Judge Swain sets omnibus hearings for Puerto Rico bankruptcy cases
SAN JUAN — On Friday, U.S. Bankruptcy Judge Laura Taylor Swain approved dates for five omnibus hearings in Puerto Rico’s bankruptcy proceedings, with the first one taking place June 28.
She also issued case management procedures and imposed local Bankruptcy Code rules for all of the commonwealth’s petitions filed under Title III of the Puerto Rico Oversight, Management & Economic Stability Act, or Promesa. The procedures set forth instructions on how to file notices, pleadings and objections for the cases.
So far, the island’s financial control board—which represents the Puerto Rico government as debtor—has commenced four cases for the central government (and its general obligations), the Sales Tax Financing Corp. (Cofina by its Spanish acronym), Highways & Transportation Authority (HTA) and the Employees Retirement System (ERS).
“To the extent the Case Management Procedures conflict with the Bankruptcy Rules, the Local District Court Rules, or the Local Bankruptcy Rules, the Case Management Procedures shall govern and supersede such rules to the extent that such variance is permitted by the relevant rules,” she stated on Friday’s order.
Moreover, she is also expected to hold several hearings throughout the next few months as she addresses other matters related to adversary proceedings filed against HTA and ERS. For instance, a hearing will be held Monday, June 5, over an action presented last week by Peaje Investments against HTA.
As for the central government and Cofina cases, Judge Swain halted until further notice debt payments to Cofina creditors, whose bonds are backed by a portion of the island’s sales and use tax. The money for the payment of this debt would be kept in reserve by the Bank of New York Mellon, Cofina’s trustee. Puerto Rico’s general obligation (GO) bondholders argue the money pledged to Cofina belongs to the commonwealth, and thus shall be used to pay constitutional debt first. Cofina creditors assure pledged sales tax revenues aren’t available to the government, as established when the structure was first conceived in 2006.