Nine parties filed challenges to the Puerto Rico Oversight Board’s written arguments for its proposed Plan of Adjustment. The challenges concern preemption of pension laws, various bondholder treatments and whether government employees were given ample notice of the plan.
The board filed its “proposed findings of fact and conclusions of law” in connection with confirmation of the modified eighth amended Title III joint Plan of Adjustment on Nov. 28.
The 109-page document is created in a form that Judge Laura Taylor Swain can sign to make its arguments her own. The submission comes after the Nov. 23 conclusion of oral confirmation hearings on the proposed Plan of Adjustment.
The Puerto Rico Fiscal Agency and Financial Advisory Authority, bondholder Peter Hein, a group of Puerto Rico credit unions, the Service Employees International Union, among others, filed objections Tuesday and Wednesday.
Among FAFAA’s arguments were against board-proposed provisions on Acts 80, 81, and 82 of 2020. These were local government laws on pensions the previous governor had agreed not to implement until he reached a settlement with the board on them. On Nov. 11, the Puerto Rico Senate passed a measure compelling implementation of Act 80 within 60 days. In response, in mid-November the board asked the court to add Acts 80, 81, and 82 to the measures to be preempted by the confirmation order.
FAFAA said the board had plenty of time to add the acts to those being preempted by the Plan of Adjustment but had failed to do so. FAFAA suggested Swain modify the proposed language on preempted laws.
On the board’s plan for a pension reserve trust, FAFAA said the board’s evidence in a passage only supports the board’s earlier plan for the trust. Therefore, the board’s proposed sentences should be deleted.
In his objection, Hein said the deal gives bondholders on the island a better deal than those on the mainland, calling it discriminatory.
He said that by not instituting pension cuts, the proposed Plan of Adjustment effectively reverses the Puerto Rico Constitution’s payment priorities.
Hein disagreed with the board’s assessment that the local government and board have operated in “good faith” because Puerto Rico has not paid debt service on its constitutionally guaranteed debt during the bankruptcy despite having money to do so.
He said the local law that authorizes the debt adjustment, Act 53, is conditioned on no cuts to pensions and this makes the debt deal uncertain, so Swain should reject it.
In a separate filing, the credit unions said their challenge to the Plan of Adjustment was mainly based on the so-called takings clause of the Bill of Rights. They said the findings should explicitly indicate the plan is feasible even if Swain were to rule that their claim and other takings clause-based claims must be paid.
The credit unions asked Swain to modify the proposed findings of fact.
In its objection, the SEIU said the findings incorrectly state their members, who work in Puerto Rico’s government, were given adequate notice. The members were not notified of the board’s plan for a 10-year restriction on the local government increasing defined pension benefit before the members voted on it. For the same reason, the SEIU also objected to a passage of the findings that says the board’s changes to the proposed Plan of Adjustment do not adversely affect creditors like their employees.
Mapfre, Suiza Matilda, PFZ Properties, Demetrio Amador Inc., and Sucesión Pastor Mandry Mercado also objected to the proposed findings of fact and conclusions of law.
The deadline to file objections to the proposed findings of fact and conclusions of law was Wednesday, but Swain has said she is open to other written filings about her decision on approving the Plan of Adjustment and related documents.
Swain has set Dec. 15 and 16 if there is need for an omnibus hearing, which could cover other authorities covered by Title III but outside of the currently considered plan. These include the Puerto Rico Electric Power Authority and Highways and Transportation Authority.
She has also given the U.S. Attorney General until Feb. 7 to comment on constitutional challenges to the plan and to the Puerto Rico Oversight, Management, and Economic Stability Act. She is unlikely to rule on the plan before then.