Court Challenge to Promesa Moves Forward
SAN JUAN—U.S. Federal Judge Francisco Besosa consolidated on Wednesday various cases brought up by a hedge fund firm, an insurance firm and private investors to resolve the issue on whether the Puerto Rico Oversight Management and Economic Stability Act (Promesa) has stayed their lawsuits.
“The parties in these three cases are disputing whether Promesa stays these actions,” Judge Besosa wrote in his ruling. “The three cases are consolidated for the purpose of resolving the issue [of] whether Promesa stays the cases.”
It is the first major challenge to a Promesa provision.
The government recently had asked the court to stay the three lawsuits, contending that there is a disposition to that effect contained in Promesa, but Besosa declined to do so. Promesa establishes a stay in the proceeding of cases against Puerto Rico filed after December 18, 2015. Currently, there are six cases in the Federal District Court in Puerto Rico and one in New York related to bond defualts and fiscal matters.
Besosa consolidated the lawsuits brought by up by National Public Finance Guarantee Corporation, Brigade Leveraged Capital Structures and one filed by Dionisio Trigo, in representation of a group of bondholders.
Brigade recently sued to stop the Government Development Bank from transferring assets. National, which insures approximately $3.84 billion of debt issued by the Commonwealth of Puerto Rico and related entities, and the plaintiffs in the Trigo lawsuit want the Puerto Rico Emergency Moratorium and Financial Rehabilitation Act to be declared unconstitutional.