Altair Global Credit Opportunities Fund v. Garcia-Padilla, explained

by | Aug 23, 2017 | Courts | Comments

On September 21, 2016, Altair Global Credit Opportunities Fund (A), LLC, et al, along with several others, filed a lawsuit in the United States District Court for Puerto Rico regarding the constitutionality of state statutes. The respondents include then governor Alejandro Garcia-Padilla, then Treasury secretary Juan Zaragoza-Gomez, Luis F. Cruz-Batista, and The Employees Retirement System of the Commonwealth of Puerto Rico. The movants of this lawsuit are:

  1. Altair Global Credit Opportunities Fund (A), LLC
  2. Claren Road Credit Master Fund, Ltd.
  3. Claren Road Credit Opportunities Master Fund, Ltd.
  4. Glendon Opportunities Fund, LP
  5. Nokota Capital Master Fund, L.P.
  6. Oaktree-Forrest Multi-Strategy, L.L. C. (Series B)
  7. Oaktree Opportunities Fund IX, L.P.
  8. Oaktree Opportunities Fund IX (Parallel 2), L.P.
  9. Oaktree Value Opportunities Fund, L.P., Ocher Rose, L.L.C.
  10. Puerto Rico AAA Portfolio Bond Fund, Inc.
  11. Puerto Rico AAA Portfolio Bond Fund II, Inc.
  12. Puerto Rico AAA Portfolio Target Maturity Fund, Inc.
  13. Puerto Rico Fixed Income Fund, Inc., Puerto Rico Fixed Income II, Inc.
  14. Puerto Rico Fixed Income Fund III, Inc., Puerto Rico Fixed Income Fund IV, Inc.
  15. Puerto Rico Fixed Income Fund V, Inc.
  16. Puerto Rico GNMA and U.S. Government Target Maturity Fund, Inc.
  17. Puerto Rico Investors Bond Fund I, Inc.
  18. Puerto Rico Investors Tax-Free Fund, Inc.
  19. Puerto Rico Investors Tax-Free Fund II, Inc.
  20. Puerto Rico Investors Tax-Free Fund III, Inc.
  21. Puerto Rico Investors Tax-Free Fund IV, Inc.
  22. Puerto Rico Investors Tax-Free Fund V, Inc.
  23. Puerto Rico Investors Tax-Free Fund VI, Inc.
  24. Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc.
  25. SV Credit, L.P., Tax-Free Puerto Rico Fund, Inc.
  26. Tax-Free Puerto Rico Fund II, Inc.
  27. Tax-Free Puerto Rico Target Maturity Fund, Inc.
  28. UBS IRA Select Growth & Income Puerto Rico Fund.

There are several individuals and corporations involved with this lawsuit.

As with almost any lawsuit regarding Puerto Rico, this involves PROMESA. For those unfamiliar with PROMESA, it was a piece of legislation that was enacted on June 30, 2016 to address the fiscal emergency in Puerto Rico. PROMESA grants an automatic stay of all liability-related litigation against the Commonwealth of Puerto Rico. The majority of plaintiffs in these cases call into question whether or not an automatic stay is warranted in certain scenarios.

The Oversight Board of Puerto Rico has the ability to intervene in some of the aforementioned instances pursuant to Rule 24(a) and section 212 of PROMESA. The Board, in its opposition to the plaintiffs’ motion for relief from stay, included a set of requirements that it seeks to have the court enforce against the Commonwealth. Those requirements are as follows:

Procedural Deficiency pursuant to Rule 24(c)

Although the Board’s motion to intervene shows that they do not wish to vacate the stay in these cases, it is not “accompanied by a pleading that sets out the claim or defense for which intervention is sought,” which is required by the Federal Rules. The Board simply stated that, “it is not at this time taking any position on the merits of the parties’ claims and defenses in pending challenges to the Moratorium Act and related Executive Orders.”

The Oversight Board’s Requested Requirements

The Oversight Board includes a set of requirements that it believes, “will alleviate some of the Plaintiffs’ concerns and…bring about much needed transparency and facilitate negotiation with creditors and of required fiscal plans.” These requirements include requests that the Commonwealth must begin rolling production of information requested by the Oversight Board on October 5 and 20, 2016 with the production completed by October 30, the Commonwealth must provide the Board with guidelines and procedures and priorities for payments for it is using to make disbursements by October 30, 2016, the Oversight Board must be given immediate unfettered access to the Commonwealth’s financial officials and advisors, as well as several other requests.

The Court concluded that, for the reasons discussed above, they “denied without prejudice” the Oversight Board’s motion to intervene in these consolidated cases.