Puerto Rico Oversight Board rules out appeal of bond clawback deadline
The Puerto Rico Oversight Board has decided against appealing a ruling affirming a May 2 deadline for filing lawsuits for bond clawbacks.
A board spokesperson told The Bond Buyer the board’s decision Friday.
On April 2 the board, through its law firm Brown Rudnick, filed a motion to “toll” or delay the statute of limitations deadline for filing the board’s clawback actions. On Wednesday Puerto Rico bankruptcy Judge Laura Taylor Swain refused to extend a May 2 deadline for the clawback of Puerto Rico central government bond payments.
The board has said that Puerto Rico’s issuance of general obligation bonds from fiscal year 2012 was in contravention to its constitution, these bonds shouldn’t be paid, and at least some of the interest paid should be clawed back. It is focusing on bondholders who have received at least $1 million in interest.
The board has also indicated that it may seek to permanently end payments on Public Building Authority, Employees Retirement System, and fiscal year 2009 to fiscal year 2011 GO bonds. It may choose to seek clawbacks on these bonds’ payments as well.
The board still plans to file law suits concerning the bond clawbacks, the spokesperson said.
On April 17 the board filed a reply in the Title III Puerto Rico bankruptcy saying that it had sent “over 300 proposed tolling agreements to potential defendants.”
These “agreements” were documents telling the potential defendants to either sign the document agreeing to postpone the statute of limitations to take legal action against them or to expect to be sued by the May 2 deadline.
“In the absence of tolling agreements, the Special Claims Committee [of the Oversight Board] plans to commence hundreds of lawsuits in the coming weeks against alleged recipients of preferences and fraudulent conveyances as well as third party defendants in connection with certain Challenged Bond offerings,” the board continued in its reply.
The third party defendants are probably underwriters, bond counsel and other municipal industry participants that received fees connected to the bond issuances.