The bankruptcy trustee for Puerto Rico, Monsita Lecaroz, has to present to federal district judge Laura Taylor Swain today a report on the composition of the creditors' committees in the Title III case of the Puerto Rican government.
Lecaroz appeared on Wednesday to the first hearing of the largest US municipal debt bankruptcy case at the request of the judge, who defined the procedural aspects of the case and even extended the periods suggested by the Oversight Board (OB) so that government creditors or interested parties may submit or request reconsideration of their arguments.
At the hearing, Swain asked Lecaroz about creditors committees that could be established and which would take part of the negotiation that precedes the readjustment of central government obligations.
The motion of the pensioners. Lecaroz explained that at the time of the hearing, the retiree committee known as “Movimiento Pro Pensionados” had filed a motion for pensioners to form a separate group within the universe of uninsured creditors of the Puerto Rican government and that her office was evaluating the motion.
Other interested parties, including the (drug wholeseller) Droguería César Castillo, suggested the judge to create a committee for creditors who sell services or goods to the government.
In the same way. union organizations have also asked to participate in the process.
"We understand that this organization must be recognized because it is integrated by a diversity of pensioners, retired police officers, ex employees at school canteens, teachers and retired employees from various agencies," said A.J. Bennazar Zequeira, who represents the “Movimiento” group together with Robert D. Gordon, form the firm Clark Hill.
On May 3rd, when the OB requested the protection of Title III of PROMESA for the government of Puerto Rico, the federal entity asserted that the government could not honor the actuarial obligation with pensioners of the public system and which is about $ 49 billions.
As from next month, the Administration of Retirement Systems (ASR, Spanish acronym) and then the Teachers´Retirement System and the one of the Judicature will have no cash resources to pay the pensions.
The payment will come from the General Fund, as contemplated in the Fiscal Plan for Puerto Rico.
Onced filed the request of Title III, Bennazar Zequeira and Gordon filed a motion to Swain stating that, in the universe of uninsured creditors, retirees are a separate class.
Broadly speaking, in bankruptcy proceedings or reorganization of a company, the Court authorizes the modification of the obligations of the debtor considering their priority or payment guarantee. Creditors are generally divided into those who have claims or guarantees in their favor (ie, "insured") and those who provide services or goods without having specific assets as a source of repayment.
Committees are usually identified by the district court trustee. However, the judge seemed to have indicate Lecaroz that she also had authority to decide on the motions that are filed.
"These are not bondholders, nor did they lend or sell assets to the state, they are very special creditors," said Bennazar Zequeira, noting that he was optimistic about the expressions of Swain, whom he described as a judge who knew the bankruptcy processes.
Other experiences. In that sense, Bennazar Zequeira told El Nuevo Día that the request from the group “Movimiento” shows no differences with the special class of retirees that was created in other municipal bankruptcy cases. Among them, Detroit, in Michigan, and Vallejo, in the state of California.
He also emphasized that, unlike other creditors, there are pensioners who have no other income than the retirement pay they receive from public pension plans and therefore, they must have a voice to protect their interests.
Although Wednesday's hearing focused on procedural matters, Gordon was the only lawyer before Judge Swain whose requests were not about Island bonds or suppliers debt.
In the hearing, Gordon said that for the past two tor three months, retirees from the Island have heard that there will be cuts in health expenses and their pensions, and also that the Fiscal Plan for Puerto Rico was approved. However, said the lawyer, the more than 90,000 pensioners represented by the “Movemiento” have not had the opportunity to participate in the negotiations convened by the OB.
According to Bennazar Zequeira, the 15 retired organizations that integrate the “Movimiento” have exercised a great deal of prudence by not expressing their frustration in public forums or on the streets and with that they have shown that they have the capacity and maturity to represent one of the most vulnerable sectors before the coming adjustments.
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