mick Mulvaney, hates Puerto Rico. While I doubt this is true, I am sure that as a fiscal conservative, he will be looking very closely at the present Board members with an eye on future appointments. I doubt they will be the same members we have now. I have previously written on suggestions for actions the Board could take.

El Nuevo Día additionally reported that the Board had sent a letter to HUD saying it was willing to help with the distribution of federal funds and make sure they were used correctly. Although sources from the Board denied this (the letter has not been made public), Governor Rosselló denounced this as a power grabbing scheme. Radio commentators came to the same conclusion. What is the truth? No idea, but the Board has become much more visible and active since the December 3 oral argument on Aurelius, jousting more than usual with the governor. Could it be that it knows it can be changed a lot sooner than August? The countdown for the case’s most important decision to date keeps ticking.

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.

Monday Update – December 10, 2018

Welcome to your weekly Title III update for December 10, 2018.  First things first; two important things happened today, in 1898 the Treaty of Paris was signed transferring Puerto Rico to the USA. But more importantly, it’s my birthday, LOL.  Back to business.

Lehman Brothers Holdings, Inc., filed a response to the Board’s request to reject its executory contract. Lehman said it had no objection but that did not include the contract it had with the Trustee. It also reserved rights to amend its proof of claims.

AsI reported last week, the UCC filed a motion to conduct limited discovery on possible fraudulent transfers, something it claims the Kobre & Kim report does not go into. On Sunday, AAFAF filed a motion saying it does not oppose said request. AAFAF, however, clarified as follows:

Nevertheless, and considering the scale of the information being requested, the Debtors, through AAFAF, are engaged in productive discussions with the Unsecured Creditors’ Committee to attempt to reach an agreement over the appropriate scope of the information and documents to be produced, as well as to establish a reasonable timeline for the production. Thus, AAFAF reserves all rights and objections as to the scope and extent of such production requested in the Motion, in the event that no agreement on such production is ultimately reached with the Unsecured Creditors Committee.

I don’t know what will happen but I doubt this is the end of the controversy.

Also, Judge Swain approved a stipulation between the bondholders seeking a receiver for PREPA, the Board and AAFAF. The Judge will hold a hearing on March 12,2019. Somehow, I believe some type of accommodation will be achieved before that date. I still think movants are striving for a better settlement and a reusing the receiver motion as leverage. Another possible scenario, however, is the Board joining the motion for a receiver, which given the conflicts with Governor Rosselló, would not be surprising. Also, the UCC will be allowed into the discovery in the case. Finally, the motion was referred to Magistrate JudgeDein by Judge Swain. Let’s see what happens.

The COFINA-Commonwealth settlement was approved on November 9, 2018. Around November 15, several unions objected to the settlement. On December 7, 2018, the Board filed an Omnibus reply to these objections. I will not bore you with the technicalities but I think this part sums it all:

In essence, the Union Objections assert that the Motion can be approved only if the Settlement is the best possible settlement of the Commonwealth-COFINA Dispute for the Commonwealth.See SEIU/UAW Objection ¶¶ 51-53; PROSOL-UTIER Objection ¶¶ 32-34. In other words, the Union Objections argue that a settlement must give the Commonwealth all, or the vast majority, of the disputed sales and use tax revenue in order to be approved by the Court. The Union Objections ignore the requirement that the Court should carefully and analytically assess the risks attendant to a litigation and the fact that the Agreement in Principle was heavily negotiated between independent representatives of both the Commonwealth and COFINA with the benefit of the Court-appointed mediation team. As such, the Union Objections fail to recognize that, not only is this a settlement, but also, in the opinion of the Commonwealth Agent, as supported by the Oversight Board, the Settlement is the best possible resolution for the Commonwealth.

In fact, the “law governing settlement under Bankruptcy Rule 9019 is well settled,” and the proponent of the settlement need only satisfy the standard “that the proposed compromise falls above the lowest point in the range of reasonableness.” The cases are clear that “the Court will defer to the trustee’s judgment and approve the compromise, provided the trustee demonstrates that the proposed compromise falls within the ‘range of reasonableness’ and thus is not an abuse of his or her discretion.” (Foot notes omitted)

Again, I believe Judge Swain will overrule the aforementioned objections.

On December 5, 2018, at 5 pm, the window for companies’ to submit qualifications for the PREPA Transmission and Distribution RFQ was closed. The next day, we were informed that five companies expressed an interest. In keeping with its tradition of full transparency, the Commonwealth said it would withhold the identity until it corroborated who actually qualified. Typical.

Meanwhile, the Board sent the office of Management and Budget a letter that says, inter alia:

At this time, the Oversight Board has 40 budget reapportionment requests pending. To facilitate an expeditious and thorough review, the Oversight Board would like to develop a collaborative process with the Government and outline several key requirements of the Oversight Board’s reapportionment review process, which if followed,will enable swift decision making and implementation.

First, reapportionments should not request to utilize funding from previous year General Fund (“GF”) appropriations, including budgetary reserves, which conflicts with section 5 of the Budget Joint Resolution from June 30, 2018.Second, reapportionments should not change the target and intentions of the rightsizing efforts, which would conflict with the New Fiscal Plan. Third, reapportionments within the General Fund should not request additional funding that would change the aggregate amount of Government spending and be in conflict with the certified Budget. Fourth, all SRF unfreeze requests from prior years should include supporting documentation of the revenue source.Fifth, all SRF budgetary increases based on updated other source revenues should include adequate supporting documentation of the revenue source and be consistent with rightsizing targets and efforts. Sixth, reapportionments should not be made from the Fiscal Plan Emergency Reserve, Cost Sharing Match Custody Account, or Unallocated Capital Expenditures, unless consistent with the purposes of those appropriations.Seventh, all Federal Fund increase requests should include copies of the notices of awards.

This is clearly a response to the petty dispute the governor has had with the Board over the paying of the Christmas bonuses. When Governor Rosselló announced he had paid the Christmas bonus, Executive Director Jaresko reminded him that he had to save in other areas the same amount he was paying or risk running out of money for payroll at the end of the Fiscal Year. The governor responded by telling the Board to stop getting its nose in his business and to work on all the reapportionment requests he had made. Same old, same old.

On this same vein, if the First Circuit were to reverse Judge Swain in the Aurelius challenge to the Board’s appointment, then the FOMB would be unable to do this to the Commonwealth. On the other hand, anew Board, appointed by President Trump, would probably not be as forgiving as this Board has been. We will wait and see.

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.

Aurelius Oral Arguments Update – December 5, 2018

Yesterday, Judges Torruella, Kayatta and Thompson heard oral arguments on Aurelius’ appeal on the Board’s appointment. In terms of prior issue exposure, Torruella and Thompson heard oral arguments on two other appeals on November 5 and Judge Kayatta actually authored a couple of PROMESA opinions.

Former Solicitor General Ted Olson argued for Aurelius. Judge Torruella inquired about the appointment of the DC Board and Olson said that they were minor officials, unlike the PR Board members. Judge Kayatta asked if it would be a problem if Congress gave the Governor of PR the power to put the island into bankruptcy. Olson explained that it would. Olson explained that the issue was not so much where the power came from, but what type of power was exercised: state or federal.

In regards to PROMESA stating that the Board is a local entity, Olson stressed that it was not important. Torruella then asked about what the Judges should look at to determine if the Board was a state or federal entity. Olson kind of skirted the answer but Aurelius’ brief discusses the factors and he cited all the pertinent Supreme Court tests.

When Utier, who also claims the Board’s appointment was unconstitutional, began its argument, it was obvious it was arguing for the reversal of the insular cases, to the extent that Judge Torruella reminded the lead counsel that the First Circuit did not have the power to do so, and Judge Thompson joined in this point. Clearly, Utier’s arguments had no impact on the Judges.

Former Solicitor General Verrilli argued for the Board. Torruella quickly challenged him on the argument that governors of the territories are appointed without Congressional approval, saying the statute was clear that this was temporary. Verrilli’s theme was that Congress’ actions showed it was not concerned with the Appointments Clause or the separation of powers. Torruella, who has written extensively on the Constitutional history of PR, challenged him again on the appointment of federal officials in PR before 1917. Clearly, Judge Torruella is not buying the argument that Congress was never concerned about the Appointments Clause in the territories.

Judge Kayatta mentioned that the appointment of the Board and their removal was under federal, not PR law. It is important to note that during the Federal Government’s oral argument, Judge Kayatta told Mr. Wall that if a person is elected, he can be removed by the electors. However, if he is appointed by the President, he can only be removed by him. More on this later.

Judge Torruella asked Mr. Verrilli if DC is covered by the same constitutional provisions (it is not) as PR. Verrilli said they are different but Congress’ power is the same. Torruella then discussed the appointment of territorial judges, which prompted Judge Kayatta to mention that territorial judges for the most part interpret territorial law, but here federal law is involved. Judge Thompson chimed in mentioning that this is bankruptcy law, not territorial law.

Torruella then asked an important question, whether the Governors of Guam and Virgin Islands were appointments. Verrilli made a point to say yes to bolster his argument of inapplicability of the Appointments Clause to the territories.

Judge Torruella then asked whether Altair was the test for a federal/territorial Board and Verrilli said no, but Judge Torruella insisted. Verrilli answered that he had to ignore Altair. Kayatta asked Verrilli whether his argument was that Congress’ compliance with the Appointments Clause in certain territorial cases meant it had to be followed in all cases for the territories? Verrilli answered yes. It is important to note that at the end of Mr. Verrilli’s argument, he became more strident in his argument. More on this later.

Mr. Jeffrey Wall, Principal Deputy Solicitor General of the United States (shows you that the Administration put a lot of effort in this case) argued that the separation of powers does not apply to the territories in the same way as other parts of the Constitution (same old argument). Mr. Wall emphasized, as he did during his entire argument, that otherwise, home rule (electing governors and legislators) would be unconstitutional. Argument clearly intended to scare the Judges.

Judge Torruella then threw in the clincher, asking whether elections were different. This has been Aurelius’ argument from the beginning to forestall the home rule issue. Wall skirted the issue but Judge Thompson came back to it asking the same question. Wall then argued that elections did not change governor’s duties. Judge Kayatta interjected a different but related statement, by stating that Congress says elections are pursuant to state law but the finances are dealt with by our guys. He also mentioned the elections exemption. Very telling. Mr. Wall said that nothing in the cases made such a distinction. This begs the question, why not make the distinction here?

Mr. Wall continued his argument citing Sánchez Valle, which prompted Torruella to comment that the Supreme Court said the case was about double jeopardy. Wall said no, it was about a lot more. Torruella jokingly said, “I read a different case.”

Judge Thompson interjected a loaded question, “could Congress appoint the Board?” Judge Kayatta joined the question. Wall meekly said that would bring other complicated questions. Mr. Wall, hit from several sides with negative comments on his arguments, did what we all do, quoted cases, essentially telling the Judges their view were wrong. He then went into an impassioned plea that there be a stay of the Board’s mandate if the case is reversed, that the Board’s work cannot stop and that bondholders were poised to take the money the Federal Government had earmarked for PR and that (not legally possible in my opinion, rhetoric more than anything else)  they did not care about funding essential services (he did not mention that neither the Board nor PR Government have defined what those are). The end of his argument sounded desperate. Judge Thompson then asked: in the case that the Appointment’s clause had been violated, what authority would the Board have to act? Very important question. Wall insisted that before that is done, further briefing would be needed.

As previously mentioned, Judge Kayatta also asked whether Congress could appoint the Board, saying that Congress had come very close to actually doing so. Wall discussed other instances where the President would appoint from a list from Congress. Judge Torruella then asked whether the separation of powers applied or not to the cases in territories, Wall had to admit no. He also insisted on Altair not being applicable.

Judge Kayatta again discussed that one thing is the power of Congress and quite another how it can exercise that power in the territories. Kayatta said the question pivots on substance v. procedure.

Then came the PDP, represented by Hernández-Mayoral, who stated the party had no position as to the constitutionality of the Board (his party had passed a resolution on Sunday against the Board, go figure), even when Judge Thompson asked the question. He was there to tell them that SCOTUS and First Circuit had stated that Congress had relinquished its power over the internal affairs of PR and any statement to the contrary would be wrong. No use to the case, though.

The PPD legislature, however, by voice of Mr. Martínez Luciano, joined the voices that said that the Board was unconstitutionally appointed. He did a good job. Judge Thompson asked whether Congress could repeal the PR home rule. Martínez Luciano skirted by saying that if that happened, the officials would be federal officials.

Olson had reserved 5 minutes for rebuttal and was asked by Judge Kayatta whether USVI and Guam would survive a ruling using Aurelius’ standard of whether the Board was federal. Olson said that the answer to that was elections exemption. Kayatta was not comforted by the answer—there had been no mention of elections exemption up to that point. Judge Torruella asked about the Federal Government’s argument of chaos if they decided in Aurelius’ favor. Olson mentioned that a stay could be implemented and the Board could act but knowing that the new Board would review all of its decisions.

From my experience in the First Circuit, the questions posed by the Judges and the answers to the questions, I would say that Aurelius has a good chance of having Judge Swain reversed, although of course I may be mistaken. This would result in grinding halt of the Title III proceedings and the Board’s authority over the PR Government, who actually would be the only winner since no action could be enforced against it. Given that President Trump is not happy with PR and that the Senate controlled by the Republicans would have to confirm the new Board, there is a chance of not having the same members again. What would be the result is anyone’s guess.

Having said that, the Board’s actions yesterday confirm my suspicion. The oral argument went from 3-4 pm PR time, and at 5:19 pm, I received an alert of a letter from the Board to PR saying it had not been complying with the requirement of sending an impact report on the dozens of laws it had passed in the last few months. Shortly thereafter, it sent a tweet saying that it expected the First Circuit to confirm the well-reasoned opinion by Judge Swain. The Board had never sent a tweet on the previous appeals. Seems to me the Board’s lawyers saw the same thing I saw, a likelihood of reversal and are preparing for it.

It’s all quite ironic though, because before yesterday’s oral arguments, the FOMB counsel must have been feeling pretty confident about the enforcement of Judge Swain’s decision.  Au contraire, Mr. Bienenstock. He and his team might be in for a rude awakening. I am sure the Board’s lobbyists are working hard in the Senate and federal government at this time. Good luck. Again, I may be wrong, Verrilli and Wall did a good job but it was clear at the end of their arguments that they knew the Judges were not buying their claims.

Irrespective of this, the loser in the case will immediately request certiorari from SCOTUS, who sees less than 1% of the requests. With a judgment by January, it is totally possible to have briefing, oral arguments and a decision no later than June 30. 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.

Monday Update – December 3, 2018

Welcome to your weekly Title III update for December 3, 2018. Given that the only news for the week before was the approval of the disclosure statement, I decided not to publish it. This week, however, a few things have transpired.

Last Monday, the Board filed the second amended COFINA Plan of Adjustment with a few modifications. The Board also filed a proposed order approving the forms, both in English and Spanish, of the Omnibus objections to proofs of claim. Judge Swain later approved the order.

On Tuesday, the Board filed a motion to reject COFINA’s contract with Lehman Brothers Special Financing Inc. for the servicing of the debt. The rationale is that the bond exchange changes everything. In any event, it will probably be granted by the Judge.

The Court not only approved the COFINA disclosure statement but also fixed the voting record date for the plan, the Confirmation Hearing Notice, the contents of the solicitation package, solicitation of votes, etc. Two dates are very important; by January 2, 2019, objections to the COFINA Plan of Adjustment must be filed and by January 8, 2019, votes on the Plan of Adjustment must have been delivered.

As to the objections to the Fiscal Plan, none have been filed. Unions in the Puerto Rico government and utilities filed objections to the COFINA/Commonwealth settlement, albeit after the cut-off date, but no objections to the Plan of Adjustment. Moreover, since the unions are not creditors or bondholders of COFINA, it is questionable if they have standing pursuant to 11 U.S.C. § 1109(a), much less when considering Article III of the Constitution. Let’s see if they file objections.

On Tuesday, the Official Committee of Unsecured Creditors of all Puerto Rico Title III debtors filed a motion requesting “the production of documents concerning potential avoidance actions that may be prosecuted by the Debtors or by a trustee appointed by the Court pursuant to section 926 of title 11 of the United States Code.” The UCC motion also states as to the Kobre and Kim report:

The Final Report did not even address the question of whether any Avoidance Actions could be maintained by any of the Debtors. Indeed, these issues were carved out of the investigation, with the Investigator noting that it did not seek or obtain “comprehensive discovery” relating to prepetition transfers because “[w]e have not been tasked” with this analysis and the Investigator lacked a “solvency analysis.”

The UCC knows that the Board was in the process of hiring a law firm to find causes of action against potential defendants so it decided to put its foot forward into what the Final Report ignored—the transfer of monies from the Commonwealth defendants. The UCC also knows that the Board is unlikely to pursue all of the causes of action in the Kobre and Kim report and it will undoubtedly seek authorization to do so. This motion is a good start. I must point out that 11 U.S.C. § 926(a) gives any creditor the chance to be appointed to prosecute causes of action that a debtor will not. This includes unions, but I doubt if they will vie to do so. We will soon find out since the statute of limitations runs out between May and July, depending on the Title III debtor.

The Board announced on Thursday that it had hired the law firm of Brown Rudnick, LLP, at $790 an hour, to determine and prosecute causes of action on behalf of the Title III debtors. I found it ironic that the firm’s paralegals will bill at $270 an hour, which is more than what most lawyers in Puerto Rico bill. Oh well.

During a hearing in the U.S. Senate, FEMA stated that it had no confidence the PR electric grid could survive a hurricane today. Not only FEMA, but all Puertorricans doubt this. Of course, the Governor immediately differed from this opinion. Some things never change.

Today, Judges Torruella, Kayatta and Thompson are hearing at 2 pm the Aurelius appeal on the Board’s appointment. Torruella and Thompson heard oral arguments on two other appeals on November 5 and Judge Kayatta has actually authored a couple of PROMESA opinions. Given that the Aurelius challenge may impact the status of Puerto Rico, which Judge Torruella absolutely hates, he is the wild card on the argument. I hope to have some analysis by Tuesday.

Finally, the government and some of the municipalities have started to pay the Christmas bonus notwithstanding the Boards warnings that the Commonwealth would run out of money. Wonder what would happen if it actually did run out of money. Will the Board request control of the Commonwealth’s bank accounts? Who knows?

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.

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.

Monday Update – November 12, 2018

Welcome to your weekly Title III update for November 12, 2018. Since I have already provided an update on some of the developments last Monday and Tuesday, I will concentrate on what occurred from Wednesday onwards.

On November 7, 2018, Judge Swain held the November Omnibus Hearing. The first order of business was the Board report by Mr. Bienestock. He explained that the Court wanted an update on the McKinsey issue (whether it holds or had held PR bonds while working for the Board) and explained that Proskauer represented this company so the Board hired an outside counsel. This counsel reported from NY that he was beginning his investigation and hoped to have a public report in a couple of months and that he had no substance to report. He then said that he hoped to have a report by the end of the year. So, either at the end of the year or two months from now we will have a report on this issue. Hopefully.

PREPA is doing well and does not need to borrow to cover its expenses. Mr. Bienestock made a distinction from operating expenses to the need to make further repairs. He also reported that PREPA was examining the answers to the request for proposals for the distribution of electricity. Later next year, those companies deemed eligible will be able to bid for a P3. He also mentioned that as to the generation, there was a need for companies to know how much of the debt they would have to carry, how much they would have to pay for the right to generate and the mix of the fuels. I would add that they need to know if they have to accept the union contracts.

Bienestock also said that on that same day there was mediation with the PREPA ad hoc group of uninsured  bondholders and one of the monolines was going to join. He hoped to continue discussions with other monolines. This adds to my theory that the monolines request for a receiver was an attempt to get better treatment in the RSA. On the other hand, PREPA bondholders have a real need to have responsible management and the government has shown time and again it is incapable of providing it.

The Board was very confusing when discussing when other Plans of Adjustment would be filed. Mr. Bienestock said that it was possible that another one could be filed in the summer (ERS?) but was not emphatic. He also mentioned the possibility of other Title III cases being filed, mentioning PRASA and the UPR, but making clear that the latter was more likely to be a Title VI. My view is that these two may go into Title III next year due to two issues: Union contracts and pensions. It is very doubtful that the PR Legislature would change these contracts or even would have the power to do so. Moreover, under in Bayron Toro v. Serra, 119 D.P.R. 605 (1987), the PR Supreme Court has stated that those pensioners who are receiving pension payments have a constitutional right to it. It behooves my mind that the Board can force said changes outside Title III. If it insists in those changes, Title III is the only recourse.

Mr. Bienestock also mentioned that he had information that the Legislature was about to approve a 29% retention of payment to all US lawyers that did work in the case outside PR. He made it clear that if faced with this, his firm would have to increase its fees, and obviously all others would. Judge Swain was dismayed and it was very telling that counsel for AAFAF had no information as to this according to Mr. Bienestock. Very bad news indeed. Let’s see what happens.

The Omnibus objections to proofs of claim was discussed and these will be the ones having to do with double filing of bond claims and others that did not belong in one case or the other. This should start at the end of the year. The UCC mentioned that it had been discussing the way in which the proofs of claims of unsecured creditors would be resolved. Mr. Despin mentioned mediation and a short discovery and hearings. Although a good idea, we need more information as to how this will work.

The rest of the week not much happened. Judge Swain approved the settlement between the Commonwealth and COFINA in the Commonwealth Title III case. Also, the Legislature passed the COFINA bill required by the agreement. Many PPD politicians and radio analysts objected to the deal but none had filed any objection, not even an amicus brief. Moreover, they did not offer any alternative to the deal. Those type of objections are easy to do, but no Court will pay them any heed.

In an interesting development in the Assured, et al request for lifting stay for the naming of receiver for PREPA, the parties further extended the deadlines in that issue. Instead of having to oppose the request by December 3, the schedule states:

  1. November 21, 2018: Parties to complete rolling document productions;

  2. December 21, 2018: Parties to exchange preliminary will/may call witness lists (identifying whether witnesses will appear live or via designated deposition testimony);

  3. January 4, 2019: Parties to file opposition brief and supporting declarations;

  4. January 14, 2019: Parties to exchange final will/may call witness lists (identifying whether witnesses will appear live or via designated deposition testimony);

  5. January 24, 2019: Movants to file reply brief and supporting declarations;

  6. January 30, 2019: Parties to complete expert discovery and depositions;

  7. January 30, 2019: Parties to file exhibit lists;

  8. January 31, 2019: Parties to designate deposition testimony; and

  9. February 2, 2019: Parties to cross-designate deposition testimony.

The Parties further propose that a hearing on this Motion take place on February 5, 2019 in New York, or on February 6, 2019 either in New York or San Juan.

What this shows is that the Board does not have to make public whether it will oppose the request until January 4, 2019, a full month’s extension. Since there are persistent rumors the Board is considering joining the Assured request, this will give it more time to ponder the issue. In addition, since I think this motion is a ploy of the monolines to obtain better treatment in the PREPA RSA, this will give the parties time to negotiate. We will see.

Talking about PREPA, the Board, PREPA and AAFAF filed a Joint Informative Motion of a Request for Qualifications for the Transmission and Distribution System. The Request for Qualifications has 38 pages and no newspaper reported it. I will not go through it all here, but I highly recommend its reading for anyone interested in this issue. For starters, this is a P3 proceeding, where the ownership of the transmission and distributions system remains with PREPA. The procedure is as follows:

October 31, 2018 – Date of issuance and first publication of public notice of RFQ by the Authority.

November 14, 2018 – Deadline for submission of Requests for Clarification with respect to this RFQ by prospective Respondents (“RFC”).

November 20, 2018 – Deadline for the Authority to release responses to RFCs.

December 5, 2018 – Deadline for submission of SOQs (no later than 5:00 pm AST).

January 16, 2019 – Estimated date for notification of Qualified Respondents.

All SOQs must be submitted by no later than December 5, 2018 at 5:00 pm AST (the “Submission Deadline”) in the manner set forth in Section 4 of this RFQ.

Other highlights are:

This RFQ is being issued to identify those Respondents that meet the minimum requirements necessary to carry out the Project in compliance with Act 120 and the PPP Act, in particular those Respondents that demonstrate:

experience operating a large electric utility;

financial strength and capital resources, with significant access to the capital markets; and

strong technical expertise, with a track record of high-quality operations.

These requirements eliminates the possibility of the much touted energy cooperatives in PR, of which there are none, to compete, unless they partner with large stateside groups. In fact, this requirement eliminates any locals, except if they partnership with outside companies. Other highlights are:

As currently envisioned, a single Private Partner will assume all rights and responsibilities related to the operation, maintenance and management of the T&D system. These rights and responsibilities are expected to include, among other things:

operation and maintenance of the T&D assets and system, including street lights and meters;

control center operations, including generation scheduling and economic system dispatch;

integration of renewable generation and distributed energy resources;

power procurement;

end customer metering, service and support (including billing and collections);

new service requests for secondary and primary connected customers;

outage management and restoration;

coordination of emergency planning and storm restoration and recovery;

interfacing with regulators, including with respect to environmental compliance;

general system planning, including sourcing, designing and implementing system growth and improvement;

acting as a servicer in connection with any charges imposed in respect of legacy obligations; and

ongoing public reporting.

First thing to note is that as Mr. Bienestock told Judge Swain, the issue of how much of the PREPA debt will be taken over by the buyers or lessees of PREPA is still an open question. In addition, the monopoly will continue, at least in regards to the transmission and distribution, since a single company will be in charge of buying power and billing customers. This entity will probably be the most important entity in the whole system but we still do not have the Energy Policy bill or PREPA’s Integrated Resources Plan. Hence, I see it difficult for the new entity and the P3 Government agency to comply with the timetable. We will see.

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.