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Union claims interference in proposed Puerto Rico creditor deal

By on May 22, 2018

SAN JUAN – A labor union representing Puerto Rico public workers and retirees has accused a representative of the Ad Hoc Group of General Obligation Bondholders of negotiating the proposed settlement to resolve a dispute between commonwealth and Puerto Rico Sales Tax Financing Corp. (Cofina by its Spanish acronym) creditors in violation of a previous agreement.

The American Federation of State, County and Municipal Employees International Union (AFL-CIO), a labor union representing public employees and retirees through Servidores Publicos Unidos (SPU) and the SPU’s retiree chapter, has filed a motion to compel the island’s fiscal oversight board, Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym), the agent representing the Puerto Rico Sales Tax Financing Corp. (Cofina) and Mediation Team to comply with an Aug. 10 stipulation.

Under the agreement, only the commonwealth and Cofina’s agents could negotiate the so-called Commonwealth-Cofina dispute. In contrast, the union said, the commonwealth creditor representative, who was selected by the Ad Hoc Group of General Obligation Bondholders and Assured Guaranty Corp., is “not authorized to negotiate any proposed settlement, but only to consent thereto.”

The dispute centers around who is the true owner of the sales and use tax revenue that back Cofina bonds. Commonwealth bondholders say the taxes are available resources under the Constitution and should go to the island’s general fund. The dispute is one of the key controversies in the bankruptcy process under the Puerto Rico Oversight, Management and Economic Stability Act’s (Promesa) Title III, and its resolution is needed to determine the distribution of assets.

On May 14, certain parties announced a proposed settlement to the Cofina-GO dispute that the fiscal oversight board later declared was “completely unaffordable.”

The settlement would have given some $10 billion in sales tax collection, the only consistent revenue of the commonwealth, to GO creditors.

Bettina Whyte, Cofina’s agent, said that while she cannot provide detailed responses to the union’s assertions because of confidentiality requirements, “throughout the mediation process, the COFINA Agent has acted appropriately, in good faith, and in a manner consistent with the Stipulation,” she said.

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