July 20, 2015 Comments (0) Blog, Securities Fraud

Public Finance Corp. (PFC) to Meet with Legal Council In Response To Puerto Rico Default

(Last Updated On: July 30, 2015)

Public Finance Corp. (PFC), U.S. Bank Trust National Association has reportedly filed a statement announcing that it is seeking legal counseling over the Puerto Rico government’s failure to deposit $93.7 million. The debt payment was due Aug. 1. The statement reported that “no determination has been made as to the taking of any further action.”

In a Caribbean Business report it was stated that the Government Development Bank (GDB) announced Wednesday it didn’t make the scheduled transfer of $93.7 million that was expected after the Legislature failed to include the appropriation in the fiscal 2016 General Fund budget that was approved in late June of this year.

“As of the date of this notice, it is unclear whether PFC or the Legislature will take further action to fund payments of principal and interest due Aug. 1,” the Caribbean Business article states.

It has been reported that GDB President Melba Acosta allegedly said the PFC first requested that the Office of Management & Budget to include this allocation in its fiscal 2016 budget proposal. The $93.7 million was reported to be included in the first version submitted by La Fortaleza, the budget plan that was approved did not include the allocation.

The government bank president was quoted to say in the report. “It is important to understand that the law that provides for that [legislative] appropriation is the only revenue source of this issuance. There is no commonwealth or GDB guarantee or anything like that. It is what they call an appropriation debt.”

Acosta has stressed in the article that after meeting with attorneys, they believe that by not transferring the funds to the trustee, it would not constitute a default “because the transfer would have been made if allocated; if there’s no appropriation, the transfer can’t be made.”

When the fiscal 2016 budget was approved by the Legislature, it created a $275 million fund. This fund reportedly included much of the GDB’s budget allocation. The fund is reportedly to be used to cover debt obligations and economic development.

There is still speculation as to whether the government will be able to cover the Aug. 1 payment or if the money will be provided by the fund created by the Legislature. In order to access $275 million fund, legislative action would be needed. The Legislature does not reconvene until Aug. 17.

“We would have to see on Aug. 1, but certainly it won’t come from that fund, because [the Legislature is] not in session,” Acosta said in the Caribbean Business report.

“The GDB knows about the availability of that fund, the procedure to have access to it and that [the bank] can request it when deemed necessary,” Senate Treasury Committee Chairman José Nadal Power stated, in the Caribbean Business report, adding that the bank “only needs to inform, solicit and justify the need [to tap the fund] to the Legislature.”

 

U.S. National Bank has reportedly met with law firm of Hogan Lovells US LLP to consult on the matter at hand. At this time, the bank has reportedly made no determination to any further action by the trustee.

The foregoing information, which is all publicly available, is being provided by The White Law Group.  The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

The White Law Group is a national securities arbitration, securities fraud, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida.

For more information on The White Law Group, visit www.whitesecuritieslaw.com.

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