By Luis Valentin Ortiz
SAN JUAN (Reuters) - Puerto Rico’s federally appointed oversight board will file another round of lawsuits against government vendors and bondholders, Luc Despins, a lawyer representing unsecured creditors in the U.S. commonwealth's bankruptcy, said on Thursday.
U.S. District Judge Laura Taylor Swain, who is hearing Puerto Rico's attempt to restructure about $120 billion of debt and pension obligations through a form of bankruptcy, approved on Thursday a stipulation between the board and an unsecured creditors committee allowing them to jointly pursue litigation ahead of a Monday deadline to file claims.
The board recently filed a flurry of lawsuits seeking to recoup payments made to government vendors and owners of the island's general obligation bonds.
The new litigation will target Puerto Rico's Employees Retirement System (ERS) and Highways & Transportation Authority (HTA), which filed separate bankruptcy cases. In addition to going after vendors, the lawsuits will seek to invalidate liens claimed by bondholders over those entities' revenues, Despins said during Thursday's court hearing. Bond insurers objected to the move.
Prior to defaulting on ERS and HTA debt, Puerto Rico used employer contributions made by government agencies and public entities to pay pension bonds, while toll revenues and other license fees covered HTA debt.
Actions to recoup debt services payments will be filed against owners of pension bonds issued by the commonwealth and not against bondholders of highways authority debt, according to Despins.
With a two-year statute of limitations ending for ERS and HTA on Monday, Swain noted: “The litigation must commence within the next few days.”
In her ruling, the judge also took into account a new July 15 deadline set earlier this month by a U.S. appeals court for the seven-member oversight board to be reappointed by President Donald Trump and confirmed by the U.S. Senate.
Swain said the oversight board’s future status "remains in question" and added that “in the face of that uncertainty, it would imprudent to deny” the stipulation.
The appeals court handed some of the island's creditors a win in February, ruling that the board members' appointments were unconstitutional.