In re Fin. Oversight & Mgmt. Bd. for Puerto Rico

• Decision Date: 05 February 2019
• Docket Number: No. 17 BK 3284-LTS,No. 17 BK 3283-LTS (Jointly Administered),17 BK 3283-LTS (Jointly Administered),17 BK 3284-LTS
• Citation: 361 F.Supp.3d 203
• Parties: IN RE: The FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as Representative of the Commonwealth of Puerto Rico, et al., Debtors. In re: The Financial Oversight and Management Board for Puerto Rico, as Representative of Puerto Rico Sales Tax Financing Corporation, Debtor.
• Court: U.S. District Court — District of Puerto Rico

361 F.Supp.3d 203

IN RE: The FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO, as Representative of the Commonwealth of Puerto Rico, et al., Debtors.¹

In re: The Financial Oversight and Management Board for Puerto Rico, as Representative of Puerto Rico Sales Tax Financing Corporation, Debtor.

No. 17 BK 3283-LTS (Jointly Administered)

No. 17 BK 3284-LTS

United States District Court, D. Puerto Rico.

Signed February 5, 2019

Julia D. Alonzo, Ehud Barak, Martin J. Bienenstock, Bradley R. Bobroff, Margaret A. Dale, Peter D. Doyle, Carl Forbes, Jr., Mark D. Harris, Jeffrey W. Levitan, Gregg M. Mashberg, Matthew J. Morris, Kevin J. Perra, Stephen L. Ratner, Brian S. Rosen, Scott Rutsky, Chris Theodoridis, Jared D. Zajac, Maja Zerjal, Chantel L. Febus, Proskauer Rose LLP, Lucia Chapman, Stephan E. Hornung, Michael Luskin, Luskin, Stern & Eisler LLP, New York, NY, Ginger D. Anders, Adele M. El-Khouri, Chad I. Golder, Rachel G. Miller Ziegler, Donald B. Verrilli, Munger, Tolles & Olson LLP, Guy Brenner, Ann M. Ashton, Ralph C. Ferrara, Proskauer Rose LLP, Washington, DC, Hermann D. Bauer Alvarez, Ubaldo M. Fernandez Barrera, Carla Garcia Benitez, Daniel J. Perez Refojos, O'Neill & Borges LLC, Wandymar Burgos Vargas, Susana I. Penagaricano-Brown, Puerto Rico Department of Justice, Raul Castellanos-Malave, Development & Construction Law Group LLC, Andres W. Lopez, The Law Offices of Andres W. Lopez, P.S.C., Katiuska Bolanos-Lugo, Cancio, Nadal, Rivera & Diaz, PSC, Ricardo Burgos Vargas, San Juan, PR, William D. Dalsen, Michael R. Hackett, Timothy W. Mungovan, Laura Stafford, Proskauer Rose LLP, Joseph P. Davis, III, Greenberg Traurig, LLP, Boston, MA, Michael A. Firestein, Lary Alan Rappaport, Jennifer L. Roche, Steven O. Weise, Proskauer Rose LLP, Los Angeles, CA, Paul V. Possinger, Proskauer Rose LLP, Chicago, IL, for Debtor.

PROMESA

Title III

AMENDED MEMORANDUM OF FINDINGS OF FACT AND CONCLUSIONS OF LAW IN CONNECTION WITH CONFIRMATION OF THE THIRD AMENDED TITLE III PLAN OF ADJUSTMENT OF PUERTO RICO SALES TAX FINANCING CORPORATION ^*

LAURA TAYLOR SWAIN, United States District Judge

Before the Court is the Third Amended Title III Plan of Adjustment of Puerto Rico Sales Tax Financing Corporation , dated January 9, 2019 (Exhibit A to Docket Entry No. 439 in Case No. 17-3284² ) (as modified pursuant to any revisions made at or subsequent to the Confirmation Hearing as set forth in the Confirmation Order, including the Second Amended Plan Supplement, and as may be modified pursuant to section 313 of PROMESA, the "Plan")³ filed by the Puerto Rico Sales Tax Financing Corporation ("COFINA" or the "Debtor"), by and through the Financial Oversight and Management Board for Puerto Rico (the "Oversight Board"), as representative of the Debtor under PROMESA section 315(b).⁴ In connection with the Plan, the following documents have been filed by the Debtor, the COFINA Agent, or PSA Creditors in support of or in connection with confirmation of the Plan, including the Settlement of the Commonwealth-COFINA Dispute incorporated into the Plan:

(a) Second Amended Plan Supplement and Plan Related Documents of Puerto Rico Sales Tax Financing Corporation (Docket Entry No. 4956 in Case No. 17-3283, the "Second Amended Plan Supplement");

(b) Certificate of Service of Solicitation Materials (Docket Entry No. 387, the "Mailing Affidavit");

(c) Certificate of Publication (Docket Entry No. 585, the "Publication Affidavit");

(d) Certificate of Service (Docket Entry No. 429, the "Garraway Affidavit", and together with the Mailing Affidavit and Publication Affidavit, the "Service Affidavits");

(e) Omnibus Reply of Puerto Rico Sales Tax Financing Corporation to Objections to Second Amended Title III Plan of Adjustment (Docket Entry No. 4663 in Case No. 17-3283, the "Omnibus Reply");

(f) Memorandum of Law in Support of Puerto Rico Sales Tax Financing Corporation's Third Amended Title III Plan of Adjustment (Docket Entry No. 4664 in Case No. 17-3283, the "Confirmation Brief");

(g) Declaration of Natalie A. Jaresko in Support of Confirmation of Third Amended Title III Plan of Adjustment of Puerto Rico Sales Tax Financing Corporation (Docket Entry No. 4756 in Case No. 17-3283, the "Jaresko Decl.");

(h) Declaration of David M. Brownstein in Support of Confirmation of Third Amended Title III Plan of Adjustment of Puerto Rico Sales Tax Financing Corporation (Docket Entry No. 4757 in Case No. 17-3283, the "Brownstein Decl.");

(i) Declaration of Christina Pullo of Prime Clerk LLC Regarding the Solicitation of Votes and Tabulation of Ballots Cast on the Second Amended Title III Plan of Adjustment of Puerto Rico Sales Tax Financing Corporation (Docket Entry No. 4794 in Case No. 17-3283, the "Pullo Decl.");

(j) Statement of COFINA Agent in Support of Second Amended Title III Plan of Adjustment of Puerto Rico Sales Tax Financing Corporation (Docket Entry No. 4656 in Case No. 17-3283);

(k) Declaration of Matthew A. Feldman (Docket Entry No. 4656-1 in Case No. 17-3283, the "Feldman Decl.");

(l) Omnibus Reply of the COFINA Senior Bondholders' Coalition to Objections to Confirmation of the Second Amended Title III Plan of Adjustment of Puerto Rico Sales Tax Financing Corporation (Docket Entry No. 4665 in Case No. 17-3283, the "Senior Coalition Reply"), and the joinder filed thereto by the certain Puerto Rico based mutual funds (Docket Entry No. 4670 in Case No. 17-3283);

(m) Declaration of Matthew Rodrigue in Support of Omnibus Reply of the COFINA Senior Bondholders' Coalition to Objections to Confirmation of the Second Amended Title III Plan of Adjustment of Puerto Rico Sales Tax Financing Corporation ("COFINA") (Docket Entry No. 4665-1 in Case No. 17-3283, the "Rodrigue Decl.");

(n) Declaration of Natalie A. Jaresko in Support of Commonwealth of Puerto Rico's Motion Pursuant to Bankruptcy Rule 9019 for Order Approving Settlement Between Commonwealth of Puerto Rico and Puerto Rico Sales Tax Financing Corporation (Docket Entry No. 4758 in Case No. 17-3283, the "Jaresko (9019) Decl.");

(o) Informative Motion of National Public Finance Guarantee Corporation in Support of COFINA Plan of Adjustment (Docket Entry No. 4888 in Case No. 17-3283);

(p) Ambac Assurance Corporation's Statement Concerning the Court's Authority to Determine and Declare the Validity of the New Bond Legislation (Docket Entry No. 4889 in Case No. 17-3283);

(q) Supplemental Brief of Plan Support Parties in Support of Proposed Findings of Fact and Conclusions of Law and Order Confirming Third Amended Plan of Adjustment of Puerto Rico Sales Tax Financing Corporation (Docket Entry No. 4890 in Case No. 17-3283); and

(r) Declaration of Susheel Kirpalani in Support of Supplemental Brief of Plan Support Parties in Support of Proposed Findings of Fact and Conclusions of Law and Order Confirming Third Amended Plan of Adjustment of Puerto Rico Sales Tax Financing Corporation (Docket Entry No. 4892 in Case No. 17-3283).

Opposition submissions were filed by the following parties: (i) Stephen T. Mangiaracina (Docket Entry No. 4481 in Case No. 17-3283, the "Mangiaracina Objection"), (ii) the Service Employees International Union and International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) (Docket Entry No. 4556 in Case No. 17-3283), (iii) Peter C. Hein (Docket Entry Nos. 4585, 4595, 4673, 4911, and 5041 in Case No. 17-3283), (iv) GMS Group, LLC (Docket Entry Nos. 4564, 4587, 4605, 4853, and 5002 in Case No. 17-3283), (v) PROSOL-UTIER⁵ (Docket Entry No. 4592 in Case No. 17-3283), (vi) Mark Elliott (Docket Entry Nos. 4597, 4598, 4606, and 4641 in Case No. 17-3283), (vii) the VAMOS Group⁶ (Docket Entry No. 4607 in Case No. 17-3283, the "VAMOS Objection"), (viii) Lawrence B. Dvores (Docket Entry No. 4613 in Case No. 17-3283), and (ix) the Credit Union Group⁷ (Docket Entry No. 415).⁸ The Court heard argument and received evidence in connection with the motion for confirmation of the Plan on January 16 and 17, 2019 (the "Confirmation Hearing").⁹ The Court has considered carefully the Plan, as well as the above-referenced supporting and opposition submissions, and the witness testimony and voluminous briefing and written evidence submitted by the parties. The Court has also reviewed and considered carefully hundreds of letters and email messages, including a petition, submitted by members of the public and has listened carefully to the oral remarks made on the record of the Confirmation Hearing by members of the public. For the following reasons, the Plan is hereby confirmed and the objections are overruled.¹⁰

INTRODUCTION

Nearly two years ago, the Commonwealth of Puerto Rico, through the Oversight Board, initiated unprecedented proceedings to restructure the debts of the Commonwealth of Puerto Rico and certain of its instrumentalities, including COFINA, under Title III of PROMESA. At the outset of these historic proceedings, the Court emphasized that the goal of Title III of PROMESA and the Court's goal in overseeing these cases would be to find a path forward for Puerto Rico, its citizens, and the others who hold stakes in its future, including the financial investors who held obligations or are otherwise dependent on Puerto Rico for their financial wellbeing. The COFINA Plan represents a significant step on the path towards Puerto Rico's financial recovery, economic stability, and prosperity.

The Court is deeply mindful that the COFINA Plan, which is based on compromises of strongly contested positions, commits substantial portions of Puerto Rico's scarce revenues to bond payments over a period of decades while at the same time affording bondholders less value, on different terms, than they had expected when they invested in COFINA. Citizens who live and work in Puerto Rico and institutions that serve them are concerned that the financial settlement that made the Plan possible will hinder the Commonwealth's ability to provide for its people,¹¹ even though the Settlement gives the Commonwealth...