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Public Finance Matters Updates on recent public finance and municipal bond developments

Tag Archives: bankruptcy

Three Strikes and Recovery Act is Out

Posted in Bankruptcy

By LEN WEISER-VARON and BILL KANNEL Today’s U.S. Supreme Court decision in Commonwealth of Puerto Rico v. Franklin California Tax-Free Trust puts an end to one of Puerto Rico’s multi-pronged efforts to deleverage itself.  Given the comprehensiveness of the First Circuit’s intermediate appellate opinion upholding the district court’s invalidation of Puerto Rico’s Recovery Act, it was… Continue Reading

You Can Lead a Horse to Water, But You Can’t Call it an Airplane: Supreme Court Oral Arguments Suggest Puerto Rico’s Recovery Act May Recover

Posted in Bankruptcy

By LEN WEISER-VARON and BILL KANNEL A few thoughts on Tuesday’s oral arguments before the U.S. Supreme Court in the litigation over whether Puerto Rico’s Public Corporations Debt Enforcement and Recovery Act, an insolvency statute for certain of its government instrumentalities, is void, as the lower federal courts held, under Section 903 of the U.S…. Continue Reading

Statutory Liens vs. Consensual Liens: Why it Matters and When it may Not

Posted in Bankruptcy

While secured creditors are entitled to special rights in bankruptcy, those rights may differ depending on whether creditors have a statutory or consensual lien on their collateral. This is primarily because section 552(a) of the Bankruptcy Code provides, in part, that “property acquired by the estate or by the debtor after the commencement of the… Continue Reading

Draft Treasury Legislation Would Give Puerto Rico Access to “Super Chapter 9” and Chapter 9 Bankruptcy

Posted in Bankruptcy

By LEN WEISER-VARON and BILL KANNEL   A draft of the U.S. Treasury’s proposed debt restructuring legislation began circulating earlier today.  The draft legislation would give Puerto Rico, as well as other U.S. territories, and their municipalities access to U.S. bankruptcy court under a new chapter of the U.S. Bankruptcy Code (so-called “Super Chapter 9”) as well… Continue Reading

Que Certa, Certa: Supreme Court Creates Uncertainty with “Cert” Review of Puerto Rico Recovery Act

Posted in Bankruptcy

By LEN WEISER-VARON, BILL KANNEL and ERIC BLYTHE It is said that muddy water is best cleared by leaving it be.  The Supreme Court’s December 4 decision to review the legality of Puerto Rico’s local bankruptcy law, the Recovery Act, despite a well-reasoned First Circuit Court of Appeals opinion affirming the U.S. District Court in… Continue Reading

First Circuit Hears Oral Arguments on Validity of Puerto Rico’s Recovery Act

Posted in Bankruptcy

By LEN WEISER-VARON and BILL KANNEL A few reactions to today’s oral arguments before the U.S. Court of Appeals for the First Circuit regarding the validity of Puerto Rico’s Recovery Act: On the three judge panel, Chief Judge Lynch seemed prepared to uphold the lower court decision invalidating the Recovery Act; she suggested  that Congress’s amendment of… Continue Reading

Municipal Bond Interest Paid By a Bond Insurer After an Issuer’s Bankruptcy Discharge Can Remain Tax-Exempt

Posted in Bankruptcy, Bond Insurance, Tax/arbitrage

By LEN WEISER-VARON and MAXWELL D. SOLET In the aftermath of recent municipal bankruptcies in which issuers proposed and/or implemented bankruptcy plans involving partial discharges of the issuer’s payment obligation on insured bonds, there has been increased focus on whether municipal bond interest paid by a bond insurer after the bankruptcy plan’s effective date continues… Continue Reading

Pennsylvania Amends Act 47 to Give the Commonwealth More Oversight and its Municipalities Less Time to Reorganize

Posted in Bankruptcy

By William Kannel and Adrienne Walker Pennsylvania’s legislature recently approved House Bill No. 1773, an overhaul to its Municipalities Financial Recovery Act, commonly known as “Act 47.”  HB 1773 was signed into law by Governor Tom Corbett on October 31, 2014. Act 47 was established in 1987 to provide the Commonwealth, largely through the Governor’s… Continue Reading

Court Rules on Applicability of Make-Whole Premiums Upon Debt Acceleration

Posted in Bankruptcy, Financing Structures

BY LEN WEISER-VARON The linked Mintz Levin client advisory, which discusses a recent bankruptcy court ruling regarding the applicability of a make-whole premium upon a refinancing of corporate debt following such debt’s automatic acceleration upon bankruptcy under the terms of the governing documents, may also be of interest to holders of municipal bonds with call… Continue Reading

PREPA Bondholders Seek Summary Judgment Invalidating Puerto Rico’s Public Corporation Bankruptcy Legislation

Posted in Bankruptcy

By LEN WEISER-VARON and BILL KANNEL On August 11, Franklin Funds and Oppenheimer Rochester Funds filed a second amended complaint, opposition to motion to dismiss and cross-motion for summary judgment in the litigation they previously filed in the United States District Court for Puerto Rico challenging the constitutionality and validity of Puerto Rico’s so-called Recovery… Continue Reading

Puerto Rico and PREPA Seek Dismissal of Bondholder Challenge to Territory’s Bankruptcy Statute

Posted in Bankruptcy

  By LEN WEISER-VARON and BILL KANNEL The Commonwealth of Puerto Rico and the Puerto Rico Electric Power Authority (PREPA) yesterday filed separate motions to dismiss the federal court complaint filed last month by some PREPA bondholders seeking to invalidate the recently-enacted Puerto Rico Public Corporation Debt Enforcement and Recovery Act.  As anticipated, the motions to dismiss… Continue Reading

Puerto Rico Poised to Enact Bankruptcy-Like Legislation for Certain Revenue Bond Issuers

Posted in Bankruptcy

By LEN WEISER-VARON and BILL KANNEL Puerto Rico’s Governor Alejandro Garcia Padilla today introduced debt restructuring legislation which, upon enactment, would provide a judicial debt relief process in Puerto Rico’s courts for certain public corporations, including the Puerto Rico Electric Power Authority (“PREPA”), the Puerto Rico Aqueduct and Sewer Authority (“PRASA”) and the Puerto Rico… Continue Reading

Legislative Trial Balloon for Puerto Rico Public Corporation Insolvency Process Attracts Bondholder Attention

Posted in Bankruptcy, State Law, Workouts

By LEN WEISER-VARON and BILL KANNEL Last Tuesday, Puerto Rico sold its much-ballyhooed $3.5 billion in non-investment grade general obligation bonds.  Two days later, two legislators in Puerto Rico’s Senate filed a bill which, if enacted, would permit insolvency filings by Puerto Rico’s public corporations in Puerto Rico’s territorial trial court.  The juxtaposition of the two… Continue Reading

Second Circuit Rules Against Make-Whole Premium for Refinancing of Accelerated Debt

Posted in Bankruptcy

By LEN WEISER-VARON The U.S. Court of Appeals for the Second Circuit has upheld a bankruptcy court’s decision enforcing indenture language providing for the automatic acceleration, without make-whole premium, of secured American Airline, Inc. notes upon American Airline Inc.’s bankruptcy filing.  The Second Circuit’s September 12 opinion generally follows that of the lower court, discussed in… Continue Reading

AMR Decision Highlights Bankruptcy Court Split on Enforceability of Ipso Facto Clauses

Posted in Bankruptcy

By LEN WEISER-VARON  A recent ruling in the American Airlines bankruptcy case enforcing an automatic acceleration upon bankruptcy provision serves as a reminder that the enforceability of so-called ipso facto provisions in debt instruments remains an unsettled, forum-dependent question.       In the American Airlines case, the question of the enforceability of an automatic acceleration upon… Continue Reading

Court Dismisses Public Pension Fund’s Bankruptcy Case

Posted in Bankruptcy

By BILL KANNEL and ERIC BLYTHE In our May 24 entry on this topic, the Northern Mariana Islands Retirement Fund (the “Fund”) was battling numerous challenges to its Chapter 11 eligibility. The dispute revolved around whether the Fund, which provides benefits to government workers and retirees, was a “governmental unit” as defined by the Bankruptcy… Continue Reading

First Bankruptcy Filed by a Public Pension Fund

Posted in Bankruptcy

By BILL KANNEL and ERIC BLYTHE On April 17, 2012, the Northern Mariana Islands Retirement Fund (the “Fund”) became the first United States public pension fund to seek formal bankruptcy protection. The Fund, which provides retirement benefits to government employees of the Commonwealth of the Northern Mariana Islands (the “Commonwealth”) a U.S. territory, listed $256… Continue Reading

Objections Filed in Harrisburg Chapter 9 Bankruptcy

Posted in Bankruptcy

BY BILL KANNEL As expected a number of objections to the Chapter 9 bankruptcy petition filed by the Harrisburg city council were filed on Friday October 28, the deadline set by the Bankruptcy Court for such objections. As expected both the Commonwealth of Pennsylvania and the Harrisburg Mayor’s Office filed objections. The Commonwealth’s objection focused… Continue Reading

Harrisburg, PA Files for Bankruptcy under Chapter 9

Posted in Bankruptcy

By BILL KANNEL As many are already aware, the City of Harrisburg, Pennsylvania filed a Chapter 9 bankruptcy late Tuesday evening, October 11 in advance of a Pennsylvania state senate vote that may have put the city on the path to a receivership.  The Chapter 9 petition (http://www.publicfinancematters.com/Harrisburg%20Petition%20.pdf) is the result of a 4-3 vote… Continue Reading