Multiple parties – including Mutual Fund Group and the Puerto Rico Funds, National Public Finance Guarantee, Ambac Assurance and the COFINA Senior Bondholders’ Coalition – filed with the U.S. Bankruptcy Court separate objections to the Commonwealth of Puerto Rico’s motion for an order approving procedures to resolve the Commonwealth-COFINA dispute.
The Mutual Fund Group and the Puerto Rico Funds objection asserts, “The Mutual Fund Group and the Puerto Rico Funds (‘Objectors’), who collectively hold over $4 billion in COFINA senior and subordinate bonds, object to the Debtors’ Motion for Order Approving Procedure to Resolve Commonwealth-COFINA Dispute….The Court should deny the Protocol Motion. The Oversight Board seeks – without any legal authority – to wrest control over the Commonwealth-COFINA Dispute4 through entry of an order (the’ Proposed Order’) that would exceed the bounds of PROMESA and violate the United States Constitution.”
In addition, “The Proposed Order would appoint an agent to enforce COFINA’s right to pledged revenues in which COFINA itself has only minimal equity – the agent would act as a receiver. There is no authority for such appointment. The Proposed Order provides for a collusive litigation between the Oversight Board’s own agents, on the Oversight Board’s own schedule, with the Oversight Board retaining the power to settle, in violation of Article III of the United States Constitution….Puerto Rico law is the lynchpin. Under the United States Constitution, federal law cannot deprive COFINA and its bondholders of property interests that are valid under Puerto Rico law. If, under Puerto Rico law, COFINA owns the revenues it pledged to its bonds, PROMESA is powerless to take the revenues away. The only issue in this dispute is whether Puerto Rico statutes transferring revenues to COFINA and securing its bonds are valid under Puerto Rico’s Constitution – an unprecedented issue that can only be decided definitively by the Puerto Rico Supreme Court, and can be so decided prior to November 1.”
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