Tuesday, August 20, 2019

Cofina deal enshrined, even if Puerto Rico fiscal board declared null

By on February 7, 2019

SAN JUAN – Even if a court of law declares Puerto Rico’s Financial Oversight and Management Board invalid, the debt adjustment of the Puerto Rico Sales Tax Financing Corp. (Cofina by its Spanish acronym) to restructure its $17 billion debt would still be valid.

The information is contained in the debt adjustment plan and agreement–under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa)–approved by Judge Laura Taylor Swain this week.

Collectively, there are several lawsuits challenging the constitutionality of the board and argue that its members were not appointed as required by the appointments clause of the U.S. Constitution.

These lawsuits include In re: the Financial Oversight and Management Board for Puerto Rico as Representative of the Commonwealth of Puerto Rico, currently pending in the U.S. Court of Appeals for the First Circuit; the Union de Trabajadores de la Industria Electrica y Riego (UTIER) v. Puerto Rico Electric Power Authority, currently pending in the Title III Court or U.S. District Court; and René Pinto Lugo, et al. v. The Government of the United States of America, currently pending in the Title III Court.

Other cases underway as well are the Hermandad De Empleados Del Fondo Del Seguro Del Estado, Inc., et al. v. Government of the United States of America, currently pending in the Title III Court; and the Hon. Rafael Hernandez-Montanez, et al. v. The Financial Oversight and Management Board of Puerto Rico currently pending in the Title III Court.

Most of these lawsuits seek to invalidate the board under the presumption that all of its actions are then declared void. Nonetheless, the plan says that in the event an order is issued related to the appointments clause litigation, all parties agreed that it will not impact the agreement or provisions barring certain litigation or the releases exempting certain officials from liability.

It “will not in any way or manner reverse, affect or otherwise modify the transactions contemplated in the Plan, the Settlement Agreement, the Confirmation Order and the Settlement Order, including, without limitation, the compromise and settlement of the Commonwealth-COFINA Dispute and the releases, exculpations and injunctions,” the plan reads.

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