La jueza Laura Taylor Swain.
Judge Laura Taylor Swain. (Archivo)

The Fiscal Oversight Board appeared yesterday before Judge Laura Taylor Swain almost convinced that, except for eminent domain cases, there are not sufficient arguments to derail the central government’s Plan of Adjustment (POA).

Because, according to the Board, the POA is the result of multiple agreements that led to gaining the support of most of the creditor classes. Additionally, over the past two weeks, as the POA confirmation hearings advanced, the fiscal entity reached other agreements with those who also opposed the proposal.

Investment bankers, who opposed the POA until the government released them for their responsibility in the island’s debt, and bondholders of the Government Development Bank (GDB) Debt Recovery Authority were among those who opposed and now support the POA. They agreed to support in exchange for receiving bonds from the Puerto Rico Highway and Transportation Authority (PRHTA) once that debt is restructured under a Title III process and some compensation through the Public Finance Corporation (PFC).

Such overwhelming support from several creditors was confirmed yesterday during the seventh day of the central government’s POA confirmation hearing that lasted about eight hours with arguments for and against the proposal.

However, the only obstacle the Board apparently could not jump was the one raised by lawyers representing Finca Matilde, Sucesión Pastor Mandry, and PFZ Properties, among others, who claim that if the entity rejects their respective claims as it intends, the central government POA will be unconstitutional.

These claims would only total about $400 million, out of some $33 billion in obligations that the Board seeks to reject or adjust.

To convince Swain, who addresses Puerto Rico’s Title III cases, the Board´s attorney Martin Bienenstock indicated that if the fiscal entity could reject eminent domain claims, the government would have the money to pay them and as a result, it would not affect the POA’s confirmation.

To prove their point, Board´s attorneys Bienenstock and Brian S. Rosen asked Swain to admit additional evidence, including the declaration of Jay Herriman, managing director of Alvarez & Marsal North America.

According to Herriman’s declaration, within the Title III case, 18 eminent domain claims total some $51.6 million and another 31 claims alleging " inverse condemnation,” that is when a property owner seeks to repossess his property to recover what is owed by the government because the government has failed to initiate any legal proceedings or pay just compensation.

Suiza Dairy also alleges that its claim -which totals about $45.3 million- constitutes a confiscation by the state, although Herriman understands that it is an unsecured claim.

According to Bienenstock, if the PDA is confirmed, once the government pays all its obligations, Puerto Rico would only have $532 million in cash, out of some $24.607 billion it has accumulated.

The Board intends to pay eminent domain claims, for approximately 20 cents on the dollar.

Two months for the Federal Justice

In law terms, however, the matter does not appear to be simple, since last week, Judge Swain accepted a request by the U.S. Department of Justice to participate in the process.

The Board asked Swain not to delay the process considering the urgency provided by PROMESA and assured that objectors have other ways such as the federal Tucker Act to claim just compensation.

Despite this, Swain granted federal Justice until January or February 2022 to express their opinion.

The Board can’t do even the federal government,” said attorney Eduardo J. Capdevila, representing Finca Matilde, noting that under the U.S. Constitution, multiple legal precedents, the Board cannot reject eminent domain claims without violating the constitution.

“We are not in the same boat as unsecured creditors,” said attorney Alex Fuentes, representing Maruz Properties, who also claims unfair treatment.

After a day full of arguments that also included the renewed rejection by the Puerto Rico Teachers Association (AMPR, Spanish acronym) and six credit unions, Swain ended Monday’s session.

She then said the hearing resumes today, Tuesday, for the Board´s final rebuttal and the discussion of the Title VI process of the Infrastructure Financing Authority (IFA) and the Convention District Authority (CDA).

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