Puerto Rico bankruptcy judge requires fiscal board to hasten avoidance claims process
Unsecured creditors have been requesting list from oversight panel
SAN JUAN – Federal court Judge Laura Taylor Swain granted Monday a request from the Unsecured Creditors Committee (UCC) that sought to set expedited deadlines for procedures for Puerto Rico to bring avoidance actions in its bankruptcy cases because of a looming deadline.
In a motion filed earlier Monday, the UCC said that despite repeated request the island’s fiscal oversight board has yet to submit a list of avoidance actions it intends to pursue.
Avoidance Actions means any and all avoidance, recovery, subordination or other claims, actions or remedies that may be brought by or on behalf of the debtors or other authorized parties in the bankruptcy proceedings. They go typically against individuals or corporations that obtain payments from the debtor 90 days before the bankruptcy filing but can go further into the past. The debtor in these cases attempts to recoup money it has already paid.
The Committee asked the court to set Wednesday, March 27, as the deadline to file objections or responses to the Procedures Motion, and March 29 as the deadline to reply.
Judge Swain, however, gave the board until March 28 to submit an objection. The UCC can file a report that day as well.
The deadline for the commonwealth to file avoidance actions is May 2. The other debtors follow afterward.
The board must provide a list by April 1 of the avoidance actions it will pursue. The UCC wants to be allowed to submit a motion seeking the appointment of a trustee to assert avoidance actions.
“This relief is necessary to ensure that no valuable Avoidance Actions are forfeited should the Oversight Board reveal, on the eve of the expiration of the statute of limitation, that it declines to pursue one or more valuable Avoidance Actions. In that case, there will be simply no time left for the Committee to file and prosecute a Section 926 Motion, and a trustee appointed under section 926(a) to commence Avoidance Actions prior to the applicable deadline,” the UCC said.
Given the short time frame, the committee said the motion is reasonable.
“The Committee has acted diligently with respect to Avoidance Actions at every stage of the [Puerto Rico Oversight, Management and Economic Stability Act’s] Title III cases and has clearly voiced, on repeated occasions, its concerns regarding the Section 546 Deadlines and the need to investigate and, if necessary, pursue Avoidance Actions in an expeditious manner,” the UCC wrote.