PR board, bondholders oppose credit unions' request for Plan of Adjustment delay

The Puerto Rico Oversight Board and bondholders argued in court papers filed Friday against the court granting the Puerto Rico credit unions' request to stay implementation of the Plan of Adjustment.

The board and the bondholders filed separate opposition papers to the U.S. District Court for Puerto Rico, which is handling Puerto Rico’s bankruptcy.

The filings follow the board’s and the bondholders’ similar filings on Wednesday opposing teachers’ associations’ request for a stay.

“A stay would inflict serious harm on the Commonwealth [of Puerto Rico], its creditors, and other stakeholders,” the board said, adding that a delay in the stay would be “potentially catastrophic” to the commonwealth’s reorganization efforts.

At issue is the Plan of Adjustment for Puerto Rico’s central government, which Judge Laura Taylor Swain approved in January. The board and bondholders hope to enact the plan on March 15. The teachers’ associations and the credit unions want the plan to be stayed as they pursue appeals in the Court of Appeals for the First Circuit.

The PSA Creditors is the active entity for the bondholders in the case, representing four groups of Puerto Rican bondholders and five bond insurers who insured Puerto Rican bonds.

In its opposition to the credit union’s stay request, the board cited a 2020 decision by the First Circuit that said, “A party seeking a stay pending appeal must demonstrate: (i) a ‘strong showing’ of likelihood of success on the merits on appeal; (ii) irreparable injury absent a stay; (iii) the issuance of a stay will not injure other interested parties; and (iv) a stay is in the public interest.”

The board and the PSA Creditors said the credit unions had failed on all measures.

Swain has already found no basis to except the credit unions’ claims from discharge and she has found the credit unions’ allegation that Puerto Rico’s government had made an illegal taking from them meritless, the board told Swain.
In its opposition, the board said if Swain were to grant the stay, she should require the credit unions to post a $1.5 billion bond to protect the prevailing party and third parties from any losses they would incur if the appeal was unsuccessful.

Compared to the board’s submission, the PSA Creditors’ opposition to the request for a stay was much shorter and they relied on their opposition to the teachers’ stay request. They pointed out that the Convention Center District Authority and Puerto Rico Infrastructure and Finance Authority would be delayed by any delay in approving the Plan of Adjustment.

The PSA Creditors ask Swain, if she grants the stay, to set the credit unions’ bond at more than $1 billion.

Suiza Dairy is also appealing the plan. It has not yet filed a motion for a stay.

A group representing Puerto Rico’s judiciary, Associación Puertorriqueña de la Judicatora, first gave notice of its intention to appeal the plan and then filed a notice saying it would not appeal. The association was unhappy with how the plan treated Puerto Rico’s judicial pensions. It gave no reason for withdrawing its appeal.