U.S. District Court Judge Laura Taylor Swain approved an interim deal for Puerto Rico Employees Retirement System bondholders whereby they will be paid interest through the end of October.
The “order approving joint stipulation” in the Title III bankruptcy case for the $3.2 billion in ERS bonds outstanding was approved Monday.
As worked out between bondholders, the Puerto Rico Fiscal Agency and Financial Advisory Authority, the Puerto Rico Oversight Board, and the fiscal agent The Bank of New York Mellon, bondholders will receive due interest of $14 million per month at the start of the month through Oct. 1. This will come from a “pre-petition account” that the ERS has already been sending money to since January. A payment for July 1 will be made in mid-July.
Additionally, the agreement states that ERS will create a “post-petition segregated account” to which the retirement system will contribute money. The ERS will contribute $18.5 million in interest at the end of every month up to and including the end of October. Additionally, on Wednesday the account will receive $18.5 million plus employers’ contributions from May 22 through May 31.
The ERS last made a bond payment on July 1, 2016, according to the Puerto Rico government’s October 2016 proposed fiscal plan. While interest is due monthly, no principal is due until fiscal year 2021.
Swain’s signed order also sets up a schedule for handling the case culminating in a hearing in New York City on Oct. 31. At that hearing Swain will hear motions for summary judgement in the case. The hearing will also take place in a court in Puerto Rico through video telecast.
During the period up to the Oct. 31 hearing, the bondholders have agreed to not seek immediate relief for their claims. The government and the bondholders will seek to have the court decide on the validity of the bondholders’ liens and security interests.
The judge will ultimately decide on how the money set aside in the “post-petition segregated account” will be used.
The board filed a Title III case for ERS on May 24. Title III is a bankruptcy mechanism found in the Puerto Rico Oversight, Management, and Economic Stability Act.
Swain is hearing cases not just for ERS but also for the Highways and Transportation Authority, Puerto Rico Electric Power Authority, Puerto Rico Sales Tax Financing Corp. (COFINA), and Puerto Rico’s general obligation debt. She will also consider a debt deal for the Government Development Bank for Puerto Rico.