Leroy N. Soetoro
2017-05-03 07:31:14 UTC
http://www.reuters.com/article/us-puertorico-debt-lawsuit-idUSKBN17Y0G3
Holders of Puerto Rican sales tax-backed debt sued the U.S. territory in
the wee hours of Tuesday morning, alleging its debt-cutting plans violate
the U.S. Constitution and kicking off a likely deluge of lawsuits against
the ailing island.
The complaint, filed in federal court in San Juan, accuses Puerto Rico's
leadership of impairing contractual rights of so-called COFINA
bondholders, whose debt is backed by sales tax revenue, and trying to take
their property in what they say are violations of the due process clause
of the U.S. Constitution.
With $70 billion in debt, a 45 percent poverty rate and near-insolvent
public health and pension systems, a torrent of litigation could force
Puerto Rico into a so-called Title III proceeding - an in-court debt-
cutting process similar to U.S. bankruptcy.
Midnight Tuesday morning marked the end of a freeze on creditor litigation
under last year's federal rescue law known as PROMESA, designed to
encourage Puerto Rico and its federal financial oversight board to
negotiate debt-cutting agreements with creditors.
With no deals reached, the expiration of the freeze opened the floodgates
for stakeholders to take Puerto Rico to court, in hopes of blocking
Governor Ricardo Rossello's plan to impose drastic repayment cuts.
The COFINA plaintiffs - which include local COFINA holder Jose Rodriguez
Perello, as well as hedge funds like Cyrus Capital Partners LP and Tilden
Park Capital Management - accuse Puerto Rico, Rossello and other officials
of angling to repurpose the tax revenue earmarked to pay COFINA debt.
The plaintiffs accuse Puerto Rico of taking their property "without just
compensation or due process in violation of rights protected under the
United States and Puerto Rico Constitutions."
They cite as evidence a law signed by Rossello on Saturday that would give
the government authority to redirect sales tax revenue into Puerto Rico's
general fund as part of a debt restructuring.
Puerto Rico "must not be allowed to continue to breach its constitutional
and contractual obligations at will," the lawsuit said.
The complaint asks the court to block Rossello from implementing a fiscal
turnaround blueprint, approved by the oversight board in March, which has
been the bane of island creditors.
The blueprint forecasts that Puerto Rico will have only $800 million a
year to pay its debt, less than a quarter of what it owes, auguring big
haircuts for all bondholders.
Litigation could spur the oversight board to push Puerto Rico into Title
III, created as part of PROMESA. That would protect the island from
lawsuits and give it more legal sway to impose the kinds of contractual
alterations the COFINA group is accusing it of undertaking illegally out
of court.
Many experts and people involved in talks see Title III as an eventual
certainty, though timing is uncertain.
Tuesday's lawsuit comes on the heels of a restructuring offer from
Rossello's administration on Saturday that would have favored Puerto
Rico's general obligation bondholders, whose debt is guaranteed by the
island's constitution.
The plan would have seen GO holders recover as much as 77 cents on the
dollar, while COFINA holders would have recouped just 58 cents.
Other defendants in the lawsuit include Elias Sanchez, Rossello's liaison
to the oversight board; Gerardo Portela, director of Puerto Rico's fiscal
agent, known as AAFAF; and AAFAF itself.
--
Donald J. Trump, 304 electoral votes to 227, defeated compulsive liar in
denial Hillary Rodham Clinton on December 19th, 2016. The clown car
parade of the democrat party has run out of gas.
Congratulations President Trump. Thank you for ending the disaster of the
Obama presidency.
Under Barack Obama's leadership, the United States of America became the
The World According To Garp.
ObamaCare is a total 100% failure and no lie that can be put forth by its
supporters can dispute that.
Obama jobs, the result of ObamaCare. 12-15 working hours a week at minimum
wage, no benefits and the primary revenue stream for ObamaCare. It can't
be funded with money people don't have, yet liberals lie about how great
it is.
Obama increased total debt from $10 trillion to $20 trillion in the eight
years he was in office, and sold out heterosexuals for Hollywood queer
liberal democrat donors.
Holders of Puerto Rican sales tax-backed debt sued the U.S. territory in
the wee hours of Tuesday morning, alleging its debt-cutting plans violate
the U.S. Constitution and kicking off a likely deluge of lawsuits against
the ailing island.
The complaint, filed in federal court in San Juan, accuses Puerto Rico's
leadership of impairing contractual rights of so-called COFINA
bondholders, whose debt is backed by sales tax revenue, and trying to take
their property in what they say are violations of the due process clause
of the U.S. Constitution.
With $70 billion in debt, a 45 percent poverty rate and near-insolvent
public health and pension systems, a torrent of litigation could force
Puerto Rico into a so-called Title III proceeding - an in-court debt-
cutting process similar to U.S. bankruptcy.
Midnight Tuesday morning marked the end of a freeze on creditor litigation
under last year's federal rescue law known as PROMESA, designed to
encourage Puerto Rico and its federal financial oversight board to
negotiate debt-cutting agreements with creditors.
With no deals reached, the expiration of the freeze opened the floodgates
for stakeholders to take Puerto Rico to court, in hopes of blocking
Governor Ricardo Rossello's plan to impose drastic repayment cuts.
The COFINA plaintiffs - which include local COFINA holder Jose Rodriguez
Perello, as well as hedge funds like Cyrus Capital Partners LP and Tilden
Park Capital Management - accuse Puerto Rico, Rossello and other officials
of angling to repurpose the tax revenue earmarked to pay COFINA debt.
The plaintiffs accuse Puerto Rico of taking their property "without just
compensation or due process in violation of rights protected under the
United States and Puerto Rico Constitutions."
They cite as evidence a law signed by Rossello on Saturday that would give
the government authority to redirect sales tax revenue into Puerto Rico's
general fund as part of a debt restructuring.
Puerto Rico "must not be allowed to continue to breach its constitutional
and contractual obligations at will," the lawsuit said.
The complaint asks the court to block Rossello from implementing a fiscal
turnaround blueprint, approved by the oversight board in March, which has
been the bane of island creditors.
The blueprint forecasts that Puerto Rico will have only $800 million a
year to pay its debt, less than a quarter of what it owes, auguring big
haircuts for all bondholders.
Litigation could spur the oversight board to push Puerto Rico into Title
III, created as part of PROMESA. That would protect the island from
lawsuits and give it more legal sway to impose the kinds of contractual
alterations the COFINA group is accusing it of undertaking illegally out
of court.
Many experts and people involved in talks see Title III as an eventual
certainty, though timing is uncertain.
Tuesday's lawsuit comes on the heels of a restructuring offer from
Rossello's administration on Saturday that would have favored Puerto
Rico's general obligation bondholders, whose debt is guaranteed by the
island's constitution.
The plan would have seen GO holders recover as much as 77 cents on the
dollar, while COFINA holders would have recouped just 58 cents.
Other defendants in the lawsuit include Elias Sanchez, Rossello's liaison
to the oversight board; Gerardo Portela, director of Puerto Rico's fiscal
agent, known as AAFAF; and AAFAF itself.
--
Donald J. Trump, 304 electoral votes to 227, defeated compulsive liar in
denial Hillary Rodham Clinton on December 19th, 2016. The clown car
parade of the democrat party has run out of gas.
Congratulations President Trump. Thank you for ending the disaster of the
Obama presidency.
Under Barack Obama's leadership, the United States of America became the
The World According To Garp.
ObamaCare is a total 100% failure and no lie that can be put forth by its
supporters can dispute that.
Obama jobs, the result of ObamaCare. 12-15 working hours a week at minimum
wage, no benefits and the primary revenue stream for ObamaCare. It can't
be funded with money people don't have, yet liberals lie about how great
it is.
Obama increased total debt from $10 trillion to $20 trillion in the eight
years he was in office, and sold out heterosexuals for Hollywood queer
liberal democrat donors.