GOLDENTREE ASSET MANAGEMENT LP v THE FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 23-1737 (1st Circuit, Jan 22,2024) Published
- Tag(s):
-
- Ruling:
- In an opinion arising out of the restructuring of Puerto Rico's public power company (PRRS and PREPA), the U.S. Court of Appeals for the First Circuit held that GoldenTree Asset Management and Syncora Guarantee had waived right to notice and hearing under § 362(e)(1) on their latest stay relief motion before the district court overseeing PRRS by agreeing to a specific case schedule, the automatic stay thus not lifting by law's operation, and hence affirmed, having first found the collateral order doctrine's conditions met and the bondholders to hold an enforceable right vindictable on appeal.
- Procedural context:
- The U.S. district court overseeing the PRRS had denied the motion filed by GoldenTree Asset Management and Syncora Guarantee (Bondholders) for relief from PROMESA's "so-called automatic stay on actions against PREPA's estate" without first noticing and holding a hearing within the timeframe set in paragraph (e)(1) of section 362, a Code provision expressly applicable to PRRS under PROMESA. On appeal, the Bondholders argued that this failure meant that the automatic stay expired as a matter of law. In addition to contesting this argument on substance, the appeal presented two threshold issues: whether the Circuit could exercise jurisdiction to even hear it pursuant to the collateral order doctrine, a creed whose prerequisites the Bondholders insisted had been met and which the entity known as the Financial Management Oversight Board of Puerto Rico (Board) charged with managing PRRS insisted had not been, and whether the Bondholders lacked any enforceable right that could be vindicated at the appellate level, with the Bondholders insisting they did and the Official Committee of Unsecured Creditors, intervening on the Board's behalf, alleging otherwise.
- Facts:
- Formerly signed by President Barak H. Obama on June 30, 2016, PROMESA) established a process for restructuring debt, the Board to oversee this process, and expedited procedures for approving critical infrastructure projects in order to combat the Puerto Rican government-debt crisis that began in 2014. Holding around $1 billion of PREPA's roughly $8 billion in bonds, the Bondholders lent money to PREPA pursuant to "a contract called a Trust Agreement" (TA). Among other things, the TA governs how PREPA was to distribute its revenues, requires PREPA to charge rates sufficient to cover both its current expenses and 120% of its bond service obligations for the following fiscal year, and specifies the remedies available to creditors if PREPA ever defaults. The latter three provisions have proven significant for two related reasons: first, since mid-2017, PREPA has been in default, and second, the Bondholders have asserted that creditors representing at least 30% if the outstanding principal bond amount have requested that PREPA be placed into receivership, a claim that the Board did not apparently dispute. Since 2017, the Bondholders, allied with similarly situated creditors and insurers, had sought relief from PROMESA's automatic stay. Indeed, they filed their first such request within a month of PREPA entering Title III proceedings in 2017.
- Judge(s):
- William J. Kayatta Jr.; O. Rogeriee Thompson; and Julie Rikelman
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