The Puerto Rico bankruptcy judge approved the Oversight Board’s plan to notify affected parties of its interpretation of the bond law supporting the bankruptcy, allowing the board’s motion to move forward with pension changes in the Plan of Adjustment.
On Monday the board’s lead attorney told Judge Laura Taylor Swain the current bond adjustment deal would collapse unless she ruled that a recently passed law, which bars pension “cuts,” allows for the board’s planned pension changes.
On Tuesday Swain approved the board’s plan to make an effort at notifying the parties by Friday through mail, email, and notices in Puerto Rican and states-based newspapers.
Among other things, the board’s notice will say the “board will seek rulings at the Confirmation Hearing that the debt authorization in Act 53-2021 is conditioned only on the plan’s cancellation of the monthly benefit modification (as defined in the plan), and does not require cancellation of (I) the elimination of cost of living adjustments and/or (II) freezes of accrual of defined benefits under the Teachers’ Retirement System or the Judiciary Retirement System from and after the plan’s effective date.”
“By agreeing she is making sure there will be little, if any objections and she will probably grant the board’s interpretation although I think it would be the wrong one,” an attorney following the case said.
The board is notifying the local government, public sector unions, and current and former employees in the Teachers and Judiciary Retirement Systems.
The Confirmation Hearing is scheduled to run intermittently from Nov. 8 to Nov. 23.
The legislature passed and the governor signed into law Act 53 on Oct. 26. The law authorizes the plan’s new restructured bonds and related Contingent Value Instruments. It conditions the new bonds on the board following through on several commitments to the Commonwealth of Puerto Rico government and to the municipal governments. It explicitly says there will be no cuts to the monthly defined benefits for those already receiving those pensions.
At Monday’s hearing with Swain, board attorney Martin Bienenstock said the law refers to “zero cuts to pensions” and similar language elsewhere. He said unless Swain ruled the board’s plans to change the pensions were legal and not barred by Act 53, the board’s proposed Plan of Adjustment would not be “implementable.”
On Tuesday Swain also approved the board’s deadlines associated with its notice. Those wishing to reply to the board’s pension ruling request have until 5 p.m. on Nov. 12 to respond using the postal system with proof of service to the Oversight Board attorney office in New York City and to the Puerto Rico Fiscal Agency and Financial Advisory attorney office in the same city. The replies must be in English and state the person’s standing for their objection to the board’s proposal.
Swain also approved the board’s Nov. 15 deadline to file with the court replies in support of the board’s position.