Puerto Rico retirement system bondholders ask court to lift stay on lawsuits
SAN JUAN – An account that was created to make interest payments to certain Puerto Rico Employee Retirement System (ERS) bondholders is running out of money next month and the creditors are asking the U.S. District Court to lift a stay on all lawsuits so they can obtain protection and collect their payments.
In a motion filed Tuesday, secured ERS creditors said that on July 14, 2017, the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish acronym) and the island’s Financial Oversight and Management Board, which represents the bankrupt ERS, entered a joint stipulation in which they agreed to make interest payments due on ERS bonds from a “Prepetition Segregated Account” and monthly deposits of $18.5 million from June through October that year that go into a newly created Post-Petition Segregated Account.
“The parties agreed that the Interim ERS Bondholder Protections would constitute adequate protection until October 31, 2017, solely with respect to the imposition of the automatic stay,” the document reads.
A court order required ERS to transfer about $27.7 million from the prepetition account to the fiscal agent to pay the interest due on the ERS bonds in December 2017 and January 2018, and to thereafter continue to transfer $13.8 million from the accounts on a monthly basis in order “to make payments equal to the contractual monthly interest due and payable on the ERS Bonds.”
According to AAFAF’s most recent summary of bank account balances for the Government of Puerto Rico and its instrumentalities, however, “the Prepetition Segregated Account contained only $19.9 million as of May 31, 2018. As a result, there are insufficient funds to make a full $13.8 million transfer to the Fiscal Agent in July, which means that the Fiscal Agent will be unable to make the requisite payment due on the ERS Bonds in August,” the bondholders argue.
They contend that efforts to obtain an extension of the interim agreement to maintain the “status quo” have been unsuccessful and as a result, want the automatic stay on litigation lifted.
“Because Movants’ property interests are not adequately protected, Movants are entitled to relief from the automatic stays triggered by ERS’s and the Commonwealth’s Title III filings,” the document reads.