The Puerto Rico Oversight Board said investors holding $2.5 million or more of challenged bonds would be subject to a clawback of payments, and warned that it would sue any financial firm that fails to identify such bond holders.
The board specified in an informative motion filed on Monday afternoon in the Title III bankruptcy which bond holders would be required to return money for bonds it deemed to have been sold illegally.
The board said it would try to claw back bond payments to those who either: one, held at least $2.5 million in “Challenged Bonds” between May 3, 2013 and May 21, 2017; two, received over $250,000 in principal and interest payments during this period; or three, received any payment of at least $2,000 for a Challenged Bonds CUSIP for which payments were made on a monthly basis or any payment of $12,000 or more on a biannual basis.
The board identified the “Challenged Bonds” in its April 8 motion it made in the bankruptcy as including general obligation and Public Building Authority bonds issued from fiscal year 2009 onwards and Employees Retirement System bonds.
In Monday’s informative motion the board said that several “Participant Holders have informed the Oversight Board that for various reasons they will not comply with the First Order and Second Order.” The board states that these rulings from Magistrate Judge Judith Dein in the Title III case clearly order them to produce the information.
The board states that it will sue any “Participant Holder[s]” that don’t present lists of those it distributed funds to in excess of the specified limits for the “Challenged Bonds.”
The board has defined the Participant Holders to be Bank of America, National Association; The Bank of New York Mellon; The Bank of New York Mellon Trust Company, National Association; Goldman Sachs & Co. LLC; Goldman Sachs Bank USA; Goldman Sachs International; JPMorgan Chase Bank, National Association; and U.S. Bank N.A. In addition it defined the term to include scores of sub-entities of these financial firms.
