A federal judge yesterday ordered the trustee for Puerto Rico’s COFINA bonds not to make a $16 million payment due on June 1, allowing creditors to litigate competing claims to the money that could be central to how the bankrupt U.S. territory restructures debt, Reuters reported. U.S. District Judge Laura Taylor Swain made the ruling during a hearing in her Manhattan courtroom, putting a freeze on the payments while stakeholders hash out central disputes over who is to be paid first and from which revenue sources. Puerto Rico, with $70 billion in bond debt and another $49 billion in pension liabilities, is embarking on the biggest financial restructuring in U.S. municipal history. Sorting out obligations of the COFINA sales tax authority, which owes some $17 billion, is arguably the biggest task in the restructuring. Judge Swain's ruling granted a request by the COFINA trustee, Bank of New York Mellon, for "interpleader," a move authorizing the bank to hold onto the interest payment due on Thursday without fear of liability, while claims over the money are resolved. Judge Swain did not rule on the underlying claims, a process that could take months, but said "their existence makes it clear that interpleader is warranted." Read more.
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
