BNY Mellon objects to Cofina mediator compensation
SAN JUAN – The Bank of New York Mellon (BNYM), which serves as trustee of the Puerto Rico Sales Tax Financing Corp. (Cofina by its Spanish acronym), and Lehman Brothers objected Tuesday to Cofina’s disclosure statement that the U.S. District Court must evaluate the entity’s debt restructuring to move forward.
The bank objected to compensation that would be given to certain mediating parties.
“The Plan provides that certain institutional holders of beneficial interests in the Existing Securities, which participated in the mediation process and executed the Plan Support Agreement, receive additional compensation over and above that provided to other holders in the same class.
“This payment is to be made from all holders’ shared collateral. The Disclosure Statement describes this payment, in the aggregate amount of approximately $332 million, as compensation for the cost of negotiation, confirmation, and consummation of the Term Sheet and the Plan,” the bank said.
In its role as trustee for all of the existing securities, BNYM said it seeks to ensure that holder who did not participate in the mediation process receive disclosure necessary for them to make an “informed, intelligent decision” with regard to the plan.
“The Disclosure Statement does not explain the basis under Promesa [Puerto Rico Oversight, Management, and Economic Stability Act] and applicable provisions of the Bankruptcy Code for making this payment from holders’ shared collateral to selected institutional holders generally and, more specifically, in the amount of $332 million,” the bank said.
Lehman Brothers also raised concern with the disclosure statement for various reasons, including that BNYM is released from claims Lehman may have against it. The investment bank also said the disclosure agreement failed to say what causes of action Cofina may have to recuperate debt money or engage in avoidance actions.
Judge Laura Taylor Swain is slated to evaluate the disclosure statement next week.