A U.S. judge yesterday denied a request by Puerto Rico’s federally created financial oversight board to extend a looming deadline to file claims, the latest hurdle for its plan to recoup billions of dollars paid to bondholders of potentially invalid debt issued by the island’s government, Reuters reported. Judge Laura Taylor Swain, who is hearing Puerto Rico’s bankruptcy cases, declined to extend a two-year statute of limitations that runs out on May 2, saying it was “not something I’m persuaded this court is allowed to do.” Edward Weisfelner, a lawyer for the board, said this could mean the board could be forced to file hundreds of lawsuits by that deadline against bondholders in order to preserve its claims. The board, which filed bankruptcy for the U.S. commonwealth in May 2017 in an effort to restructure about $120 billion of debt and pension obligations, had requested more time, arguing that the judge had to rule first on the validity of certain debt before claims against scores of bondholders could be filed. Extending the deadline would have avoided unnecessary and costly litigation, according to the board. Read more.
In related news, the Financial Oversight and Management Board for Puerto Rico said yesterday that it has requested the U.S. Court of Appeals for the First Circuit to extend the stay of its Feb. 15 ruling — which legitimizes the panel’s efforts “to achieve fiscal responsibility” on the island and that it gain access to the capital markets — pending the board’s petition to the U.S. Supreme Court for review of the case, Caribbean Business reported. The First Circuit had declared the appointment of the board’s members unconstitutional, “a decision that is profoundly wrong and deeply destabilizing,” the fiscal panel said in its petition on Tuesday for a writ of certiorari to the Supreme Court. Absent a further stay, the board would be forced to cease operations May 16. Disrupting its operations “midstream would have immediate and devastating consequences for the Puerto Rican economy and the debt restructuring process that Congress determined was a critical necessity when it enacted PROMESA [Puerto Rico Oversight, Management, and Economic Stability Act] and created the Oversight Board,” the panel said yesterday. The board further stressed it would be “unable to carry out its responsibility of certifying the fiscal year 2020 budgets for the Commonwealth and instrumentalities to ensure that they are compliant with the fiscal plans.” Read more.
