Puerto Rico Government Development Bank restructuring hearing postponed until Friday
SAN JUAN – A hearing into the Unsecured Creditors’ Committee’s (UCC) request to obtain derivative standing as part of the process to stop the Government Development Bank’s (GDB) restructuring under Title VI of the Puerto Rico Oversight, Management and Economic Stability Act (Promesa), was postponed until Friday to allow for negotiations that could end the dispute with the commonwealth.
The discussions were announced by Peter Friedman, a lawyer for the GDB and the Puerto Rico Fiscal Agency and Financial Advisory Authority, at a New York court Wednesday. Judge Laura Taylor Swain appeared to be aware of the discussions and agreed to the postponement, which was agreed upon by UCC lawyer Luc Despins.
The nature of the agreement to end the dispute was not revealed but sources with knowledge of the negotiations did not dismiss the possibility that the UCC will be allowed to make amendments to the restructuring deal.
The creditor group had filed a suit on Sept. 6 seeking derivative standing to stop the GDB restructuring because it would disallow any claims by the Promesa Title III debtors against the GDB, which was the commonwealth’s financial adviser before it became insolvent.
A creditor committee, according to the law, can seek derivative standing or permission to represent the debtor in possession when refusing to act on behalf of the estate.
In the past, the UCC has also complained that the government refused to allow it to access GDB documents to pursue its own claims. The group has been a vocal critic of the recent investigation commissioned by the fiscal board into the causes of the island’s debt because it did not identify individuals responsible for the debt crisis.
Also on Wednesday, the UCC appealed Judge Swain’s Sept. 18 denial of an order to enforce the automatic stay to stop the GDB restructuring, according to a certificate of service submitted to the court. Among her arguments, Judge Swain said at the time that the stay does not prevent Title III debtors from taking actions that could have an impact on the property or the estate. She said the GDB restructuring law is a vehicle to effect a transaction by debtors not against debtors.