Puerto Rico creditors presented arguments in federal court in Boston as they asked a judge to lift a stay on litigation over the island's debt, even as an official in San Juan said the government there would seek to have it extended.
At issue is a provision of the Puerto Rico Oversight, Management, and Economic Stability Act, signed June 30, which imposed a stay on such suits to give the government breathing room and let the Oversight Board to come up with a broad debt restructuring plan. Under the stay, cases were delayed until Feb. 15, with the possibility of an extension of 60 or 75 days or until the Oversight Board chose to file a petition to commence debt-adjustment proceedings, if that date is earlier.
After PROMESA's stay went into effect, several bondholders and bond insurers sued Puerto Rico's government and leading members of the government in federal court to end the stay. In early and mid-November a judge in the United States District Court for the District of Puerto Rico ruled in two decisions concerning several cases that the stay should continue.
One of the litigants in some of the suits, Peaje Investments LLC, has launched appeals to the Federal Court of Appeals for the First Circuit in Boston, where oral arguments in two of these cases were made Wednesday.
Meanwhile, at a news conference on Wednesday Luis Rivera Marín, secretary of state for Puerto Rico Gov. Ricardo Rossell-, said the government will seek to have both the litigation stay and the deadline to complete a five-year fiscal plan extended. The El Vocero news web site reported Rivera Marín's comments.
The PROMESA Oversight Board is currently seeking to have the Rossell- government submit a proposed plan by Jan. 15. According to El Vocero, Rivera Marín said the government would leave at the board's discretion how long to extend the due date for the plan and the end of the stay.
In its brief to the Boston court, Peaje Investments argued that it was the respondents (Puerto Rico's) responsibility to show to the court that the stay would not cause Peaje harm.
"They must at a minimum demonstrate when they will stop taking Peaje's collateral, and, after they do stop, that the remaining future toll revenues will have a value sufficient to cover not only future obligations but also any shortfalls in the accounts resulting from their ongoing taking of Peaje's property. Appellees [Puerto Rico], however, never even attempted to satisfy this burden."
The district court erred by failing to hold an evidentiary hearing, Peaje argued in its brief.
In a friend of the court brief, the Oversight Board argued for upholding the ruling continuing the stay. "There can be no dispute that the amounts due will be paid during the pendency of the PROMESA stay, and the appellants will, therefore, suffer no material harm during the pendency of the stay," the board stated to the appeals court.
Similarly, in its brief Puerto Rico argued, "It is not even clear how the stay is causing appellants any concrete injury, let alone the kind of substantial injury that would justify lifting a stay designed to help abate an unprecedented fiscal crisis affecting the health, safety, and welfare of millions of individuals."
The appellants "will be free to litigate their claims as soon as the stay lifts," they wrote.
