Tough sledding ahead for GO-Cofina settlement
Editor’s note: The following article originally appeared in the May 17-23, 2018, issue of Caribbean Business.
BY EVA LLORÉNS VÉLEZ and PHILIPE SCHOENE ROURA
In matters pertaining to Puerto Rico’s debt crisis, the devil is in the fine print. Thus, the footnotes in the recently announced Commonwealth-Cofina Joint Settlement suggest a deal is far from cemented, as significant creditor constituencies are listed in the footers as parties either excluded from the deal or harboring reservations pending outcomes of legal challenges that remain in place.
Although the deal brings to the table two of Puerto Rico’s most important creditor constituencies that have been in a legal harangue over the priority of their credits, the Unsecured Creditor Committee (UCC) representing general unsecured claims is reluctant to participate in the exchange.
“The UCC has been very unconstructive and have refused to participate,” one Wall Street source with knowledge of the negotiations told Caribbean Business. “When you get the principles talking, there is progress, but lawyers who are advising the unsecured creditors want to do all the negotiating and nothing gets done.”
It is not the first time legal advisers have come between sides in negotiations tied to debt crisis. In Argentina’s debt crisis, some of the hedge funds involved had more lawyers on staff than analysts and made a killing in billables in cases that took a decade to resolve.
There are eight members on the UCC, which was appointed in June 2017 to represent the interest of all general unsecured creditors of the commonwealth, the P.R. Electric Power Authority, Employees Retirement System and Highways & Transportation Authority.
The members are the American Federation of Teachers, Drivetrain LLC as the Creditors’ Trustee for Doral Financial Corp., Genesis Security Services Inc., Peerless Oil & Chemicals, P.R. Hospital Supply, Service Employees International Union, Total Petroleum P.R. Corp. and Unitech Engineering Group S.E.
The UCC is not the official committee of unsecured creditors for Cofina.