Tuesday, January 12, 2016

Assured Guaranty's Frederico rejects Chapter 9 protection for Puerto Rico

The war of words between bond insurers and the Government of Puerto Rico escalated on Monday as Assured Guaranty President Dominic Frederico disputed Gov. García Padillas's assertions the Commonwealth and its creditors will soon face the opposite of due process and rule of law.

“It is ironic that the Governor’s remarks feign concern about the absence of a legal framework, due process and the rule of law when it was his illegal action, ordering the confiscation of pledged revenues through clawbacks, that violates the constitutional rights of the holders and insurers of bonds issued by Puerto Rico’s Highways and Transportation Authority, Infrastructure Financing Agency, and Convention Center District Authority," said Frederico.

Last Friday, García Padilla anticipated that the legal action initiated by bond insurers will kick start a race to the courts from creditors clamoring for their respective payments despite the absence of a legal framework to restructure debt.

“Puerto Rico’s creditors will soon face a process in which their claims lack the legal status to be resolved in an organized manner. That reality creates an uncertain scenario for all parties,” García Padilla said. He blamed Congress for its lack of action regarding Puerto Rico’s inclusion on Chapter 9. “Congress – responding to Wall Street lobbyists – has ignored Puerto Rico’s crisis and instead preferred that the island’s 3.5 million American citizens and its creditors enter into chaos,” he added.

In response, Frederico expressed confidence in the judicial system and described the U.S. District Court for the District of Puerto Rico "an appropriate forum to resolve the clawback litigation."

The executive accused the government of Puerto Rico of adopting a deliberate strategy promoting a ‘crisis narrative’ to gain retroactive access to bankruptcy protection from the U.S. Congress. "This strategy has worsened Puerto Rico’s situation, eroded its credibility and delayed prospects for recovery," said Frederico.


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