Puerto Rico
Oversight Board Clarifies Plan Changes for Court, Saying Objectors ‘Misunderstand’ or Apply ‘Strained Reading’ of Certain Revisions, Reiterates AAFAF Support for Modified Confirmation Order
Mon 01/03/2022 07:31 AM
Relevant Document:
Informative Motion
The PROMESA oversight board on Dec. 30 endeavored to provide the Title III court with clarification on certain revisions to the plan of adjustment. In an informative motion, the oversight board elaborates on its response to the court’s order highlighting problematic provisions with the plan and addresses certain objections to the proposed revisions.
The informative motion also explicitly reflects the court-approved stipulation among the oversight board and the government parties resolving the dispute over acts 80, 81 and 82 and Joint Resolution 33 by striking these acts from the plan’s exhibit of pre-empted laws. The oversight board says that the Puerto Rico Fiscal Agency and Financial Advisory Authority has represented that the modification to the plan exhibit satisfies the issues it raised in its reply and that AAFAF “consents to the entry of the Confirmation Order as it may be revised to reflect the exhibit modification.”
A footnote states that the official committee of unsecured creditors’ nonsubstantive changes proposed in its reservation of rights will be incorporated in a further modified plan. The filing also says that the objections of certain credit unions, or the cooperativas, are now moot in light of the court’s opinion dismissing their adversary complaint.
The oversight board asserts that certain objections misunderstand or apply a strained reading of the plan revisions related to the treatment of allowed claims for asserted eminent domain or inverse condemnation takings. The objections maintain that the board is attempting to “circumvent” the court’s order, the informative motion says, by asserting that (a) “the plan does not separately classify Eminent Domain/Inverse Condemnation Claims from CW General Unsecured Claims, and fails to pay such claims in full by including them in the CW General Unsecured Claims and conditioning payment in full upon entry of a Final Order determining non-dischargeability,” and (b) “the definition of “Final Order” is overly broad and, because the automatic stay prevents continuation of litigation of prepetition claims, it would require claimants to relitigate pre-petition judgments.”
This position “could not be further from the truth,” the oversight board argues, and provides redlined versions of the changed provisions to highlight the modifications. According to the motion, the revisions make it so that all allowed eminent domain/inverse condemnation claims are paid in full and will not be included as a commonwealth general unsecured claim. The revisions also aim to preserve all rights to appeal any determinations related to dischargeability of or need to pay in full the takings claims and provide for a mechanism to liquidate any such claims efficiently, the oversight board says. The informative motion adds that to the extent the court finds that postpetition interest must be included in the calculation of just compensation, as some objections argue, the plan will be modified to reflect such a determination.
In addition to conditioning payment in full of these claims on entry of a final order (and providing a mechanism for treatment of claims that prevail on appeal), the allowance of claims is subject to the claims resolution process in the Title III cases, giving the debtors 180 days after the effective date to object to claims, the motion states. The oversight board says that the plan provides for modification of the automatic stay to allow certain takings litigations to continue to liquidation pursuant to a final order. “The Plan does not provide for the relitigation of the merits of the claim,” the oversight board stresses. However, the oversight board adds that the debtors’ right to object to allowance of the claim should be preserved.
The informative motion also addresses the court’s concerns about the ability of PROMESA and the court to “prospectively preempt statutes which have yet to be enacted,” clarifying that the oversight board will remain consistent with its prior practices and will notify the commonwealth of any inconsistency and whether it impairs or defeats PROMESA’s purposes in accordance with PROMESA section 108(a)(2).
Informative Motion
The PROMESA oversight board on Dec. 30 endeavored to provide the Title III court with clarification on certain revisions to the plan of adjustment. In an informative motion, the oversight board elaborates on its response to the court’s order highlighting problematic provisions with the plan and addresses certain objections to the proposed revisions.
The informative motion also explicitly reflects the court-approved stipulation among the oversight board and the government parties resolving the dispute over acts 80, 81 and 82 and Joint Resolution 33 by striking these acts from the plan’s exhibit of pre-empted laws. The oversight board says that the Puerto Rico Fiscal Agency and Financial Advisory Authority has represented that the modification to the plan exhibit satisfies the issues it raised in its reply and that AAFAF “consents to the entry of the Confirmation Order as it may be revised to reflect the exhibit modification.”
A footnote states that the official committee of unsecured creditors’ nonsubstantive changes proposed in its reservation of rights will be incorporated in a further modified plan. The filing also says that the objections of certain credit unions, or the cooperativas, are now moot in light of the court’s opinion dismissing their adversary complaint.
The oversight board asserts that certain objections misunderstand or apply a strained reading of the plan revisions related to the treatment of allowed claims for asserted eminent domain or inverse condemnation takings. The objections maintain that the board is attempting to “circumvent” the court’s order, the informative motion says, by asserting that (a) “the plan does not separately classify Eminent Domain/Inverse Condemnation Claims from CW General Unsecured Claims, and fails to pay such claims in full by including them in the CW General Unsecured Claims and conditioning payment in full upon entry of a Final Order determining non-dischargeability,” and (b) “the definition of “Final Order” is overly broad and, because the automatic stay prevents continuation of litigation of prepetition claims, it would require claimants to relitigate pre-petition judgments.”
This position “could not be further from the truth,” the oversight board argues, and provides redlined versions of the changed provisions to highlight the modifications. According to the motion, the revisions make it so that all allowed eminent domain/inverse condemnation claims are paid in full and will not be included as a commonwealth general unsecured claim. The revisions also aim to preserve all rights to appeal any determinations related to dischargeability of or need to pay in full the takings claims and provide for a mechanism to liquidate any such claims efficiently, the oversight board says. The informative motion adds that to the extent the court finds that postpetition interest must be included in the calculation of just compensation, as some objections argue, the plan will be modified to reflect such a determination.
In addition to conditioning payment in full of these claims on entry of a final order (and providing a mechanism for treatment of claims that prevail on appeal), the allowance of claims is subject to the claims resolution process in the Title III cases, giving the debtors 180 days after the effective date to object to claims, the motion states. The oversight board says that the plan provides for modification of the automatic stay to allow certain takings litigations to continue to liquidation pursuant to a final order. “The Plan does not provide for the relitigation of the merits of the claim,” the oversight board stresses. However, the oversight board adds that the debtors’ right to object to allowance of the claim should be preserved.
The informative motion also addresses the court’s concerns about the ability of PROMESA and the court to “prospectively preempt statutes which have yet to be enacted,” clarifying that the oversight board will remain consistent with its prior practices and will notify the commonwealth of any inconsistency and whether it impairs or defeats PROMESA’s purposes in accordance with PROMESA section 108(a)(2).
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