A U.S. federal judge on Friday ruled against a group of bondholders that bought debt issued by Puerto Rico’s largest public pension, the Employees Retirement System (ERS), denying their ability to hold claim on property used as collateral, Reuters reported. With roughly $120 billion in debt and pension liabilities, Puerto Rico filed for bankruptcy protection under a court-ordered process created under PROMESA. Judge Laura Taylor Swain, who presides over Puerto Rico’s bankruptcy process, stated ERS bondholders “do not possess a perfected security interest” over property pledged by the bankrupt public entity to pay its debt. According to Swain, “any security interest held by” this group of bondholders over ERS revenues is “invalidated and unenforceable.” The ruling lands yet another blow to Puerto Rico bondholders who seek to minimize their losses amid the U.S. commonwealth’s record municipal bankruptcy. ERS bondholders had argued otherwise, claiming they had a right to receive payments out of ERS’s revenue sources, particularly employer remittances into the pension system.
