Three years from the central government having initiated the protection of Title III of the federal Promise law to reorganize its finances, a new turn of the Federal District Court to resolve dozens of legal disputes prior to the certification of a fiscal plan, could delay further the restructuring of over $ 72 billion in debt.

This after federal judge Laura Taylor Swain indicated in the middle of the week that she will accept – with some changes – recommendations proposed by the Title III Mediation Team that would mean the cancellation of some bond issues and the possible establishment of a new plan for Government adjustment

For bankruptcy analyst and lawyer, John Mudd, the determination is a significant delay for the end of bankruptcy and understands that the filing of a new adjustment plan will be within two years. In September of this year, Mudd had anticipated that the fiscal plan filed that month by the Federal Fiscal Control Board would not have the support of creditors.

“The Mediation Team is right to establish as a priority that they must resolve certain disputes and seek the cancellation of part of the debt before certifying a plan. What they don’t say is that once the judge decides on this, that is appealed. The decision, then, will not be given until the end of next year and once that happens, the creditors will return to the negotiating table, ”he explained.

Bankruptcy judge Barbara Houser, who chairs the Mediation Team, said the adjustment plan – which seeks to restructure $ 35 billion of debts and claims, as well as $ 50 billion in pension obligations to retirees – should be amended to get the support from most creditors, which in Mudd’s opinion can only be achieved if the amount of money that will be paid to them is increased.

“If the judge rules in favor of the bondholders, they will have to substantially increase the amount of money paid to them. If it fails against it, it may remain as it is or even less the reward. It is a double-edged sword. Until that is decided, which will take months in what is made discovery, views and motions are seen, nothing can be done. Until 2021 there will be no new plan, ”Mudd added.

For his part, Edward Zayas, spokesman for the Fiscal Board, argued that the adjustment plan based in September is consistent with the judge’s determination to advance the Title III process. “We will continue with our work of contributing to the government achieving fiscal discipline, prioritizing those vital services for citizens and achieving the necessary savings so that Puerto Rico can meet its responsibilities and get out of bankruptcy,” he emphasized.

However, the situation is alarming for lawyer Rolando Emanuelli because it represents that – if a new adjustment plan is submitted – the previously certified tax plan must also be amended. According to him, this is another delay that adds to the recommendations of the Mediation Team.

“It is said that more support from bondholders is needed. This could represent more money for creditors because there is no other alternative to invite them to join. Now, we should also amend the tax plan because they have to be compatible and so far the certificate does not have a secret chest with money, ”he said.

The recommendation that the court will accept also seeks an end to the automatic suspension of some disputes related to income bonds such as General Obligations (GOs) and others that together could lead to the invalidation of an amount. substantial current public debt.

Emanuelli was of the opinion that the fact that it is ordered that the questions of law that are in the litigation on the validity of the bonds prior to the certification of a plan be resolved, is the most responsible way to reduce the debt and that in case of If Swain fails in favor of the bondholders, they can be assigned additional amounts of money without falling on Puerto Ricans.

“Without knowing what the debt adjustment is, there will be no balanced budgets because it is not known what the payments will be. The picture will be bleak in the light of the fact that – if the board has to increase debt service to the bondholders of the central government – they will have to get the money from somewhere, ”he said.

The recommendation that the court will accept also seeks an end to the automatic suspension of some disputes related to income bonds such as General Obligations (GOs) and others that together could lead to the invalidation of an amount. substantial current public debt.

Emanuelli was of the opinion that the fact that it is ordered that the questions of law that are in the litigation on the validity of the bonds prior to the certification of a plan be resolved, is the most responsible way to reduce the debt and that in case of If Swain fails in favor of the bondholders, they can be assigned additional amounts of money without falling on Puerto Ricans.

“Without knowing what the debt adjustment is, there will be no balanced budgets because it is not known what the payments will be. The picture will be bleak in the light of the fact that – if the board has to increase debt service to the bondholders of the central government – they will have to get the money from somewhere, ”he said.