Appeals court sets hearing on Puerto Rico Plan of Adjustment stay

Bonds

The U.S. Court of Appeals for the First Circuit set the hearing for a stay on the Puerto Rico Plan of Adjustment for Wednesday after several teachers’ associations filed the request.

On Friday the Appeals Court gave until 5 p.m. on Sunday for the Puerto Rico Oversight Board to respond to the teachers’ request for a stay. The court also said there would be argument on the motion on Wednesday afternoon and the court will not allow extension of the hearing.

The teachers’ associations asked first the U.S. District Court and then the Appeals Court for a stay on this enactment, as they are opposed to the way the plan would treat Puerto Rico public school teachers’ pensions.

District Court Judge Laura Taylor Swain rejected the teachers’ associations and a separate Puerto Rico credit unions’ request for a stay of the enactment on Thursday. Attorneys for the teachers’ association filed a stay request with the Appeals Court later Thursday.

The Plan of Adjustment is scheduled to be enacted March 15 and Puerto Rico’s restructured general obligation bonds are expected to come to market the same day.

Bufete Emmanuelli Partner Jessica Méndez Colberg filed a request for a stay on the Puerto Rico Plan of Adjustment with the U.S. Appeals Court for the First Circuit Thursday.

District Court Judge Laura Taylor Swain rejected the teachers’ associations and a separate Puerto Rico credit unions’ request for a stay of the enactment on Thursday. Later that day, attorneys for the teachers’ association filed a stay request with the Appeals Court.

The teachers’ associations appealing are Federación de Puerto Rico; Grupo Magisterial Educadores(as) por la Democracia, Unidad, Cambio, Militancia y Organización Sindical; and Unión Nacional de Educadores y Trabajadores de la Educación.

An attorney for the credit unions did not immediately respond to a request for comment on whether he would be seeking a stay on Plan of Adjustment enactment.

Both the credit unions and the teachers’ associations filed their notices of appeal with the Court of Appeals for the First Circuit on Jan. 28.

The teachers associations are being represented by attorneys Jessica Méndez Colberg and Rolando Emmanuelli Jiménez, both with the Bufete Emanuelli law firm.

An attorney in the Puerto Rico bankruptcy said the teachers had about a 30% chance of gaining the stay.

If the teachers ultimately win their appeal, the board would be forced to try to renegotiate the Plan of Adjustment into a form where the bondholders would get less money. Since bondholders are unlikely to accept reduced payments, the courts would have to dismiss the Plan of Adjustment and the Title III bankruptcy process, the attorney said.

This would leave creditors to seek their remedies in the court system without the processes and protections set out in the Puerto Rico Oversight, Management, and Economic Stability Act.

The Oversight Board did not respond to a request for comment by press time.

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