NEW YORK, April 3, 2019 /PRNewswire/ -- The Ad Hoc Group of General Obligation Bondholders (the "Ad Hoc Group") announced today that it has filed a conditional claims objection (the "Ad Hoc Group's Objection") in Puerto Rico's bankruptcy case. The Ad Hoc Group's Objection seeks to disallow claims asserted against the Commonwealth of Puerto Rico by the Public Buildings Authority (the "PBA"), holders of all PBA bonds, and holders of certain series of General Obligation Bonds issued by the Commonwealth. In total, some 27 series of bonds, having a face amount of approximately $6.1 billion, are targeted by the Ad Hoc Group's Objection.
The bonds targeted by the Ad Hoc Group's Objection are different than the three series of General Obligation Bonds selectively targeted by the claim objection filed on January 14, 2019 (the "Board's and UCC's Objection") by the Oversight Board (the "Board") and the Official Committee of Unsecured Creditors (the "UCC").
Although the Ad Hoc Group will in due course dispute the Board's and UCC's Objection, the Ad Hoc Group's Objection is premised on the assumption that certain core tenets of the Board's and UCC's Objection are correct. The Ad Hoc Group's Objection says, in effect, "If the Board's and UCC's Objection is otherwise right, its own logic dictates that the onus should fall on the claims targeted by the Ad Hoc Group's Objection."
The Board's and UCC's Objection contends that the PBA has always been a sham; that what were fraudulently advertised to the capital markets and the people of Puerto Rico as bonds issued by the PBA were really issued by the Commonwealth; and that those fraudulently advertised bonds should be retroactively counted against the Commonwealth's debt limit – something that has never before happened in any state or territory. Perversely, the Board and the UCC are not seeking to invalidate the PBA bonds issued pursuant to this purported fraud but rather three series of General Obligation Bonds issued in 2012 and 2014. If the Board and the UCC have their way, not only would the PBA bonds pay no price for this supposed artifice, they (and many other creditors) would receive a huge windfall at the expense of those three series of General Obligation Bonds.
The Ad Hoc Group's Objection filed today seeks to place responsibility for the purported fraud where it belongs.
By pursuing this extreme and unprecedented path, the Board and the UCC have chosen to squander what little is left of Puerto Rico's credibility with investors and to launch a multi-year feeding frenzy for the lawyers at Proskauer Rose LLP, Brown Rudnick LLP, and Paul Hastings LLP. The amounts billed by the Board's and the UCC's professionals as a result of this reckless litigation strategy, as well as billions of dollars of other professional expenses previously incurred or projected, will be paid by Puerto Rico.
SOURCE The Ad Hoc Group of General Obligation Bondholders