NEW YORK, Oct. 24, 2016 /PRNewswire/ -- Senior creditors of the Puerto Rico Sales Tax Financing Corporation ("COFINA") issued the following statement today regarding the action entitled Lex Claims, LLC et al. v. Garcia-Padilla et al., pending in the United States District Court for the District of Puerto Rico (the "Action") and the stay on litigation established under the Puerto Rico Oversight, Management, and Economic Stability Act ("PROMESA"):
In response to certain General Obligation ("GO") bondholders' meritless assertions directed at COFINA in the Action, we have filed a motion to intervene for the limited purpose of enforcing the stay on litigation established under PROMESA. At the appropriate time, our group will comprehensively set forth why challenges to COFINA lack merit.
Congress deemed the temporary stay "essential to stabilize the region for the purposes of resolving this territorial crisis." Unfortunately, the Plaintiffs appear committed to evading the restructuring process set out by Congress and doubling down on the obstructionist positions they took in the lead up to PROMESA's passage. We agree with the Oversight Board for Puerto Rico's recent observation "that ongoing litigation is a major distraction that interferes with the Oversight Board's congressional mandate." As constructive participants engaging in good faith negotiations with the Government of Puerto Rico and other bondholder groups, we believe that the Plaintiffs' efforts to circumvent congressional intent and disrupt established processes undermine the best interests of the Commonwealth, its citizens and creditors.
In their recently filed Proposed Second Amended Complaint, the Plaintiffs advance legal theories premised on fundamental mischaracterizations of PROMESA and a complete disregard for the statutory and constitutional framework under which the Commonwealth established COFINA nearly a decade ago. In short, the Plaintiffs' claims amount to a baseless, untimely request to declare that the Sales & Use Tax ("SUT") is an "available resource" under the Puerto Rico Constitution and to strip COFINA creditors of their vested property interests. Not only do the Plaintiffs' claims find no support under PROMESA or Commonwealth law, but they ignore the express admonitions in the offering documents for the GO bonds, which specifically provide that COFINA's portion of the SUT is not an "available resource," and is not subject to clawback should there be a shortfall in payment of the GO bonds.
In the near 10-year period since the Legislative Assembly of Puerto Rico first transferred a portion of the then newly-created SUT to COFINA, no challenges to COFINA have been made. Given COFINA's bi-partisan support since its creation, this is not surprising. Indeed, the Commonwealth and investors alike, including the Plaintiffs, all benefited from the low-cost financing that COFINA offered. The lack of any challenge to COFINA underscores the manifest deficiencies in the Plaintiffs' claims and is also fatal to their attempts to now evade PROMESA's mandatory stay.
About the COFINA Senior Bondholders Group
The Group is a coalition of creditors made up of retirees and individual investors in Puerto Rico and throughout the United States, as well as asset managers GoldenTree Asset Management LP, Merced Capital LP, Tilden Park Capital Management LP, Whitebox Advisors LLC, and others.
Greg Marose (on behalf of COFINA's senior creditors)
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/cofina-senior-bondholders-file-motion-to-defend-stay-on-litigation-established-under-promesa-300350216.html
SOURCE COFINA Senior Bondholders Group