Wednesday, December 8, 2021

Fiscal board appeals Lex Claims ruling denying stay

By on March 6, 2017

SAN JUAN – The Financial Oversight and Management Board has appealed to the First Circuit Court of Appeals a lower court ruling that declined to stay the Lex Claims lawsuit, in which general obligation (GO) bondholders are questioning the legality of the Puerto Rico Sales Tax Financing Corp. (Cofina).

The stay on all lawsuits expires in May and the local government is asking the oversight board to ask Congress to extend the stay until the end of the year. Federal Judge Francisco Besosa has stayed most of the liability claims pending in federal court.

On Friday, the fiscal board appealed a ruling by Besosa, who had denied the commonwealth’s motion to stay a lawsuit filed by the GO bondholders and a motion to intervene presented by senior Cofina bondholders.

Besosa, however, granted motions to intervene filed by the oversight board; Ambac Assurance Corp., which insures $800 million in Cofina funds; the Puerto Rico Funds and by major Cofina bondholders.

“This is not an action to recover a liability claim against the government of Puerto Rico that arose before the enactment of Promesa because the GO Bondholders seek only declaratory and injunctive relief,” Besosa said in his refusal to stay the claim.

Lex Claims is a lawsuit filed by GO bondholders against the island’s governor, Treasury secretary and director of the Office of Management Budget, as well as the Bank of New York Mellon Corp. The lawsuit was later amended to include Cofina and its executive director, as the GO bondholders want the court to stop the government from diverting the sales and use tax (IVU by its Spanish acronym) to pay Cofina bondholders. The GO creditors say their bonds are guaranteed by the commonwealth’s full faith and credit and taxing power and have payment priority over Cofina.

 

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