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Muni Week Review / Preview 9/5/2017

Tuesday, Sep 05, 2017

PUERTO RICO UPDATE

Court Schedule For Resolving COMMONWEALTH – COFINA Dispute

COFINA Bondholders take the positon that they invested in the law created by the Puerto Rico legislature. The law states that it is the intent of the Legislative Assembly that the COFINA bondholders have a perfected statutory lien on the Pledged Sales Tax Revenue deposited in the Dedicated Sales Tax Fund and these revenues do not constitute “available resources” of the Commonwealth for any purpose, including for the purposes set forth in the Constitutional Debt Priority Provision. In addition the law states that the Dedicated Sales Tax Fund is to be transferred to, and shall be the property of the COFINA Corporation and provides further that the Pledged Sales Tax Revenue will (i) be deposited in the Dedicated Sales Tax Fund upon receipt and will not be deposited into the Commonwealth’s General Fund until COFINA bondholders’ debt service is satisfied, (ii) not constitute resources available to the Commonwealth, and (iii) not be available for use by the Secretary of Treasury.  

The Commonwealth on September 8 will file its complaint on why they should be allowed to disregard the law that created the statutory lien and be allowed access to Dedicated Pledged COFINA Revenue. On August 10, 2017 the court approved a stipulation entered into by the Agent (lawyers) for the Commonwealth and the Agent (lawyers) for COFINA. COFINA bondholders believe their statutory lien on Pledged Sales Tax Revenues, which was created by the Puerto Rico legislature and supported by various legal opinions including the Puerto Rico Department of Justice, is ironclad. However, the Court following due process must hear opposing views before it renders a ruling. The Court would prefer the parties reach a consensual resolution prior to the December hearing. Both Agents have agreed on the following schedule:

Friday September 8

The Commonwealth must file its complaint, why it should have access to COFINA funds. The Commonwealth and its relevant agencies and departments including the Department of Justice, Government Development Bank, COFINA and the Puerto Rico Treasury Department shall commence production of documents related to the complaint.

Friday September 15

The COFINA Agent shall file its answer to the Commonwealth Agent’s complaint, along with any counterclaims it intends to assert.

Friday September 22

The Commonwealth shall file its answer to any counterclaims asserted by the COFINA Agent. Any parties who wish to intervene in the Commonwealth – COFINA dispute shall file motions to do so. The permitted intervenors are required to file a pleading setting forth their respective position.The Commonwealth and its previously mentioned agencies shall complete production of documents.

Friday September 29

The Commonwealth and COFINA Agents shall file answers to any pleadings by the permitted intervenors.

Friday October 6

Other than permitted intervenors, opposition pleadings to motion to intervene by nonpermitted intervenors are due. Permitted intervenors shall file answers to any counterclaims asserted against them.

Friday October 13

Reply briefs in support of their motions to intervene in the Commonwealth – COFINA dispute by any person other than the permitted intervenors are due.

Friday October 27

The Commonwealth and COFINA Agents shall complete taking “Fact” discovery.The Commonwealth and COFINA shall submit expert reports.

Friday November 3

The Commonwealth and COFINA shall complete expert discovery.The Commonwealth and COFINA shall file their opening pre-trial briefs.

Wednesday November 15

Motions to intervene shall be heard at an omnibus hearing.

Friday November 17

The Commonwealth and COFINA will file oppositions to the others pre-trial briefs.

Monday November 20

The Commonwealth shall submit to COFINA its draft pre-trial order.

Friday November 24

COFINA shall submit to the Commonwealth its draft pre-trial order.

Monday November 27

The Commonwealth and COFINA shall file a reply to pre-trial briefs.The Commonwealth and COFINA shall jointly file a final pre-trial order.

Monday December 4 to 8

The court hearing for the Commonwealth – COFINA dispute shall be held before Judge Laura Swain in the U.S. District Court for the District of Puerto Rico. The legal substance of the claims or defenses asserted by each party shall determine the parties’ respective burdens of proof in this matter. The expedited schedule set forth herein depends upon substantial completion of document discovery, including the substantial completion of document production by the Commonwealth and its relevant instrumentalities and departments by September 22, 2017. Before or after such deadline, the Agents may together or separately move upon shortened notice to compel such discovery and/or to modify the schedule as necessary. The parties may move for Judge Swain to resolve the dispute by Summary Judgment on or before October 13, 2017.

If you have any questions or desire updated information contact your GMS Account Executive.

Information obtained from sources deemed reliable; GMS does not purport Review/Preview contains all available information.