Tuesday, April 24, 2018

Puerto Rico creditors ask court for access to data used for fiscal plans

By on January 9, 2018

SAN JUAN – If the calculations, models, projections and other elements that make up the fiscal plans of the Government of Puerto Rico cannot be questioned in court, how can anyone be sure the maximum amount is being allocated to the repayment of the public debt?

This is one of the main arguments of nearly a dozen creditor groups who want the federal court to authorize access to material related to the preparation of the island’s fiscal plans. So far, both the government and the financial control board oppose the request.

“Either way, [the commonwealth and the board], who continue to tout their ‘commitment to transparency’ […] insist that these Fiscal Plan Development Materials must never see the light of day,” reads a brief filed Friday by a group of creditors that includes hedge funds, mutual funds and insurers who own different types of Puerto Rico debt.

It is not the first time these creditors request the court for access to the government’s financial data. In December, magistrate Judge Judith Dein partially authorized an initial petition for discovery filed by these creditors. Following the court order, differences between the parties remain regarding the production of certain data and information.

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Although most creditor groups already have access to part of the materials requested, mainly through an access-restricted virtual dataroom, they claim the mediation process under way and other confidentiality agreements prevent their use in bankruptcy cases under Title III of Promesa. In addition, they argue the government and the board have also rejected access to certain information, alluding to the fact that it is privileged material or it is too early to produce.

Specifically, the creditors want all input, calculations, formulas and assumptions that went into the fiscal plans, as well as any draft the government has delivered to the board.

After postponing an initial Dec. 22 delivery date, the fiscal panel granted the administration of Gov. Ricardo Rosselló until Wednesday, Jan. 10, to submit revised plans for the central government, the Electric Power Authority (Prepa), and the Aqueduct and Sewer Authority (Prasa).

The creditors are also asking for the financial model that underlies the central government’s fiscal plan. Created by DevTech, consultants since the administration of Gov. Alejandro García Padilla, the model projects the island’s gross national product and inflation, key elements that have a direct bearing on the commonwealth’s revenue.

Lastly, creditors want to know how the so-called “reconciliation adjustment” in the fiscal plan was determined–a $600 million a year cash reserve to address the historical gaps between what is budgeted and what is actually spent each fiscal year.

(Juan J. Rodríguez/CB)

“Everyone, especially the Court, must see the basis for those [fiscal plan] calculations. That is because [creditors] have a right to receive the maximum that the debtor could reasonably pay. [The commonwealth and the board] want the Court to take their word as to how much the Commonwealth could reasonably pay,” the creditors’ brief adds.

The government and the board have until Jan. 19 to present their position to the court, which would decide by the end of the month if a hearing to address the dispute is merited. Hearings related to Title III cases continue Wednesday with one that will address, among other matters, an action by certain creditors to invalidate the appointment of the seven members of the fiscal board.

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