Monday, June 5, 2017

Puerto Rico Bankruptcy: Judge freezes payments to COFINA bondholders

NOTICEL: Judge freezes payments to COFINA bondholders

by Damaris Suarez

Judge Laura Taylor Swain Tuesday suspended payments to the Bondholders of the Appealing Interest Fund Corporation (COFINA) and ordered that the money from the Sales and Use Tax (IVU) corresponding to these funds be kept in custody Of its fiduciary the Bank of New York Mellon until it solves the controversy in its merits.
In this way, the judge determined to grant the motion of interposition of the Bank of New York Mellon , which will have to keep in a reserve account and pay a kind of bond of $ 1,000.00 monthly in the Federal District Court in San Juan. It issued an order to paralyze and consolidate all claims related to these funds until the controversy over who gets the COFINA funds is resolved.
"Leaving the money in a Bank of New York Mellon reserve until the Court determines who is the same is the best way to make sure we have an orderly process, not an improper distribution," she said.
The next COFINA payment was due on Thursday, June 1st. The judge also paralyzed subsequent payments due in July and August. The bondholders of COFINA were the only group that had received uninterrupted money since last year the government determined that it could not honor its debts

Kurt. F. Gwynne, a lawyer for the Bank of New York Mellon, opened the hearing explaining that due to internal disputes between the principal and subordinated bondholders the Court's urgency should be to determine whether the banking institution should issue the payment due on Thursday and What to do prospectively with funds from the IVU.
Likewise, he questioned the participation of bondholders of general obligations in the discussion of the case since they have no interest in COFINA. "This is not the case to determine the constitutionality of these funds," Gwynne said.
The legal representative of the general bond bondholders, Gary Orseck, stated that according to the doctrine they must have access to the funds destined to COFINA. "That the government benefits from the funds that COFINA now has to offer services and the GO's are paid," said the lawyer.
During her participation in the process, the legal representative of the Financial Advisory Authority and Fiscal Agency (AFAAF), Susan Uhnan, stated that the public corporation favored continuing to honor payments to COFINA.
COFINA is the legal entity created during the administration of Aníbal Acevedo Vilá as a mechanism to issue debt based on revenues from the Sales and Use Tax (IVU) as a source of repayment, so that their payments were insured.
The judge opened her eyes giving condolences for the death of Lcdo. Scott K. Rutsky of the Proskauer firm, legal counsel to the Fiscal Control Board (JCF).