SAN JUAN (Reuters) - A judge on Thursday ordered banks to comply with a request from Puerto Rico's federally created financial oversight board to disclose customer information related to certain debt issued by the bankrupt U.S. commonwealth.
The ruling boosts a potential effort by the board to recover billions of dollars in payments made to bondholders should a federal court hearing Puerto Rico's bankruptcy cases choose to invalidate disputed debt issued by the government and its agencies.
U.S. Magistrate Judge Judith Gail Dein's order said "good cause exists" to grant the board's motion, which seeks to compel banks to submit bondholder names and addresses along with Puerto Rico debt payments the bondholders received between 2013 and 2017.
The Bank of New York Mellon (NYSE:BK), Bank of America Corp (NYSE:BAC), JP Morgan Chase (NYSE:JPM) Bank, and U.S. Bank objected to the board's request last week, citing concerns over disclosing confidential customer information, as well as the cost and ability to produce a large amount of information by the April 19 deadline set by the board.
The judge ordered the banks and the board to submit a proposed confidentiality agreement by April 23 and set rolling deadlines of April 25, April 30 and May 8 for the banks to submit bondholder information. She rejected requests by the banks to be reimbursed for their costs and for indemnity for claims that could result from compliance with the order.
It was unclear whether the banks will appeal. Attorneys for the banks either declined to comment or could not immediately be reached.
The quest for bondholder information is related to an attempt by the board and some creditor groups in the bankruptcy to have the federal court void more than $6 billion of defaulted general obligation (GO) bonds sold in 2012 and 2014, as well as debt issued by Puerto Rico's Public Buildings Authority and bonds sold for the island's Employees Retirement System.
The board filed bankruptcy for the island in May 2017 to restructure about $120 billion of debt and pension obligations. But it did not seek to void the GO bonds on the basis they were issued in violation of debt limits in the Puerto Rico Constitution until January 2019, just months before the statute of limitations on bringing such actions runs out in early May.
U.S. District Court Judge Laura Taylor Swain is scheduled to take up the board's motion to extend that deadline at an April 24 hearing.