Puerto Rico bankruptcy Judge Laura Taylor Swain set the Disclosure Statement Hearing for the central government bankruptcy for July 13, setting up a first step in approving the commonwealth's plan of adjustment for its debts.
On Tuesday afternoon Swain posted her order for the hearing, deadlines connected to it, to establish a related document depository, and to set up a way to deal with confidential information. Swain is handling the bankruptcy in the U.S. District Court for Puerto Rico.
“The beginning of the end of government bankruptcy is near. The hearing on whether the disclosure statement is adequate will be on July 13. This is the first step in approving the adjustment plan. If everything follows its ordinary course, [Puerto Rico] would start paying in 2022,” Puerto Rico attorney John Mudd tweeted.
The Puerto Rico Oversight Board in early April had asked Swain to set the Disclosure Statement Hearing for June 16.
The July hearing will consider the adequacy of the Disclosure Statement that the board submitted in late February.
Mudd said if the board submitted an amended Plan of Adjustment and Disclosure Statement this week, Swain’s timetable was realistic.
Along with the July 13 deadline, Swain set a deadline for objections to the proposed Disclosure Statement 28 days after service of the Disclosure Statement Hearing Notice.
Prime Clerk will handle service of notice. Swain did not specify when it will be completed.
Swain set a deadline of 14 days after the objection deadline for replies to the objections.
Only those who file written objections to the Disclosure Statement will be allowed to participate orally in the July 13 hearing.
Swain also ordered the Oversight Board to set up a Disclosure Statement Repository by 9 a.m. on Friday at titleiiiplandataroom.com. The repository will include “factual source materials and raw data underlying the Disclosure Statement … as well as documents relating to the nature of claims and classifications under the plan.”
Only Puerto Rico government employees (including those working for the board) and creditors will be allowed access to the depository, according to Swain’s order. Those accessing the depository can specify whether they want only access to the non-confidential documents or also access to the confidential ones.
The board will designate what documents are to be designated confidential. Creditors are given the right to appeal the board’s designation of confidential material.
Those accessing confidential documents will have to promise to keep them confidential. They will also have to destroy the documents within 60 days after a final order confirming the plan of adjustment or exhaustion of all appeals of it.
Mudd said Swain’s granting the board the right to declare documents confidential was unreasonable given the bankruptcy is being financed with taxpayer money.
Puerto Rico Clearinghouse Principal Cate Long said she thinks "significant problem could be that the board included the commonwealth's fiscal year 2017 Comprehensive Annual Financial Report in the Disclosure Statement and those financials likely will be restated when they publish the fiscal year 2018 CAFR in June.
“The government had significantly more cash than was disclosed in the 2017 CAFR, according to the U.S. Treasury in December 2017, and investors may not be able to rely on that information in the Disclosure Statement, which is material in my opinion,” Long said. “Unfortunately, the Puerto Rico government has slow walked their audited financial statements.”
