NOTICIAS PROMESA

Washington Watch – Spotlight on Puerto Rico: POB Creditors Stand to Lose After Court Puts Their Claims in Doubt

By Jennice Fuentes / Fuentes Strategies

Federal Judge Laura Taylor Swain, appointed by Chief Justice John Roberts to oversee the Puerto Rico debt restructuring process mandated by PROMESA, ruled that the creditors who won Pension Obligation Bonds (POBs) did not properly draft the paperwork awarding them a lien over the Retirement Systems Administration’s (ASR in Spanish) assets. This court decision does not necessarily mean that these creditors do not have a right to repayment, but rather that they cannot seize ASR assets in order to do so. Most analysts in Puerto Rico viewed this technicality as a lucky break for the Commonwealth, though the decision could still be appealed to the U.S. First Circuit Court of Appeals in Boston.

In her decision, Swain ruled that the plaintiff’s claim on the ASR assets was «invalidated and unenforceable» due to a translation error and other technicalities. According to Pensions & Investments, the bondholder «…group that sued, including Altair Global Credit Opportunities Fund and several Oaktree Capital Management (OAK) funds, held $2 billion of roughly $3.15 billion in Employees Retirement System (ERS) bonds as of February 2017.»

PREPA Selects Company to Revamp Grid

El Nuevo Día reports that once the Electric Power Authority (PREPA) is certain of the federal funds that it will receive in response to Hurricane Maria, the government will contract with a private company, Naviganta Consulting, to design a new electrical grid. While the firm has worked with PREPA in the past, this particular agreement will be executed in coordination with the Central Recovery and Reconstruction Office of Puerto Rico. José Ortiz, executive director of PREPA, said that the Fiscal Board «has not yet approved» the contract. Ortiz and Governor Ricardo Rosselló Nevares indicated that PREPA could receive between $17 and $26 billion in federal funds, according to various government requests for funding assistance.

Ortiz described the company as an «expert» in power generation and distribution. According to Rosselló Nevares, Naviganta will «ensure» that the subsidies granted by the Federal Emergency Management Agency (FEMA) are used properly and in compliance with the provisions of law.

FOB Debt Audit Report Released

Kobre & Kim—the independent investigators hired by the Fiscal Oversight Board (FOB)—released its findings on the Island’s debt and the reason for its financial collapse. The findings will be discussed at the next meeting of the FOB, to be held on September 18, 2018. The session will provide a space for «…interested parties to have the opportunity to hear the findings of the investigation and be heard about them.»

“This 10-month-long investigation undertook an extensive process of evaluating evidence and sources of information. We conducted over 100 interviews with witnesses and revised a voluminous number of documents in Spanish and English,” wrote John Couriel, an employee at Kobre & Kim. A copy of the report can be found HERE.

Ties to D.C. Firm, Creditor Groups Put Both Major Puerto Rico Political Parties on the Defensive

New Progressive Party (NPP) and the opposition Popular Democratic Party (PDP) leaders are on the defensive after revelations that D.C. firm DCI Group made campaign contributions to Governor Rosselló, while also hiring PDP politicians to push for their interests. The firm represented creditor groups that spent significantly on advertising and lobbying efforts tying former Governor Alejandro García Padilla to then Cuban President Raúl Castro and Venezuelan President Nicolás Maduro.

Current PDP President Héctor Ferrer and former PDP Senator and current candidate for Governor Roberto Prats were both on the payroll for DCI group, working on behalf of the same creditors that were trashing their own party’s governor, while also defending the creditors against the Governor’s efforts to restructure the $70 billion public debt.

The PDP held a meeting of its Governing Board after party leaders publicly called for Ferrer to explain his ties to the group.