Aurelius Capital Management, a major Puerto Rico bondholder, asked a federal judge on Wednesday to throw out the U.S. territory’s historic bankruptcy, challenging the constitutionality of the board overseeing the island’s finances, Reuters reported. At a hearing in federal court in New York, Aurelius told U.S. District Court Judge Laura Taylor Swain that Puerto Rico’s oversight board was appointed by the U.S. Congress in violation of the Constitution’s appointments clause, which governs how certain public officials are designated. “Congress can go back and do this right,” Aurelius lawyer and former U.S. Solicitor General Theodore Olson said. “The president can make new appointments.” The bankruptcy case filed by the board last May on Puerto Rico’s behalf should be thrown out, Olson added during a three-and-a-half hour hearing. Judge Swain, who is presiding over Puerto Rico’s bankruptcy case, did not indicate when she may rule, and her decision is certain to be appealed by whichever side loses. Read more.
In related news, Puerto Rico’s federally-appointed oversight board on Wednesday granted a two-week extension for the bankrupt island’s government to deliver a revised blueprint for its fiscal turnaround. The board said in a statement that the turnaround plan, initially due on Wednesday, will now be due on Jan. 24. Fiscal plans for Puerto Rico’s debt-laden power utility, PREPA, and sewer authority, PRASA, were extended to the same date. Puerto Rico, burdened by $120 billion in combined bond and pension debt, filed the largest U.S. municipal bankruptcy in history last May. Its finances are under the management of a seven-member board appointed by federal lawmakers. Read more.
