Puerto Rico bankruptcy Judge Laura Taylor Swain has set a schedule for considering establishing a committee to represent retail holders of Puerto Rico bonds.
On June 30 Swain approved a motion by a retail bondholder to consider the committee, which would provide legal representation of retail bondholders in the bankruptcy.
New York attorney and Puerto Rico bondholder Peter Hein had made earlier motions to establish a retail bondholders committee but Swain had struck them down in April 2019.
But in a June 9 filing, Hein said new developments "now show that the court should re-evaluate the need for a committee to represent retail investors and should now appoint a committee to represent members of the eight retail investor classes in the confirmation process.” The proposed Disclosure Statement defines retail investors as those holding less than $1 million in par amount.
Hein's June 9 filing made a cross-motion that asked Swain to establish the committee in the confirmation process. On the morning of June 30 Hein said he had settled with Oversight Board attorneys on a proposed timeline for considering a committee.
Later that day Swain approved the timeline giving Hein until 6 p.m., Tuesday to submit a motion on the topic, other parties until 5:00 p.m. on July 19 to respond, Hein until 5:00 p.m. on July 27 to reply to the responses. Swain promised an oral argument on the proposal on Aug. 18.
In his motion Hein argued that, first, retail bondholders are the only group who are not being directly or indirectly paid by Puerto Rico’s government and debtor authorities. The hedge funds and other investment funds that negotiated the central government deal will get 1.5% of total part outstanding to cover consummation costs.
Puerto Rico also pays for the attorneys representing the unsecured creditors and retirees’ committees and Hein said it was only fair that the retail bondholders also be given some attorney representation.
Second, Hein said the complexity of the proposed Plan of Adjustment and Disclosure Statement make it “essential” that a committee be established for retail investors. The plan and statement’s “complexity” make them “beyond the capabilities of the typical retail investor to evaluate.”
“The court could set an appropriate cap on expenses by the committee’s retained professionals, using as a benchmark starting point the level of fees incurred by professionals retained by existing committees or cash payments and payments in the form of administrative expense claims that debtors have agreed to make to other parties,” Hein said.
About Hein’s latest request Puerto Rico attorney John Mudd said, “She has denied it in the past. Maybe this time she will change her mind.”
