Puerto Rico creditor group defends validity of Public Buildings Authority bonds
But argues commonwealth’s debt limit was breached
SAN JUAN – The Lawful Constitutional Debt Coalition supported attempts to declare invalid $6.2 billion in Puerto Rico general obligation bonds issued in 2012 and 2014 because they violated debt limits but defended the validity of Public Buildings Authority bnonds.
The coalition, which includes holders of general obligation bonds and PBA bonds issued before 2012, nonetheless said $582 million in government facilities revenue refunding bonds issued by PBA in 2012, some $78.1 million in bonds issued by the Puerto Rico Infrastructure Financing Authority (
In January, the island’s Financial Oversight and Management Board and the Unsecured Creditors Committee filed a lawsuit to declare invalid some $6 billion in general obligation bonds issued between 2012 and 2014. Both called the PBA a sham used to issue debt that was not in the commonwealth’s name but payable through general revenues so it does not get
In December 2018, the UCC and the fiscal board filed a complaint seeking a declaration that certain leases between the PBA and agencies are disguised financing mechanisms and that rent due is not subject to priority payment.
The coalition defended the PBA, which reports 615 properties under its jurisdiction, has capital assets totaling $3.7 billion and more than 1,000 employees who provide maintenance, administrative and operational services to its buildings.
Since its creation by the Legislative Assembly in 1958, no court has suggested that the PBA was unlawfully created. PBA issued bonds to finance the construction and maintenance of its buildings. The Commonwealth also guaranteed the payment of principal and interest on PBA bonds through guarantees issued in favor of PBA bondholders. The practice of guaranteeing PBA bonds began in 1968, 10 years after the PBA’s creation.
The PBA derives its revenue from rent paid by its tenants and is used to pay principal and interest on its bonds.
Three years after the PBA was established, and before the commonwealth began guaranteeing PBA bonds, the Puerto Rico Constitution was amended in 1961 to prohibit the
“The Commonwealth was able to issue GO Bonds and GO Guarantees in 2012 and 2014 only because it did not include the payments that the Commonwealth made to the PBA in the prior fiscal year for principal or interest on PBA Bonds when determining whether it had debt capacity in 2012 and 2014,” according to the document written by the firms Reichard & Escalera and Quinn Emanuel Urquhart & Sullivan, LLP
According to one of the firms, PBA debt was not included because the government interpreted the constitutional disposition to mean debt guaranteed by the commonwealth was counted only if the
“The Commonwealth’s failure to comply with this Constitutional mandate resulted in the issuance of approximately $6.7 billion of purported full faith and credit GO bonds and guarantees in 2012 and 2014 that violated the express terms of the Constitutional Debt Limit,” the document reads.
However, it said the PBA was validly created and its bonds are undeniably constitutional, serving important public purposes over the past 60 years.
“We believe recent efforts to mischaracterize PBA debt are predicated upon a fundamental misunderstanding of the public corporation’s history and a strained reading of Puerto Rico’s Constitution that adds words that are not there while omitting words that are. Since the passage of the PBA Enabling Act in 1958, both the Commonwealth and every court that has reviewed the matter have found that the PBA is not an arm of the central government, but rather a validly established and separate entity. Indeed, numerous states have mirrored the PBA structure to design, construct, and develop critical government buildings,” coalition representative Susheel Kirpalani, of Quinn Emanuel Urquhart & Sullivan, said in a statement.
“Although the Commonwealth has guaranteed the principal and interest payments on PBA bonds since 1968, prior administrations and their
“Had the Constitution been faithfully applied, GO bonds and guarantees issued after March of 2012 could not have been backed by the Commonwealth’s full faith and credit,” he added.
Being Vigilant of the 7 Benchmarks to end 2022
We are just about to end the fourth quarter of...
- Posted November 22, 2022
Inflation Heading Down, What Happens Now?
The Four Benchmarks to review that confirm inflation may be...
- Posted November 14, 2022
The Six Factors to Expect during the end of 4Q22
We are deep within the fourth quarter we thought it...
- Posted November 10, 2022
Puerto Rico Banks Deliver strong earnings, beating most banks
Puerto Rico Banks Transformed their operational model The Puerto Rico...
- Posted November 9, 2022
US Congress Discrimination affecting the Puerto Rico’s Healthcare Ecosystem
The market dynamics that changed the Healthcare Ecosystem as we...
- Posted November 8, 2022
MCS contributes over $5 million to support member healthcare
The insurer distributed the amount among 409 community pharmacies in...
- Posted November 7, 2022
Droguería Betances Launches 60th Anniversary Ad Campaign
Droguería Betances has launched a new advertising campaign, “60 Reasons...
- Posted October 31, 2022
Puerto Rico Food Industry Helps Communities in Aftermath of Hurricane Fiona
Over three-quarters of a million dollars in aid to...
- October 24, 2022
Medplus Solutions celebrates 10 years Saving Lives
Innovation and continuous growth Expansion of specialized and more...
- May 18, 2022
Amazon Web Services Expands Operations in Puerto Rico
Local Office Will Offer Services to other Caribbean Islands...
- April 22, 2022
García Padilla: Rubio Is No Friend of Puerto Rico
Governor Says Rubio's Remarks Confirm he Works for 'Vultures'
- February 26, 2016
Why the plebiscite was a disaster
A column by A. W. Maldonado
- June 16, 2017
[Annotation] The People Have Spoken
By abstaining, you can’t express anything
- June 15, 2017
You must be logged in to post a comment Login