Puerto Rico Oversight Board asks for more debt negotiation time

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The Puerto Rico Oversight Board asked the bankruptcy court for more time to conduct its central government debt negotiations.

The board made the request Sunday in a filing to the United States District Court for Puerto Rico.

Attorney Martin Bienenstock
Puerto Rico Attorney Martin Bienenstock said it would be premature to set a schedule for confirming a central government debt adjustment plan.

Since the COVID-19 pandemic began earlier this year, the board has repeatedly requested Judge Laura Taylor Swain postpone deadlines in the central debt confirmation process. Swain has granted the requests.

In the winter Swain had the confirmation hearing for the central government debt plan scheduled to start Oct. 20. That confirmation hearing is now unscheduled and is eight, 10, or more months away.

On Sept. 8 board attorneys told Swain that “only a brief respite is required” to determine if the board could reach a deal with the creditor parties. It asked Swain to allow the board until Oct. 25 to get back to her to report on the status of a deal.

In the report submitted Sunday, the board didn’t claim that it would come to definitive deal or non-deal in the near future.

The board said it is unclear when the COVID-19 crisis will end. It said it anticipates getting local government assent and legislative approval for any deal and that this must wait for the outcome of the gubernatorial election on Nov. 3 and for the legislature to reconvene.

The board, through its lead attorney Martin Bienenstock, said it would be "inappropriate" and "premature" "to propose a schedule for consideration of the debtors' plan and disclosure statement."

Accordingly, the board asked Swain to allow it to return to the court on Dec. 4 with an update of its status. It said it is continuing discussions with creditors who are members of the existing Plan Support Agreement, those outside it, and with Puerto Rico’s Fiscal Agency and Financial Advisory Authority. The last is a branch of the local government.

Since the board’s Sept. 8 request for more time, PSA creditors have filed a motion for the court to put deadlines on the process of approving a deal. Swain hasn’t yet ruled on the motion.

In another development concerning the debt deal, on Sunday the court unsealed and made public the mediation agreement the PSA creditors signed before entering mediation in 2019 with the board.

On Oct. 6 bond insurer National Public Finance Guarantee asked the court to order an investigation of alleged insider trading by the investment funds that are the PSA creditors.

The mediation agreement stated: “Nothing in this agreement, including any duty of confidentiality, is intended to prevent any participating party from trading any securities (or derivative of securities) issued by (a) the government; (b) monoline insurers; or (c) any other entity to which the confidential information may relate.”

However, there may have been U.S. securities laws that would have barred the participating parties from trading in securities based on non-public information.

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