Judge orders Cofina trustee not to make interest payment
SAN JUAN – U.S. Bankruptcy Judge Laura Taylor Swain, who is overseeing the bankruptcy petitions for Puerto Rico, on Tuesday reportedly ordered the trustee of Puerto Rico Sales Tax Financing Corp. (Cofina by its Spanish acronym) bonds not to distribute a $16 million interest payment due this week.
The judge told the Bank of New York Mellon (BNYM) to refrain from making the payments until she could decide on a dispute surrounding the funds.
BNYM had sued the local government seeking to determine what to do with the interest payments due Thursday.
The decision will mark the first time a Cofina payment is not made since its creation. The public corporation is one of the entities that had filed for bankruptcy under Title III of Promesa.
BNYM lawyers said at a hearing May 17 in Puerto Rico that since the commonwealth had taken actions that call into question its commitment to pay the bonds, it faces claims in the New York court that it breached its duties.
BNYM lawyers said that because of the commonwealth’s actions, it had been subjected to competing demands by bondholders with respect to a default, whether to accelerate the bonds and whether to make payments on the bonds.