Puerto Rico bankruptcy judge extends stay, continues mediation

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Puerto Rico bankruptcy Judge Laura Taylor Swain ordered a continuation of the mediation concerning the central government's debts and an extension of the stay on related litigation.

Swain entered the order on Monday, after a request from the Puerto Rico Oversight Board and the Puerto Rico Fiscal Agency and Financial Advisory Authority. She ordered that the mediation team submit its report as late as Nov. 27 rather than on Oct. 28, the hearing on the report be scheduled for Dec. 11 rather than on Nov. 14, and the stay on litigation be extended to Dec. 31 from Nov. 30.

The order affects general obligation, Public Building Authority, Highways and Transportation Authority, Employees Retirement System, and Puerto Rico Infrastructure Financing Authority bonds.

Swain released the order on July 24 that put a stay on litigation on several topics concerning these bonds and that ordered the parties to enter into confidential mediation.

Swain’s order affects about $25.7 billion of debt in the bankruptcy process guided by the Puerto Rico Oversight, Management, and Economic Stability Act.

In other board-related news, on Friday Gov. Wanda Vázquez signed two measures to improve coordination of her government’s activities with the Oversight Board.

Puerto Rico attorney John Mudd said Vázquez’s signing of the measures shows she is cooperating with the board more than her predecessor as governor, Ricardo Rosselló, had done.

In late September Vázquez announced that she supported the board’s plan of adjustment for the central government, even though it includes a cut in government pensions. Rosselló had said he would oppose any plan that included a cut to pension benefits.

In one of the measures Vázquez signed Friday, she committed to notify the board of the creation of new laws, have the government’s Office of Budget and Management and FAFAA provide an estimate of the law’s fiscal impact within a defined period, and have agencies make requests to the board for reassignment of funds. The local government will also certify to the board whether newly passed laws are consistent or inconsistent with the fiscal plan.

The other measure says that the local government’s communications and meetings with federal officials must be approved and coordinated by the local government’s non-voting member of the board, Eli Díaz Atienza.

The two measures follow a history of disputes between the governor and board over the local government's responsibilities with respect to spending. In early July the board sued Gov. Rosselló for, among other things, two dozen resolutions appropriating funds for expenditures not in the board-approved budget and for his practice of failing to provide laws to the board for financial review, complete with cost estimates, in a timely fashion.

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