UNITED STATES DISTRICT COURT 

DISTRICT OF PUERTO RICO

In re:

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO,

as representative of

THE COMMONWEALTH OF PUERTO RICO, et 

al.

Debtors.1

PROMESA

Title III

No. 17-BK-3283-LTS

(Jointly Administered)

This filing relates to the 

Commonwealth, ERS, and PBA. 

DEBTORS’ REPLY TO RESPONSE OF OFFICIAL COMMITTEE OF UNSECURED 

CREDITORS TO DEBTORS’ MOTION FOR ORDER FURTHER EXTENDING 

DEADLINE TO FILE OBJECTIONS TO PROOFS OF CLAIM

 1

 The Debtors in these Title III Cases, along with each Debtor’s respective Title III case number and the last four (4) 

digits of each Debtor’s federal tax identification number, as applicable, are the (i) Commonwealth of Puerto Rico 

(“Commonwealth”) (Bankruptcy Case No. 17-BK-3283- LTS) (Last Four Digits of Federal Tax ID: 3481); (ii) Puerto 

Rico Sales Tax Financing Corporation (“COFINA”) (Bankruptcy Case No. 17-BK-3284-LTS) (Last Four Digits of 

Federal Tax ID: 8474); (iii) Puerto Rico Highways and Transportation Authority (“HTA”) (Bankruptcy Case No. 17-

BK-3567-LTS) (Last Four Digits of Federal Tax ID: 3808); (iv) Employees Retirement System of the Government of 

the Commonwealth of Puerto Rico (“ERS”) (Bankruptcy Case No. 17-BK-3566-LTS) (Last Four Digits of Federal 

Tax ID: 9686); (v) Puerto Rico Electric Power Authority (“PREPA”) (Bankruptcy Case No. 17- BK-4780-LTS) (Last 

Four Digits of Federal Tax ID: 3747); and (vi) Puerto Rico Public Buildings Authority (“PBA”) (Bankruptcy Case 

No. 19-BK-5523-LTS) (Last Four Digits of Federal Tax ID: 3801) (Title III case numbers are listed as Bankruptcy 

Case numbers due to software limitations).

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To The Honorable United States District Court Judge Laura Taylor Swain:

The Financial Oversight and Management Board for Puerto Rico (the “Oversight Board”), 

as Title III representative of the Commonwealth of Puerto Rico (the “Commonwealth”), the 

Employees Retirement System of the Government of the Commonwealth of Puerto Rico (“ERS”), 

and the Puerto Rico Public Buildings Authority (“PBA,” and together with the Commonwealth 

and ERS, the “Debtors”), pursuant to section 315(b) of the Puerto Rico Oversight, Management 

and Economic Stability Act (“PROMESA”),2 respectfully submits this reply (the “Reply”) to the 

Response of Official Committee of Unsecured Creditors to Debtors’ Motion for Order Further 

Extending Deadline to File Objection to Proofs of Claim [ECF No. 23263]

3 (the “Response” or 

“Resp.”) and in support of the Debtors’ Motion for Order Further Extending Deadline to File 

Objection to Proofs of Claim [ECF No. 23234] (the “Second Extension Motion”). In support of 

this Reply, the Oversight Board represents as follows:

PRELIMINARY STATEMENT

1. Similar to its response to the Debtors’ first request for an extension of the deadline 

to file objections to claims, the Official Committee of Unsecured Creditors (the “Committee”)

again does not oppose the extension requested in the Second Extension Motion, and acknowledges

“the challenges the Oversight Board is facing in reconciling more than 170,000 claims filed against 

the Title III Debtors, including as it relates to gathering information from the Commonwealth and 

its agencies necessary for the Oversight Board to evaluate the more than 7,700 Remaining Claims.” 

Resp. ¶ 1. Nevertheless, the Committee repeats its request that the extension “be conditioned on 

the Oversight Board providing a timeline as to how it expects to bring the reconciliation of the 

 2

 PROMESA is codified at 48 U.S.C §§ 2101–2241.

3

 Unless otherwise stated herein, ECF citations refer to documents filed in Bankruptcy Case No. 17-BK-3283-LTS.

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Remaining Claims to an expeditious conclusion.” Id. ¶ 5. The purported basis for this request is 

that “the Committee is concerned about the pace at which the Remaining Claims are being resolved 

and the timing of distributions to general unsecured creditors.” Id. ¶ 2.

2. As before, the Oversight Board and the Debtors wholeheartedly share the desire to 

make distributions as soon as possible, but again, believe the Response is inappropriate for two 

basic reasons. First, as requested by the Court in connection with every Omnibus Hearing, the 

Oversight Board has provided an update on the claims reconciliation process, the status of the 

Administrative Claims Reconciliation (“ACR”) and Alternative Dispute Resolution (“ADR”)

processes, and the anticipated number of claims to be subject to objection. At such time, the 

Oversight Board has advised the Court and parties in interest of the inherent difficulties in the 

claims reconciliation process arising from the multitude of proofs of claim filed in a “fully 

unliquidated” amount, as well as the difficulty accessing information necessary to evaluate proofs 

of claim. Second, the Committee has ceded all responsibility for the ongoing reconciliation of 

proofs of claim to its two (2) appointees to the Avoidance Actions Trust Board, and the Oversight 

Board, consistent with its obligations pursuant to the Plan4, regularly informs those appointees of 

the status of claims reconciliation. Plan § 82.1. In fact, but for the ongoing pendency of an appeal 

of the Confirmation Order, as the Plan provides, the Committee would have been dissolved other 

than to safeguard the fees and expenses incurred by its members and professionals. As such, the 

Committee is in no position to file a response at all, let alone, one requesting that conditions be 

attached to the Debtors’ extension. 

 4 Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Second Extension 

Motion.

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3. Although the Debtors maintain that the Committee’s request should be denied, the 

Debtors, in the interest of good faith, hereby provide the Court, the Committee, and parties in 

interest with an update on the status of the “fully unliquidated” Remaining Claims which are 

preventing current distributions. These claims are considered “fully unliquidated” because they 

assert an unknown amount (i.e., the claimants associated with these claims failed to provide an 

asserted amount in their proofs of claim forms). Rather, they merely provide the bare minimum 

and require significant investigative work to be done.

4. To date, the Debtors have resolved nearly seventy-eight percent (78%) of fully 

unliquidated claims associated with litigations, but, there are over 1,100 of these claims for which 

reconciliation efforts are still ongoing. These claims are preventing distributions because there is 

still insufficient information and/or documentation regarding the underlying litigations for the 

Debtors to make a reasonable estimation of the amount that should be reserved. If the Debtors 

were to make a good faith estimation now, any reserve would need to include all claims that are 

pending objection, but have not yet been finally resolved by Court order, including those which 

have been subject to prior omnibus objections and remain subject to pending Notices of 

Presentment. The lack of information at this time makes a good faith estimation impractical, and 

such a reserve might have to be so large that distributions to creditors could not reasonably occur

or provide a meaningful recovery. 

5. For the same reason that the Debtors cannot reasonably estimate the reserve for 

these claims, the Debtors cannot reasonably determine whether to object to many of these claims. 

To be clear, the Debtors have made significant progress in reviewing and reaching initial 

determinations for resolving a large number of these claims. But, others of these claims involve

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substantive and complex issues that require more time to review and to collect and analyze relevant 

information. 

6. The extension sought is necessary because it will avoid the needless filing of 

objections and afford the Debtors an opportunity to, among other things, perform additional

analysis concerning the most efficient manner of resolving these and other Remaining Claims in 

the interests of ensuring ratable distributions among, and maximizing value for, legitimate 

creditors.

REPLY

A. The Debtors Have Been Working Diligently and Expeditiously on Claims 

Reconciliation But There Are Over 1,100 Fully Unliquidated Proofs of Claim Subject 

to Ongoing Reconciliation Efforts Which Are Prohibiting Distributions

7. Although the Committee’s appointees to the Avoidance Actions Trust Board 

already receive a monthly report providing the status of the claims reconciliation process, the 

following is an overview of the status of certain of the Remaining Claims which are preventing 

distributions. Those claims are “fully unliquidated” claims, or claims asserting unknown amounts 

because the claimants associated with these claims failed to provide an asserted amount or even 

basis for recovery in their proof of claim forms. 

8. By way of background, over 5,050 fully unliquidated proofs of claim asserting 

liabilities related to litigations have been filed against the Debtors. To date, approximately 3,900 

of these claims have been resolved through: (i) objections that have been ordered by the Court; (ii) 

objections that have been granted but are awaiting orders from the Court; (iii) withdrawals by 

creditors; and (iv) determinations that Kroll Restructuring Administration LLC made a filing error. 

9. In November 2022, the Debtors moved to amend the ADR Proceduresto streamline 

the offer-exchange process and facilitate the expeditious and economical determination of claims 

associated with claimants who fail to respond to offers or counter-offers. See Motion of the 

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Financial Oversight and Management Board for Puerto Rico to Amend Alternative Dispute 

Resolution Procedures [ECF No. 22936]. The Court granted the Debtors’ motion to amend on 

December 20, 2022. See Order Granting Motion of the Financial Oversight and Management 

Board for Puerto Rico to Amend Alternative Dispute Resolution Procedures [ECF No. 23113]. 

10. Of the claims that have been resolved through objections to date, over 400 were

initially transferred into ADR pursuant to the Order (A) Authorizing Alternative Dispute 

Resolution Procedures, (B) Approving Additional Forms of Notice, and (C) Granting Related 

Relief [Case No. 17-BK-03283, ECF No. 12576] (the “ADR Order”), as amended, and were 

subsequently subject to omnibus objections for having failed to respond to Information Requests 

(as defined in the ADR Order) or having failed to provide sufficient information in response to 

Information Requests.

11. Further, in the months since the Court’s previous Extension Order, the Debtors, 

together with local counsel, have been reviewing and analyzing responses received to Information 

Requests in order to develop settlement valuations for unliquidated claims that have been 

transferred into ADR. The Debtors also have received approximately one hundred mailings from 

claimants related to the motion to amend the ADR Procedures, and the Debtors have been 

reviewing the mailings to determine the most effective and efficient way to leverage claimant 

interest to perform additional outreach, obtain necessary information, and move for speedy (but 

fair) resolution. 

12. Since the Extension Order was entered by the Court in August 2022, the Debtors 

have also filed thirty-nine omnibus objections covering approximately 400 fully unliquidated 

claims. Among those objections were new objection types, including objections for the purpose 

of liquidating proofs of claim according to procedures agreed-upon by the Committee. 

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13. It is against this background that the Debtors’ ongoing reconciliation of 1,100 

remaining fully unliquidated claims must be viewed. To date, the Debtors have made significant 

progress in obtaining additional information regarding these fully unliquidated claims, and 

reviewing and reaching initial determinations for resolving a large number of these claims. But, 

there are other of these claims involving substantive and complex issues that require more time to 

review, collect relevant information, and analyze. Accordingly, the Debtors cannot reasonably 

determine whether these 1,100 claims are suitable for objection or ADR because there still is 

insufficient information and/or documentation regarding the underlying litigations. For this same 

reason, these claims are preventing distributions: without sufficient information and/or 

documentation, the Debtors are unable to make a reasonable estimation of the amount that should 

be reserved. If the Debtors were to make a good faith estimation now, the reserve would need to 

include all claims that are pending objection, but have not yet been finally resolved by Court order, 

including those pending Notices of Presentment.

5 The lack of information at this time makes a 

good faith estimation impractical, and such a reserve might have to be so large that distributions 

to creditors could not reasonably occur or provide a meaningful recovery.

14. Indeed, as the Debtors have previously explained, the class action litigation

captioned Rosa Lydia Vélez et al. v. Puerto Rico Department of Education, No. KPE-1980-1738

is just one example of a litigation that is currently preventing distributions. This litigation, which 

underlies hundreds of fully unliquidated claims pertaining to thousands of plaintiffs, was filed 

against the Department of Education three decades ago related to services which were allegedly

not provided to certain special needs children. Although a partial judgment was entered in that 

 5 At this time, there are approximately 2,500 claims subject to approximately 12 pending Notices of Presentment. The 

Debtors anticipate filing 55 Notices of Presentment covering approximately 11,500 claims this week. 

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case (see Motion for Relief from Stay [ECF No. 730]), the damages owed to each plaintiff were 

never determined. Before the case was stayed, counsel for the plaintiffs were supposed to provide 

copies of records to the Department of Education naming each of the plaintiffs and showing which 

services were allegedly not provided to which plaintiffs. The Debtors maintain that those records 

are necessary so that the alleged damages purportedly owed to each plaintiff (and each claimant)

can be ascertained. Absent this information, the Debtors cannot, at this time, reasonably estimate 

a reserve in order to account for the hundreds of underlying unliquidated claims.

15. The Debtors have continued their attempts to obtain those records (and others 

related to the underlying litigations) through the aforementioned outreach efforts, including: (i) 

coordinating with the Puerto Rico Department of Justice to attempt to obtain relevant pleadings 

and supporting documentation; (ii) re-contacting claimants or claimants’ counsel via mailing, 

telephone and/or email, using the contact information provided by the claimants in their proofs of 

claim, and reviewing and analyzing information submitted; and (iii) sending follow-up letters on 

behalf of the Oversight Board to numerous different Commonwealth agencies that were named 

parties in the litigations underlying the claims. While the Debtors have received some helpful 

information, in many instances, the Debtors require additional follow-up information in order to 

fully evaluate the asserted litigations. 

16. The extension is, accordingly, critical because it will avoid the needless filing of 

objections and afford the Debtors an opportunity to, among other things, perform additional

analysis concerning the most efficient and appropriate manner of resolving these and other 

Remaining Claims in the interests of ensuring ratable distributions among and maximizing value 

for legitimate creditors.

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B. The Committee No Longer Has Oversight Duties Over the Claims Reconciliation 

Process 

17. The entire premise for the Committee’s request is that “the Committee is concerned 

about the pace at which the Remaining Claims are being resolved and the timing of distributions 

to general unsecured creditors.” Resp. ¶ 2. The Debtors, of course, agree that expeditious 

resolution of the claims reconciliation process is critical so that holders of valid claims receive 

appropriate distributions. At the same time, the Debtors are cognizant that, without engaging in 

hearings to estimate thousands of “fully unliquidated” claims, a time-consuming and extremely 

costly exercise, no distributions can be made. But, as mentioned above, while the Committee

seeks to inject itself, it no longer has oversight responsibility of the claims reconciliation process.

18. The Plan provides that, upon the Confirmation Order being a Final Order6 and 

except for the limited involvement associated with the recovery of fees and expenses of the 

Committee’s professionals and members, as of the Effective Date, the Committee is considered 

“dissolved and ... deemed to have satisfied all of its respective duties and obligations, and ... 

released and discharged from any action or activity taken, or required to be taken, in connection 

with the Title III Cases[.]” Plan § 90.1. With the consummation of the Plan, the Committee, 

arguably, does not have any duties with respect to the claims reconciliation process. Indeed, those 

duties now belong to the Committee’s two (2) appointees to the Avoidance Actions Trust Board.

Id. § 82.1(b). Pursuant to the Plan and the Confirmation Order, such appointees receive monthly 

reports regarding the claims reconciliation process and have “the right to ... review the claims 

objections and reconciliation process, including the ADR Procedures, as it relates to CW General 

Unsecured Claims, ERS General Unsecured Claims, [and] Convenience Claims[.]” Id. 

 6 The Debtors acknowledge that an appeal of the Confirmation Order remains pending, but the benefits of the Plan 

and the Confirmation Order (i.e., the appointment of the Committee members) have been realized and implemented 

for nearly one year. 

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19. The Committee does not dispute that such appointees have been receiving such 

progress reports from the Debtors and analyses from the Committee’s financial advisor, and that 

it is fully aware of the claims reconciliation process and the need to address the “fully unliquidated” 

claims. Likewise, there is no dispute that, prior to the Effective Date, the Committee was keenly 

aware of the need to review all claims and the difficulty in obtaining the information needed to do 

so. Accordingly, while the Debtors appreciate the concern associated with making distributions 

to holders of valid claims, they reiterate that they can only do so in a pragmatic manner designed 

to provide such holders with their rightful recoveries.

WHEREFORE the Debtors request that the Court grant the relief requested in the Second 

Extension Motion and such other and further relief as is just. 

Dated: January 25, 2023

San Juan, Puerto Rico

Respectfully submitted,

/s/ Brian S. Rosen

Martin J. Bienenstock (pro hac vice)

Brian S. Rosen (pro hac vice)

PROSKAUER ROSE LLP

Eleven Times Square

New York, NY 10036

Tel: (212) 969-3000

Fax: (212) 969-2900

Attorneys for the Financial 

Oversight and Management Board 

as representative for Debtors

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/s/ Hermann D. Bauer 

Hermann D. Bauer

USDC No. 215205

O’NEILL & BORGES LLC

250 Muñoz Rivera Ave., Suite 800

San Juan, PR 00918-1813

Tel: (787) 764-8181

Fax: (787) 753-8944

Email: hermann.bauer@oneillborges.com

Co-Attorney for the Financial Oversight and 

Management Board as representative for the 

Debtors

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CERTIFICATE OF SERVICE

I hereby certify that, on this same date, I electronically filed the foregoing with the Clerk 

of the Court using the CM/ECF system, which will send notifications of such filing to all CM/ECF 

participants in this case.

/s/ Hermann D. Bauer

Hermann D. Bauer

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