Judge Besosa stays four consolidated cases against commonwealth
SAN JUAN – U.S. District Court Judge Francisco Besosa on Tuesday opted to maintain the stay imposed by the Promesa law in four cases in which the plaintiffs were challenging the Emergency Moratorium and Financial Rehabilitation Act.
The decision is yet another victory for the commonwealth, which is trying to get its fiscal problems in order.
The court, however, denied a request by the Financial Oversight and Management Board to intervene in the cases without prejudice. The board wanted to intervene, arguing that the consolidated actions name the commonwealth, its public officials and multiple covered territorial instrumentalities, and that the cases could affect debt restructuring efforts.
The cases stayed by the court were Brigade Leveraged Capital Structures, National Public Finance Guarantee Corp., the group of bondholders in the Dionisio Trigo case and a lawsuit filed by U.S. Bank Trust National Association, the University of Puerto Rico’s Trustee.
Echoing remarks he had made in another case that he also stayed, Besosa urged the commonwealth for a second time not to waste time in reinvigorating consensual negotiations with its various creditors.
“The Court reiterates that same counsel here. At bottom, the Commonwealth has three – theoretical – options going forward. In order to help extricate itself from its current financial predicament, it can: (1) make a serious commitment to negotiate voluntarily with its creditors, (2) seek to be placed into debt restructuring proceedings pursuant to title III of Promesa or (3) recommence making payments to all of its bondholders,” Besosa said.
The third option is undoubtedly the most ideal, and is expressly permissible during the Promesa stay period, Besosa said.
Taking the commonwealth at its word that its outstanding debt obligations are truly not payable, however, that option is an infeasible avenue. “Although the second option may become necessary in the future, debt adjustment proceedings pursuant to title III must first be certified by the Oversight Board…. This certification, in turn, requires a would-be debtor to prove to the Board that it has, among other things, made meaningful attempts to reach a consensual resolution with its creditors…. Thus, the second option will not become available to the Commonwealth and its covered instrumentalities unless and until the first has been faithfully attempted.
“In light of this fact, the earnest revitalization of the voluntary negotiation process is the Commonwealth’s only realistic pathway forward. With the added benefit and breathing room afforded by the Court’s decision today, the defendants must not delay in pursuing it,” Besosa said.