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Date set for first mediation session of Puerto Rico Title III cases

By on June 28, 2017

SAN JUAN – During the first half of Wednesday’s omnibus hearing over Puerto Rico’s bankruptcy cases, a July 12 date was announced for the first mediation session between creditors and the commonwealth.

Shortly after 9:30 a.m. Wednesday, federal Judge Laura Taylor Swain commenced the hearing by introducing U.S. District Judge Barbara Houser, who will lead the committee of five federal judges that will serve as mediators for the island’s Title III cases under the federal Promesa law.

Judge Houser explained the mediation process that will take place in the coming months, and announced that the first session will take place July 12 in New York City. It is expected to be an organizational meeting.

Moreover, also introduced was Judge Judith Dein, who will serve as magistrate assisting Judge Swain in the handling of the bankruptcy cases, as well as adversary proceedings.

Cases consolidated

Judge Swain authorized the consolidation of the handling of the bankruptcy cases presented for the Employees Retirement System (ERS) and the Highway & Transportation Authority (HTA), with that of the central government and Cofina. Although creditors of the two entities initially opposed to the move, during the hearing it was announced that they settled their differences and withdrew their objections.

As for the dispute between general obligations (GOs) and Sales Tax Financing Corp. (Cofina) creditors, the judge rejected a request by certain mutual funds to lift the stay and thus be able to request the Puerto Rico Supreme Court’s say on the legality of the structure that the sales and use tax (IVU by its Spanish acronym) guarantees. The fiscal board, like certain groups of creditors, opposed the move.

Meanwhile, the judge rejected a request from the board to appoint two independent agents for the central government and Cofina, which were intended to represent, on behalf of the board, the particular interests of these entities. The rejected motion also sought to establish a mechanism to resolve the dispute with a Nov. 1 deadline.

Judge Swain said that if concerns—including the board’s power over potential settlements and the appointment of the agents—are adequately addressed, the board may file again the suggested procedure.

ERS bondholders’ lift of stay motion

During the second half of the hearing, Judge Swain will hear arguments over a motion filed by ERS creditors, who seek to lift the stay and that they be adequately protected. The group alleges that because the government will stop making employer contributions to the systems next fiscal year, they will be affected because the contributions guarantee the bond repayments.

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