Investors in Puerto Rican debt have clashed in US federal court over a temporary halt to litigation in one of the first significant disputes between creditors since the crisis intensified last year.
Investors holding senior debt issued by the Puerto Rico Sales Tax Financing Corporation, known as Cofina by its Spanish acronym, have filed a motion in US court in San Juan to intervene in a lawsuit brought by several hedge funds, US capital markets correspondent Eric Platt reports.
The Cofina holders — including GoldenTree Asset Management and Merced Capital — have sided with a seven-member control board appointed by President Barack Obama, which has asked for a stay of litigation to remain in effect.
The motion disputes a complaint filed by hedge funds including Aurelius Capital Management, Monarch Alternative Capital and Stone Lion Capital, which had alleged that Puerto Rico had diverted funds and violated emergency legislation passed by Congress and signed into law earlier this year.
The emergency law halted new litigation against the commonwealth until February 2017, giving the control board time to understand the peculiarities of the $69bn debt burden, the competing creditor interests and complexities of the Puerto Rican economy. Nonetheless, more than half a dozen lawsuits have been filed in a test of the stay.
“As constructive participants engaging in good faith negotiations with the government of Puerto Rico and other bondholder groups, we believe that the plaintiffs’ efforts to circumvent congressional intent and disrupt established processes undermine the best interests of the commonwealth, its citizens and creditors,” the senior Cofina creditors said in a statement.
A ruling by Judge Francisco Besosa could open the commonwealth to a barrage of litigation and complicate the job for the control board if the stay is loosened or lifted entirely. Puerto Rico does not have access to traditional bankruptcy protections afforded to US towns and cities, and is instead reliant on the emergency legislation to restructure its debt in an orderly manner.
The senior Cofina creditors have been at odds with several investors holding general obligation bonds, which is guaranteed by the Puerto Rican constitution. Both have claimed that they should rank at the top of the near $70bn debt mountain.
Copyright The Financial Times Limited 2016. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.
Investors in Puerto Rico’s debt clash in US federal court
No comments:
Post a Comment