Commonwealth of Puerto Rico’s official committee of unsecured creditors filed with the U.S. Bankruptcy Court an objection to the ad hoc group of general obligation (GO) bondholders’ motion to reconstitute the official committee of unsecured creditors.
The objection asserts, “The Trustee has ably fulfilled its statutory duties by appointing a diverse and representative Committee comprised of trade creditors, unions representing current employees, and tax refund creditors….Each of the Committee members remains unpaid and is dedicated to working diligently to protect and maximize the recoveries of all general unsecured creditors. The Committee’s members have one other thing in common: they are undoubtedly unsecured creditors. By contrast, the GO Group has been arguing for years that it holds secured claims, and it does so again in the first paragraph of this Motion where it requests to be appointed to the unsecured creditors’ committee. The GO Group fails to cite a single case where a court appointed a creditor holding only secured claims (or a creditor arguing that it is ‘fully secured’) to an unsecured creditors’ committee because no such case exists.”
The objection continues, “While the Committee does not disagree with the basic premise that an unsecured bondholder owed several billion dollars could be selected by the Trustee to sit on an unsecured creditors’ committee, the Trustee refused to appoint the GO Group to the Committee because it insists that it holds fully secured claims, rather than unsecured claims. The GO Group is, therefore, the architect of its own predicament….The relief requested by the GO Group is simply premature. If, in the future, they concede that they are unsecured creditors, or the Court makes that determination for them, it may be appropriate for Trustee to add representation from the Commonwealth Bondholders to the Committee. That cannot happen, however, as long as the question remains in doubt regarding whether the Commonwealth’s general obligation bonds are fully secured by all available resources.”
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