- Law firms
- Insurer deal is latest step toward bankruptcy exit
- Fees reach $943 million
- Bond revenue litigation to hit pause
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July 14 (Reuters) - Puerto Rico has reached a tentative agreement with two bond insurers that have long opposed its debt restructuring proposal, a lawyer for the federally-appointed financial oversight board said on Wednesday.
Brian Rosen of Proskauer Rose made the announcement about the “verbal understanding” at the outset of a virtual hearing before U.S. District Judge Laura Taylor Swain in San Juan. The deal, with bond insurers Ambac Assurance Corp and Financial Guaranty Insurance Co, still needs to be finalized and documented, Rosen said. The tentative accord comes a day after the oversight board announced an agreement with its official unsecured creditors’ committee that secures its support for the restructuring.
The board hopes to push through its debt adjustment plan by the end of the year. Under the proposed plan, Puerto Rico’s $35 billion in public debt would be reduced to $7.4 billion and more than $50 billion in pension liabilities would be restructured. The proposal has support among several groups of bondholders but still faces opposition from the Puerto Rican government, as well as some retail investors and individual citizens.
As a result of the tentative bond insurer settlement, Swain will likely wait until later this month to issue a formal ruling on the board’s request to begin soliciting creditor votes for the plan. Atara Miller of Milbank, who represents Ambac, said during Wednesday’s hearing that she is “pleased” by the agreement reached with the board and that Ambac will soon move to halt ongoing litigation over rights to certain revenues that they say secure their bonds.
Puerto Rico is now four years into its court-supervised bankruptcy-like process, known as Title III. The case has racked up approximately $943 million in legal fees, according to a report from the court-appointed fee examiner filed on Tuesday night.
The major dispute remaining involves the Puerto Rican government, which opposes pension cuts proposed in the board’s plan. The plan would impose an 8.5% cut to public pensions with a floor to ensure no monthly retirement benefits are below $1,500.
The board sued the government in early July to block legislation that it says would reintroduce expensive pension obligations that the plan is specifically trying to address.
The case is In re Commonwealth of Puerto Rico, U.S. District Court, District of Puerto Rico, No. 17-03283.
For the oversight board: Martin Bienenstock, Brian Rosen, Mark Harris, Ehud Barak, Timothy Mungovan, John Roberts and Margaret Dale of Proskauer Rose; and Hermann Bauer-Alvarez of O'Neill & Borges
For Ambac: Atara Miller, Dennis Dunne, Grant Mainland, John Hughes III and Jonathan Ohring of Milbank and Roberto Camara-Fuertes of Ferraiuoli LLC
For FGIC: Martin Sosland, James Bailey III and Adam Langley of Butler Snow and Maria Pico of Rexach & Pico