Peaje sues to prevent Puerto Rico Highway Authority default
SAN JUAN – Now that the Highway and Transportation Authority has filed for Title III bankruptcy protection under Promesa, Peaje Investments filed motions for a temporary restraining order and two suits to force the HTA to resume deposits of toll revenues to meet a bond payment due next month.
Peaje, which owns $65 million in uninsured bonds secured by a lien on toll revenues, filed its motion for a restraining order as part of a separate adversary proceeding filed in HTA’s reorganization case, as well as an adversary proceeding filed in the commonwealth’s reorganization case.
“The action concerns HTA’s and its Executive Director’s ongoing taking and dissipation of Plaintiff’s collateral in violation of applicable law. Plaintiff is the holder of certain bonds secured by a valid, enforceable, first-priority lien on certain toll revenues that HTA collects in its operations,” the lawsuit reads.
For over a year, HTA and its executive director, Carlos Contreras, have not been depositing toll revenue with the fiscal agent that are used to pay bonds as required under the 1968 bond resolution, the suit says. As a result of the ongoing diversion, the fiscal agent has insufficient funds to satisfy the entire payment of principal and interest due on the bonds in July.
“Moreover, HTA and its Executive Director have indicated that they have no intention of depositing the Toll Revenues with the Fiscal Agent as required under the 1968 Resolution and applicable law. Instead, HTA and its Executive Director have made it clear that they intend to continue diverting the funds for other purposes, leaving the bonds unpaid after the Fiscal Agent exhausts the bondholders’ collateral account to partially satisfy the next installment of principal and interest due on the bonds in July 2017,” the suit adds.
Peaje is also asking the court for an action to stop the commonwealth and the Puerto Rico Fiscal Agency and Financial Advisory Authority (FAFAA) from interfering with the obligation of HTA and its executive director to deposit the toll revenues used to pay for the bonds.
The company notes that its claims predate Promesa and other laws. Peaje also said Section 922(d) of the Bankruptcy Code affords special protection to “special revenue” bonds, largely exempting the holders of those bonds from the bankruptcy stays and providing that the debtor must turn over “pledged special revenues.”
Peaje also pointed to portions of the HTA’s fiscal plan that suggest the agency and its executive director’s intention not to meet bond payments. “Bondholders of the PRHTA would cease to receive money for debt repayment by July 2017, when the reserve funds that have been used until now run out,” the suit says.