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UNITED STATES DISTRICT COURT 

DISTRICT OF PUERTO RICO 

-----------------------------------x 

In re: 

 

THE FINANCIAL OVERSIGHT AND PROMESA 

MANAGEMENT BOARD FOR PUERTO RICO, Title III 

 as representative of Case No. 17 BK 3283 (LTS) 

THE COMMONWEALTH OF PUERTO RICO, 

et al., (Jointly Administered) 

 Debtors. 

------------------------------------x 

 New York, N.Y. 

 December 14, 2022 

 8:30 a.m. 

Before: 

HON. LAURA TAYLOR SWAIN, 

 Chief U.S. District Judge 

APPEARANCES: 

For the Financial 

Oversight and Management 

Board for Puerto Rico: Martin J. Bienenstock, Esq. 

 Brian S. Rosen, Esq. 

 Steve Y. Ma, Esq. 

 Libbie B. Osaben, Esq. 

 Javier F. Sosa, Esq. 

 Laura Stafford, Esq. 

For the Official Committee 

of Unsecured Creditors 

(the "Committee"): Luc A. Despins, Esq. 

For Assured Guaranty 

Corp. and Assured 

Guaranty Municipal Corp: William J. Natbony, Esq. 

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APPEARANCES, Continued: 

For The Puerto Rico 

Fiscal Agency and 

Financial Advisory 

Authority: Peter Friedman, Esq. 

 Matthew P. Kremer, Esq. 

 Carolina Velaz-Rivero, Esq. 

For The Ad Hoc Group 

of PREPA Bondholders: Amy Caton, Esq. 

For U.S. Bank: Ronald J. Silverman, Esq. 

 Pieter van Tol, Esq. 

For Syncora: Susheel Kirpalani, Esq. 

For Bonistas del Patio: Donald S. Bernstein, Esq. 

 Benjamin S. Kaminetzky, Esq. 

Also present: Judge Shelley Chapman 

 Judge Robert Drain 

 Judge Brendan Shannon 

 Yusif Mafuz-Blanco 

Proceedings recorded by stenography. Transcript produced by 

CAT. 

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THE COURT: Buenos dias. Good morning, everyone.

This is Judge Swain. 

Would the courtroom deputy please announce the case?

THE DEPUTY CLERK: The United States District Court

for the District of Puerto Rico is now in session. The

Honorable Laura Taylor Swain presiding. Also present, the

Honorable Magistrate Judge Judith Dein. God save the United

States of America and this Honorable Court.

In re: The Financial Oversight and Management Board of

Puerto Rico, as representative of the Commonwealth of Puerto

Rico, et al, PROMESA, Title III, Case No. 2017-BK-3283, for

Omnibus Hearing.

THE COURT: Thank you, Ms. Ramirez.

Mr. Bienenstock, you have your hand up.

MR. BIENENSTOCK: Yes, your Honor. 

Good morning. I just wanted to put my hand up because

I'm getting a message the host stopped my video. I don't mind

not seeing my face, but I just didn't want you to think that I

didn't have it on on purpose.

THE COURT: Alright. Thank you for letting us know.

MR. BIENENSTOCK: Oh, it's fixed.

THE COURT: There you are. You're back.

I'd ask that everyone turn their video on for the

opening remarks.

I'm wearing a mask. I'm here in the courtroom with

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other people, and our numbers are higher in New York, so in

order to be courteous to the court staff with me, you'll see me

masked. If you have real difficulty understanding me, which

you really shouldn't, but if anyone does, raise your hand and

we'll work on doing something about that.

MR. NATBONY: Judge Swain, it's Bill Natbony at

Cadwalader. I have the same problem.

THE COURT: Of the video?

MR. NATBONY: No picture. No picture.

THE COURT: Alright. Let's see what we can do about

that.

Okay. I think we're fixing those going along. So if

I see your name, I will assume that it is our fault and not

yours.

MR. NATBONY: Thank you.

THE COURT: Welcome, counsel, parties in interest, and

members of the public and press. We are about to begin today's

Omnibus Hearing in the PROMESA Title III cases. After the

conclusion of the Omnibus Hearing, we will proceed to a hearing

on the application, pursuant to Title VI of PROMESA, for the

approval of the proposed Qualifying Modification of certain

bonds issued by the Puerto Rico Public Finance Corporation,

which is referred to as PFC.

To ensure the orderly operation of today's virtual

hearings, all parties appearing by Zoom must mute their

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microphones when they're not speaking and, after these initial

remarks, turn off their video cameras if they're not directly

involved in the presentation or argument. When you need to

speak, you must turn your camera on and unmute your microphone

on the Zoom screen.

I again remind everyone that consistent with court and

judicial conference policies, and the orders that have been

issued, no recording or retransmission of the hearing is

permitted by anyone, including, but not limited to, the

parties, members of the public, and the press. Violations of

this rule may be punished with sanctions.

I'll be calling on each speaker during the

proceedings, and when I do call on you, please turn on your

camera, unmute yourself, and identify yourself by name for

clarity of the record. After the speakers listed on the agenda

for each of today's matters have spoken, I may permit other

parties in interest to address briefly any issues pertinent to

the presentations that require further remarks. If you wish to

be heard under these circumstances, please use the "raise hand"

feature at the appropriate time. That feature can be accessed

by selecting the reactions icon in the tool bar located at the

bottom of your Zoom screen. I will then call on the speakers

one by one. After you finish speaking, please select the

"lower hand" feature also in the reactions area.

Please don't interrupt each other or me, so that we

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can have an accurate transcript; and, as usual, I apologize in

advance for breaking the interruption rule, because I may

interrupt if I have questions or if you go beyond your allotted

time. If anyone has trouble hearing me or another participant,

please use the "raise hand" feature.

The Amended Agenda, which was filed as Docket Entry

No. 23055 in Case No. 17-3283 and as Docket Entry No. 68 on the

PFC docket, which is Case No. 22-CV-01517, is available to the

public at no cost on the Kroll Restructuring website,

previously known as Prime Clerk, for those interested. The

Prime Clerk website addresses and telephone numbers are still

operational.

I encourage each speaker to keep track of his or her

own time. The Court will also be keeping track of the time and

will alert each speaker when there are two minutes remaining

with one buzz and, when time is up, with two buzzes. If you're

speaking for three minutes or less, you'll only hear the final

two buzzes. Here's an example of the buzz sound.

(Sound played)

THE COURT: If we need to take a break, people who are

on the AT&T listen-only line should put their phones on hold

but not hang up. So if we're on a break, put your listen-in

line on hold, and then take it off hold at the time when we're

scheduled to restart.

This morning we will proceed until 11:50 Eastern

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Standard Time, which is 12:50 Atlantic Standard Time, and we'll

resume, if necessary, from 1:10 Eastern Time to 4:00 p.m.

Eastern Time. I'll aim to take a break at about 10:30 Eastern

Time, which would be 11:30 Atlantic Standard Time, and that

would be a ten-minute break. Again, during the break, people

who are on the listen-in line should just put the line on hold

and not hang up.

So please, everyone except Mr. Bienenstock, turn your

cameras off now, and then when we reach your agenda item or I

call on you, turn your camera back on.

Good morning, Mr. Bienenstock.

MR. BIENENSTOCK: Good morning, Judge.

THE COURT: Thank you.

Before we turn to the first item on the filed Agenda,

I note that last night the Oversight Board, rather than filing

a plan in accordance with the deadlines set by the extension

order that was filed on December 12, filed an urgent motion

requesting a further extension of the PREPA Plan-related

deadlines. That urgent motion is Docket Entry No. 23064 in

Case No. 17-3283 and Docket Entry No. 3108 in Case No. 17-4780. 

The urgent motion indicates that the resolution of

some type of problem with the production of information by the

Board has created a need and opportunity for further

discussions and potentially for a material change in the

Oversight Board's position.

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Do I have that right, Mr. Bienenstock?

MR. BIENENSTOCK: Yes, your Honor. I think that's

what we wrote in the motion. Yes.

THE COURT: So I'd just like a little bit more insight

into the situation. Is this information information that the

Board had undertaken to produce in connection with the earlier

order?

MR. BIENENSTOCK: Your Honor, the answer -- I'm not

absolutely sure. It was information that was put into a data

room. Not everyone realized it was there. It obviously was

not manufactured by the Board. It was uploaded into the data

room, and if we had -- if the Board had understood it had been

there earlier, it would have produced it earlier. There were

just a series of I think people not knowing things, and it all

pertained to one of many issues at stake. And it was disclosed

a couple evenings ago.

That's the best I can tell you, your Honor.

THE COURT: Yes. There was certainly good news in the

extension notice from my perspective hearing that the Board's

willing to hear information that might move more productively

the mediation. I am aware that all participants have been

working hard in the mediation, but it also sounds as though,

whether by reason of information tracking, communications, or

otherwise that some responsibility and perhaps significant

responsibility for delays that have brought us past the

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original time target that I set and the extended time target

that I set may be traceable to the Board and those the Board

works with.

Given the importance to Puerto Rico and all of the

stakeholders of the issues that we're dealing with in seeking

to get a proper PREPA plan to confirmation in a timely manner

by the middle of this year, I'm deeply disturbed by that. And

so I will expect that the Board, as Debtor representative, will

be scrupulous and more scrupulous, to the extent necessary, in

its attention to the full range of matters that are important

here and the need to use the time of the Court and the

mediators and the other parties in interest well in moving

toward confirmation of a plan for PREPA and a more solid future

for Puerto Rico moving forward, and the ability of Puerto Rico

to focus on repairing infrastructure and reviving the economy.

None of that should be surprising, but I felt a need to share

that this morning, having read the statement in the extension

request.

So now I would invite you to speak further to the

extension request.

MR. BIENENSTOCK: Your Honor --

THE COURT: I'm sorry. Shelley Chapman, the lead

mediator, has her hand up.

Judge Chapman, did you want to be heard before

Mr. Bienenstock speaks further?

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JUDGE CHAPMAN: No. Good morning, your Honor. I'm

sorry. I'm perfectly happy to wait until after Mr. Bienenstock

has concluded his remarks.

THE COURT: Thank you. So I'll call on you after

Mr. Bienenstock has concluded his remarks.

Thank you. Please proceed, Mr. Bienenstock.

MR. BIENENSTOCK: Okay, your Honor. As the Court

understands, the mediation confidentiality severely constrains

what I think any of us can and should be saying. So to the

extent something more than what we wrote in the motion is

beneficial to the Court, I think I would just point out a few

things, and hopefully not breach any mediation confidentiality

in doing it.

THE COURT: I do want you to be careful not to breach

mediation confidentiality, so I appreciate your attention to

that. I just want to give you an opportunity to say anything

further that you're comfortable in saying.

MR. BIENENSTOCK: So outside of the mediation, and

from the beginning of this case, the Board has taken a position

in respect of its fiscal plans and budgets, that those are not

up for negotiation, because the welfare of Puerto Rico and its

people is not something that can be negotiated. That said, the

Board has always specified that it would change its fiscal

plans and budget on at least two conditions -- on either of two

factual scenarios. One is if someone shows that it made a

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mistake, and the other is if it gets additional material

information that would change its conclusions.

In the mediation, from the Board's point of view, its

positions on that are just its positions, whether it's in

mediation or not. Suffice it to say, in connection with the

mediation, some people think that the issue in particular in

respect of the data that was the subject of the problem is

material and should change positions. Some people not. Some

people think there are other issues that overwhelm the single

issue that that data concerns. But from the public record, the

public and the Court knows that so far the Board has done deals

with Vitol, as one impaired accepting class, and the Fuel Line

Lenders, whose claims exceed $800 million as a second impaired

accepting class.

Certainly a goal of the Board and the entire

mediation, is to see if that can be expanded to include the

bondholders, which is comprised of the largest class of

creditors. The Board, as the motion states, will continue to

negotiate what the bondholders and other parties who are not on

board yet -- significantly, we have the unions, which the

biggest issue with the unions is they have an underfunded

pension plan. That's public knowledge. And there's no --

there's no at least finalized understanding with the statutory

-- the Official Creditors Committee. So negotiations with all

those parties, from the Board's point of view, will continue

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whether or not the Board files a proposed plan without those

things being settled.

As the motion says, the Board is and has been prepared

to do that, but because of the view that reaching a deal, at

least with the bondholders, might be more difficult if a

proposed plan is on file than if it's not, the Board has been

more than willing to accommodate various inputs that it should

ask for extensions of the mediation so as to try to reach those

deals without the proposed plan being on file. Whether that

will prove true, we don't know, but since the litigation that

resolves some of the key issues has not been slowed down, and,

in fact, yesterday reply briefs were filed -- I think the only

thing left is on December 20 the intervenors can file some

supplemental pleadings -- the Board has felt that by requesting

extensions of the mediation, it has not slowed down the

progress or reduced the likelihood of confirmation in July.

So, essentially, the Board's request is to try to

accommodate those parties who believe it's better to negotiate

without a plan on file, and that's why we made the request.

And because it is important to some parties, we hope the Court

will grant it. If it doesn't, the Board is prepared to file

its proposed plan and disclosure statement and to continue

negotiating.

THE COURT: Thank you, Mr. Bienenstock.

Judge Chapman.

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JUDGE CHAPMAN: Good morning, your Honor. Can you

hear me?

THE COURT: Yes, I can. Good morning.

JUDGE CHAPMAN: Good morning, your Honor. 

Shelley Chapman from the law firm of Willkie Farr &

Gallagher, appearing this morning on behalf of the mediation

team.

Your Honor, I must confess that Mr. Bienenstock's

remarks have gone off in a direction that I did not anticipate,

so I'm not going to fully address and respond to a number of

the observations that he's made with respect to the overall

plan process, but I do believe that I need to correct the

record, if you will, and give you an explanation from our

vantage point as to what happened and why we are now here

before you today in connection with a third extension request.

THE COURT: Again, you, too, will be scrupulous about

mediation confidentiality?

JUDGE CHAPMAN: Yes. Indeed I will. And, your Honor,

if I am anywhere near the line, please let me know and I will

stop on a dime.

We got here today first as a result of an initial

extension request that was made by the mediation team in a

December 1st filing. That extension request contained a number

of conditions. The condition primarily at issue today was the

following: That the Oversight Board shall promptly deliver to

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the Ad Hoc Group and the Monolines, on a rolling basis, all of

the information on which the Oversight Board had relied in

formulating its current position in the ongoing plan

negotiations, with such delivery to be completed by the close

of business on December 2nd, 2022. That's in the extension

request. It's a matter of public record. 

Your Honor, the word "all" meant all, and up until

that point, the document request had been extensive and had

been discussed over and over again. And, indeed, in connection

with the filing of the December 1st report, the mediation team

made it crystal clear specifically what it was looking for, and

on an included but not limited to basis.

There can be no doubt, respectfully, I'll say contrary

to Mr. Bienenstock's observation, that the documents that

emerged in the early hours of the morning, not several days ago

but yesterday morning, up until 3:00 a.m., prior to the time

that mediation was to commence at 9:30 in the morning, had

previously been requested multiple times. And while the

mediation team is well aware of the process of the Board in

connection with the fiscal plan and otherwise, the mediation

team is determined that these negotiations proceed based on

data and facts, and we believe that that's the only way that

there can be a sensible, well-informed negotiation.

So, your Honor, just to put a little more color on it,

because I think this is very important, December 2nd came and

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went, and document production was obviously not complete.

Documents continued to be produced over that subsequent weekend

and into the week of December 5th. Another extension request

was filed as we were all staring down the deadline. The

mediators felt that it was important that the document

production be completed.

This is not simple stuff, your Honor. It's not a

matter of just documents, you know, in a box the way we all

grew up with. There are -- I don't want to get too granular,

but there's data, there's methodologies and the like that's all

required for the advisors to fully present a picture to the

parties so that they can negotiate.

Over the weekend, over the weekend of December 10th

and 11th, the Ad Hoc Group's advisors feverishly worked with

such information as had been provided in order to prepare for

ongoing meetings. We thought we were finally done, and then

low and behold, beginning at midnight through the night before

the mediation session that occurred yesterday, critical data

appeared for the first time.

And it does appear to us that it's not a matter of

simply that folks -- you know, this just happened and folks

didn't know it was there. I am unwilling to accept that

characterization. But I'm going to -- I'm going to try to stop

short, because I want to have a good and productive line of

communication and dialogue open with the Board's advisors, but

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we do believe that they need to be held to account. A

tremendous amount of time and effort has been expended here,

your Honor. It could have gone differently, but we insist that

the process has integrity and that it be data based.

Your Honor, we think that what's been lacking here, in

addition to, you know, the data itself, is an overall

atmosphere of candor and cooperation. I expect to hear from

everybody. I want my phone to be ringing off the hook. It's

essential to the success of any mediation, and, in my

experience, that's what drives a successful outcome. So we

hope and we expect that going forward that will be the case

during this latest and presumably last extension request.

It's not just a matter of holding up the filing,

filing of the plan. These parties are big, big folks. They've

been -- they're very sophisticated. They know how to move

forward.

Your Honor, if the mediators are in a position to make

a proposal, which will be the case if the Board indicates its

willingness to make a material move, rest assured that the

mediators' proposal will be informed by the entirety of the

record, by everything that the mediators have been privy to,

and will take into account the newly disclosed data. We're

seeking a data-based solution that is fair to the creditors,

but, above all, is fair and in the best interest to the people

of Puerto Rico, and that ensures a solid future for PREPA.

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Your Honor, if we're not in a position to make a

proposal and the plan has to be filed, we would ask that we

have an opportunity to come back before you, give you our

additional thoughts, and address scheduling matters. 

Thank you, your Honor.

THE COURT: Thank you.

Mr. Bienenstock, you have your hand up again, and I

also see that Ms. Caton's hand is up. But first,

Mr. Bienenstock.

MR. BIENENSTOCK: Thank you, your Honor.

I have to very respectfully disagree with Ms. Chapman.

The Board and its -- the people doing the production did not

fail to comply with any condition or any request, and the

reason I can say that so definitively is that the conditions

and requests were to produce all information the Board relied

upon. The information that's been the subject of this hearing

is not information the Board relied on, and, in fact, it didn't

really know about it.

The reason it was produced at all, given that it was

not something that the Board had relied on, was that in a

Monday discussion with some of the creditors or their advisors,

there was a specific request for the type of information that

was, and when the Board looked, it found it and produced it

even though it had not relied on it. All that said, I am

extremely proud of the way the Board has methodically attempted

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to continue to try to make consensual deals. It will continue

to do so. And we've made solid progress.

As your Honor knows, we've confirmed a lot of plans

where there were a lot of issues even more difficult than

these, and with creditors, and we hope to have the same success

here. And I think, directionally, we are exactly where the

mediators are, but I simply cannot leave the Board undefended

when it comes to the remarks that Ms. Chapman made.

THE COURT: Thank you, Mr. Bienenstock.

I think that there is clearly identified here ongoing

issues of clarity, trust, and candor that need to be attended

to continually to make that progress and to make sure that

there is an atmosphere in mediation that is constructive and in

which there are no unnecessary barriers. So everyone is a

grown-up. We all know what our goals are and what our duties

are. So I will urge you to, on all sides, err in the direction

of communication and substance and style that will facilitate

productive work. If there's any doubt as to whether something

would raise an unnecessary barrier or not, don't raise the

unnecessary barrier.

This is not a rocket science speech, but it is a

remark that comes from my concern about the dynamics hindering

progress. So --

JUDGE CHAPMAN: Your Honor.

THE COURT: Yes, Judge Chapman.

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JUDGE CHAPMAN: Yes. I'm sorry. May I just have 30

seconds more, your Honor?

THE COURT: Yes, but I don't want this to end up being

a back and forth. So 30 seconds.

JUDGE CHAPMAN: I don't want it to be a back and forth

either, and I suppose we're going to have to agree to disagree.

The one thing I'll say is that, on the granular basis, the

dispute centers on a request that had been made over and over

again. And, beyond that, I think we're mincing words.

I did want to ask your Honor, I have two very

wonderful co-mediators, and I did want to ask your Honor if you

wanted to hear from them as well. So -- I didn't want to speak

to the exclusion of them. And with that, your Honor, I'll

conclude.

THE COURT: Thank you.

If either of the co-mediators who is on would like to

add a comment, please raise your hand now and I'll call on you

before I call on Ms. Caton.

So Judge Drain has just raised his hand.

Good morning, Judge Drain.

JUDGE DRAIN: Good morning, your Honor.

I agree with Judge Chapman's remarks entirely, and

would say that with all of the work that has been done, and

there's been a lot done to pull out information, because this

is ultimately a data-driven determination we believe, this is,

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in our belief, the best time to reach an agreement with the

largest group of creditors. And we have tried very hard to

keep these deadlines as short as possible in light of that and

obviously the Court's concerns to move this process along.

JUDGE SHANNON: Good morning, your Honor. This is

Judge Shannon. I'll keep it very, very brief. 

To the comments of my colleagues, me, too. I could

not agree more with the observations, and I do believe this is

both a critical time and a meaningful opportunity to try to

move forward with the process. And we are committed to it.

Thank you.

THE COURT: Thank you, Judge Shannon, and thank you,

Judge Drain.

Ms. Caton, did you -- I will now hear from

representatives of other parties in interest who wish to be

heard on the question of whether the extension should be

granted. I would ask that each speaker be as brief as

possible. I will have a beep sounded at three minutes and

another at five. Please don't make me get to the five. If you

can do it in under the three, that would be great, too.

So I think Mr. Kirpalani's hand is up. 

Ms. Caton had her hand up, but it's no longer up. So,

Ms. Caton, if you wish to speak, put it up again, but first

I'll call on Mr. Kirpalani.

I'm sorry, Ms. Caton. You got your hand up right

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away, so, Ms. Caton, you go first.

MS. CATON: Thank you, your Honor.

I appreciate it. Amy Caton on behalf of the Ad Hoc

Group of bondholders. I am going to be brief this morning, and

I want to note we did not request this extension, but nor did

we object. And I will be very careful about breaching the

confidentiality of the mediation and keeping my comments

productive. 

I do want to note that Mr. Bienenstock, in his

statements about the document request, specifically have his

facts wrong, and we can leave that for another day. And I'm

also going to leave for another day when this data was actually

received, whose control it was in, but I do want to note, your

Honor, that these are really critical issues that we think

warrant full discussion and review at a later date, because

they really do go to the heart of mediation and the plan

process and the intent of the parties.

And I also want to note that while Mr. Bienenstock's

extension request states that the parties need time to

determine whether this information is meaningful or not, that,

again, without getting into the depths of the mediation, I

believe it was observed by all the parties, including the

mediators and Oversight Board's advisors yesterday that this

information was indeed important to review.

Finally, on this point, I do want to note that it's

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our view that the Court mediators have tried everything in

their power not to just get to a deal here, any deal, but also

to understand the critical issues before them, and this is what

PREPA can afford to pay to its creditors and how PREPA's

electricity rates drive that question.

And we've done everything we could to try to answer

the mediator's questions on these critical issues, and I hope

that all of the parties have done the same. So I hope that the

Board members and their advisors have the opportunity to review

this data, discuss their next steps, and see where we go from

here. And I'm sorry that my description can't be more robust,

but I do think -- I think I've met the requirement of keeping

within the mediation privilege.

Finally, the Board's report yesterday notes that it's

reached a settlement with the Fuel Line Lenders, and towards

that settlement, I just again note that the Board continued

sort of statements about litigation with the bondholders rather

than focusing on trying to get a deal, in its comments to the

Court, bring us back to what is probably the intent of the

settlement, which is to create an impaired accepting class that

may be acceptable to your Honor. I think that that is also

going to have to be reviewed fully at another date.

So with that, I will conclude my remarks and thank

you, your Honor, for your time.

THE COURT: Thank you, Ms. Caton. 

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Mr. Kirpalani.

MR. KIRPALANI: Thank you, your Honor. Susheel

Kirpalani from Quinn Emmanuelli on behalf of Syncora Guarantee,

who is a member of the Ad Hoc Group. I'll be very brief.

Your Honor can probably tell from reading between the

lines of the pleading that was filed by the Board that they

have a plan that's ready to go. So thanks to the hard work of

the mediators, the Board is willing to continue hearing and

reacting to points of contention or disagreement, which is

positive.

I would just say if we don't reach a deal, your Honor

-- and we have in multiple scenarios been the leading voice in

getting to a deal. You know, that's what we're trying to do,

rather than litigate. The Board I feel, with some fresh eyes

that I could add to this process, has set up the litigation

schedule to claim objections only because they feel that gives

them the greatest amount of optionality without ever having to

reach threshold issues that will have to be answered by the

Court at confirmation. And it creates a bad dynamic for them

to deal.

I'm not going to go back through the history, but I

just want to alert the Court that if the deal can't be

negotiated, and I'm going to remain hopeful that we can, but if

a deal can't be negotiated based on all the relevant evidence

to be considered, we're going to come back to the Court at the

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disclosure statement hearing phase and ask your Honor to find

points of intersection where the Court could lawfully exercise

its jurisdiction to determine some threshold issues that would

actually facilitate determining whether it's a good use of

judicial resources to entertain the plan along the lines of

what the Board has in mind currently.

Thank you, your Honor.

THE COURT: Thank you, Mr. Kirpalani. 

Mr. Natbony. You're muted, Mr. Natbony. 

MR. NATBONY: Can you hear me now?

THE COURT: I can. Thank you.

MR. NATBONY: Thank you.

Your Honor, first I need to apologize for not being

properly suited. I had a family crisis and had to fly away and

did not bring a suit. So I apologize to you. No disrespect is

meant. 

THE COURT: Understood. My sympathies in your family

crisis. I hope that it is resolved well and quickly.

MR. NATBONY: Thank you, your Honor.

I'll be very brief. I just want to basically say, on

behalf of Assured -- William Natbony on behalf of Assured. 

I want to reiterate and confirm and support the

comments of the mediation team and Ms. Caton and Mr. Kirpalani.

Assured stands ready, willing, and able to continue

negotiations in good faith to reach a deal relating to the

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PREPA debt. We are hopeful, but, at the same time, have the

same concerns that have been previously expressed.

Thank you, your Honor.

THE COURT: Thank you, Mr. Natbony.

I have someone labeled as Creditors Committee. I

don't know if that's Mr. Despins or someone else, so Creditors

Committee representative -- it looks like Mr. Despins.

MR. DESPINS: Good morning, your Honor. I thought it

said Luc Despins.

THE COURT: Well, actually, it does now that you're

up. I couldn't read the full label in my side list. 

Good morning.

MR. DESPINS: Good morning, your Honor.

So, obviously you know the Committee's position, I

will not restate it, but, you know, again, we are very

concerned about what's going on here. You know, counsel for

the bondholders really let the cat out of the bag saying, oh,

mediators are doing a great job because they're focusing on

PREPA'S ability to pay, and that's -- that was the words

expressed, so I'm not reading anything -- but that's the

problem.

The PREPA and the people of Puerto Rico should not pay

for something that they don't have to pay legally for,

regardless of what they can afford. And, by the way, there are

huge issues about what they can afford, but aside, there is a

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threshold issue before the Court, and it is, is PREPA liable

for these billions of dollars of bonds. And, you know, I'm

very concerned, when I hear that the focus is apparently solely

or largely on the issue of ability to pay, and also I'm

concerned about -- I'm sorry.

THE COURT: I just want to say that I hear and

understand that concern, and understand that it is prompted by

a statement that was made intending to be with care not to go

into the substance of matters being discussed in the mediation.

So I will say that I am certainly aware of the parties'

consistent position as to the rights, if any, of these credits,

and I will shortly have fully briefed that merits dispute. 

My schedule, in terms of attending to litigation,

hasn't changed, and so I would -- today I don't -- I would like

to avoid having discussions of the merits of positions while

still encouraging everyone to make, within the mediation

context, their -- themselves heard as to what is critical and

what isn't, or is less critical.

Sorry to interrupt, Mr. Despins. You can go on.

MR. DESPINS: Oh, yes, and, by the way, I was not

going to go into the merit of the claims. I just stated the

Committee's position, which is there is a threshold issue which

is, regardless of one's ability to pay whether there's a legal

entitlement to pay, and that's it. So I'm not going to go into

the merits of that.

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I'm also concerned about having these exchanges in

open court about whether the Board is operating with candor.

By the way, you know we are no friend of the Board, and we've

had numerous battles with the Board, but, you know, this is a

pretty serious outfit with former Bankruptcy Judge Gonzalez in

there. And the implication that somehow the Board, with people

like Judge Gonzalez, would not be operating in full candor is

really troubling. 

But I'm not involved, so I don't know -- meaning I'm

not part of these negotiations, so I cannot opine, but I would

say these are pretty serious allegations given the people

involved here. So I just want to state my position on that. 

Thank you, your Honor.

THE COURT: Thank you, Mr. Despins.

Mr. Friedman, for AAFAF.

MR. FRIEDMAN: Yeah. Good morning, your Honor.

I think you know where AAFAF stands, as it has in

every facet of these cases over the last five, five and a half

years.

We support restructurings when they foster

reliability, resilience, a strong bridge. We don't, if they

can't --

THE COURT: I'm sorry. Mr. Friedman, you broke up

there. So if you can go back to "we support restructurings

where they foster reliability, resilience --" and then we

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started to lose you.

MR. FRIEDMAN: Sorry. Affordability, sustainable debt

burdens, as Mr. Despins referenced, we think where they're

consistent with applicable law, in particular with respect to

PREPA, affordability is a real issue, to the extent that is

what this turns on, and obviously there are really important

legal issues, affordability is a major issue, it is a driving

factor, or certainly we believe strongly correlates with

poverty issues. 

And the Court knows about the poverty levels in Puerto

Rico. This restructuring has to result in affordable

electricity rates for individuals, as well as industrial and

commercial customers, and if there isn't a deal in mediation

that reaches that, while that's a credible outcome from the

mediation perspective, from an overall perspective in Puerto

Rico, and what's supposed to happen under PROMESA, and what has

to happen for a successful Puerto Rico in the future, that may

be an okay result, or it is an okay result.

An affordable deal and a deal that reflects legal

rights is more important to us than seeing a mediated outcome

with a result that doesn't work for the people of Puerto Rico

and is inconsistent with AAFAF's mandate. We take the process

seriously. We've done that with mediators throughout, but the

process, as I said, I think to us, as sacred as it is and as

much as it needs to be respected by everybody who's a party to

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it, as much as there needs to be an atmosphere of trust -- and

we do worry that what goes on at the hearings can sometimes

undermine that process. We think it -- the ultimate issue is

the bigger issue, is what is the outcome of this Title III

process.

Thank you.

THE COURT: Thank you, Mr. Friedman.

Mr. Bienenstock's hand had been up momentarily. I

don't see it up now. If he or anyone else wishes to be heard

before I decide -- 

Mr. Bienenstock, I see you on one monitor, but that

may not be because you've raised your hand. So --

MR. BIENENSTOCK: I don't need to say several things I

was going to say because of comments of Mr. Despins and

Mr. Friedman. I'll say that I have to say that I totally take

issue with what Ms. Caton said about incorrect facts, but one

fact, which is the key fact, that cannot be incorrect and she

cannot know about is what the Board relied on. And I know

personally and from my colleagues and other advisors, the Board

did not rely on the data she's talking about, because we didn't

even know we had it until Monday. But, again, it's sort of a

side show we think. But we hope there's a deal.

We have the constraints identified by Mr. Despins,

Mr. Friedman, the Bankruptcy Code provisions that require only

allowable claims be paid. And with that all said, we think we

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should just get back to the negotiations and see if we can do a

deal in the near term or, if not, in the medium term.

THE COURT: Thank you, Mr. Bienenstock, and thank you

all for your comments.

I am persuaded that it is in the best interests of

this process to grant the extension, and I am hopeful that, you

know, further and more informed communications can help the

parties reach a result that is -- if possible, that's

negotiated and that serves the key issues for Puerto Rico going

forward. And so the extension request is granted, and so that

takes the deadline to Friday, unless the Oversight Board

indicates that it is willing to proceed further, in which case

the deadline goes out until Wednesday for filing the plan. And

the extension request specifies the activity to take place

between Friday and Wednesday.

So I will sign the proposed order and, again, I thank

you all for speaking to this issue.

I now turn to item one on the agenda, the prepared

agenda, which is the status report of the Oversight Board and

AAFAF. I thank the Oversight Board and AAFAF for those

informative status reports.

Does the Oversight Board have any further comment to

its report?

MR. BIENENSTOCK: Thank you for asking, your Honor,

but we do not, unless the Court has any questions.

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THE COURT: I do not have any questions. Thank you.

Does AAFAF have any comments further to report?

MS. VELAZ RIVERO: Good morning, your Honor. Carolina

Velaz-Rivero or Marini Pietrantoni Muniz for AAFAF.

We do not have anything further to add, unless your

Honor has any questions.

THE COURT: Thank you, Ms. Velaz. I do not have any

further questions.

If anyone has a question or further comment in

connection with the status reports, please raise your hand now.

I see no raised hands.

Item two, the fee application related matters, has

been dealt with in an order filed prior to this hearing, and

so, at this point, we can go on to the first matter which is

listed as uncontested, and that is the motion of the Oversight

Board for an order authorizing amendments to the ADR

procedures. I believe that Ms. Stafford is to be speaking to

that.

Ms. Stafford, would you please turn on your camera and

unmute yourself?

MS. STAFFORD: Yes. Good morning, your Honor. Laura

Stafford on behalf of Proskauer Rose on behalf of the Oversight

Board.

THE COURT: Good morning, Ms. Stafford, and welcome

back to these proceedings.

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MS. STAFFORD: Thank you, your Honor. It's a pleasure

to be back.

THE COURT: Thank you.

MS. STAFFORD: I apologize, your Honor.

THE COURT: No. No. Please go ahead and make your

statement.

MS. STAFFORD: Of course. 

So, as we noted in the agenda, we're not intending to

speak on this item unless the Court has questions, but just to

briefly summarize, the motion seeks to revise our ADR

procedures order for two limited purposes. First, to allow

objections to claims that have -- to claimants who have not

responded to offers or further offers in the ADR procedures,

and to allow the processing of administrative expense claims to

these procedures. We think in both instances it will help us

preserve the cost effective purposes of the ADR procedures,

while allowing us to represent the claims more efficiently. 

So if your Honor has any questions, I'm happy to

answer them.

THE COURT: Thank you. I do have some concerns from

the Court administration point of view about efficiency, and

Judge Dein and I have put a lot of attention into this and have

some suggestions for some important tweaks to the proposed

procedures. So I'd like to lay them out now and hear you on

them. Of course it's my goal that the procedures continue to

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provide opportunities for a cost efficient, consensual

resolution, but I do want to ensure that the Court's time and

resources, and especially the work of the people who have

agreed to work as mediators as necessary, is used wisely and

meaningfully, and not unnecessarily.

So, first of all, the proposed amendments to section

6(c), 7(b), and 7(c) to expand the scope of claims that can be

transferred to include administrative expense claims as defined

in the proposal is acceptable to the Court. It's fine. I

recognize that there is a need for it, and that that can help

to promote efficiency. The proposed amendment to 7(e), to

include a timeline for the filing of an informative motion

regarding resolved claims, is also something that will help us

continue to move along and process things through efficiently,

and so that's fine.

It is the proposed amendment to 3(f), which

contemplates, as it is written now, identification of the

evaluative mediation process, where a claimant has been

non-responsive to an offer or further offer, that raises some

concerns, the Court's concern is that, as written, the

initiation of evaluative mediation as the next step after, you

know, what seems to us could be a simple failure to respond to

an offer or a further offer, would not be an efficient use of

resources on our side at least, and also on the debtor's side,

because it could lead to the necessity for creation of an

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evaluative mediation case and compilation and review of

materials where there is a claimant who has no actual intention

of engaging with the evaluative mediation process. As you

know, it is not until something is transferred into evaluative

mediation that we match it up with a mediator and that person

starts working, and so we think that an additional threshold

requirement, or a more robust requirement for the predicate for

an impasse notice would be helpful here. 

So what I am suggesting, and we have particular

language but I'll just describe it conceptually, is that the

Oversight Board's impasse notice would have to include an

affirmative -- would have to be preceded by an affirmative

effort by the Debtor to elicit an indication that the

designated claimant, although it doesn't want to engage on that

offer, is, in fact, willing to engage in evaluative mediation.

So the additional language would be something to the

effect of, if the designated claimant is deemed to have

rejected an offer or further offer by failing to timely respond

to an offer or further offer, the offer exchange impasse notice

must include a certification that the debtor has been in

contact with the designated claimant and the designated

claimant has consented to proceed to evaluative mediation. So

that tells us when we get the impasse notice that the Debtor

does expect that there will be someone for us to talk to on the

other side, since mediation statements are optional and the

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process, as currently written up, doesn't include a point of

engagement before the preparation of the evaluation, which may

not be very meaningful if there is only one-sided input.

So, similarly, we think that it is a salutary thing to

build on the Debtors' suggestion that there be some sort of

outreach by the mediator that would allow the mediator to

assess whether the person is engaging in the evaluative

mediation, but I'd like to tweak that a little bit and make it

a little bit more specific, so, basically, to add a provision

that says that if the designated claimant fails to submit a

mediation statement, then the mediator may solicit engagement

of the designated claimant in advance of the formulation of the

evaluation. That outreach by the mediator would include

notifying the designated claimant that failure to respond and

participate may result in the termination of the evaluative

mediation process. Then, if the designated claimant is not

responsive to the mediators' reasonable outreach efforts during

the evaluative mediation process at that time or at another

time that's material in that process, the mediator has the

ability to file a -- what we're calling a notice of

non-engagement, and the filing of a notice of non-engagement

would be an additional predicate event that would render an

evaluative mediation case an unresolved matter prior to the

preparation of evaluation in this instance where the designated

claimant is not responding in a way that enables the evaluative

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mediator to move forward appropriately.

There are existing provisions on what happens with

unresolved claims, which we would not propose to change, we see

no need to change. So do you have questions about or concerns

about these suggested revisions?

MS. STAFFORD: No, your Honor. That all sounds very

reasonable and efficient to us.

THE COURT: Very good. So what I will do is file an

order with the specific language that we're suggesting, and

order you to file on presentment a revised note of order and

notice incorporating these concepts, and then we'll see if

there are any objections to that. There haven't been

objections to this change so far. Then we would have an order

and an amended process that I do believe will serve the goals

and help to expand the ability to address these claims

sufficiently.

For the record, I will state that I expect to approve

these amendments adjusted in the way that we've discussed

pursuant to the Court's broad authority to grant relief from a

final judgment or order pursuant to Rule 60(b)(6) of the

Federal Rules of Civil Procedure. I've evaluated the requisite

factors, which include whether the application's timely,

whether exceptional circumstances warrant amending the ADR

Procedures Order, and whether the proposed amendment unfairly

prejudices claimants. See Liljeberg v. Health Services

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Acquisition Corp., 486 U.S. 847 (1988), and Bouret-Echevarria

v. Caribbean Aviation Maintenance Corp., 784 F.3d 37, 43 (1st

Cir. 2015).

I find that the motion is timely; and that the

Commonwealth Plan of Adjustment recently became effective on

March 15th, 2022; that a need exists for an additional,

efficient process for liquidating administrative expense

priority claims; and that the interests of justice and

efficiency require a mechanism for terminating the evaluative

mediation process if a party begins but disengages from

participation in the evaluative mediation process.

So I will file that order with suggested language for

incorporation into the revised procedures. I did have one

other question for information and context for our team. Can

you preview for us the types of administrative expense claims

that you anticipate would be transferred into the ADR process?

MS. STAFFORD: At this time, I don't have a clear

sense of exactly which types of administrative expense claims

we might be anticipating would go into the process. Our review

of those administrative expense claims is ongoing, but I'm

happy to provide more information as we start to develop it

over the next few months.

THE COURT: Alright. We will await further

developments.

MS. STAFFORD: Thank you.

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THE COURT: Thank you very much. 

That concludes Item III.1 of the Agenda, which is the

motion of the Oversight Board that was filed at Docket Entry

No. 22936 in 17-3283. 

Thank you, Ms. Stafford.

MS. STAFFORD: Thank you, your Honor.

THE COURT: So next we move to the contested matters

in section IV of the Agenda, the first of which is the motion

of the Bonistas Del Patio for payment of certain professional

fees and expenses by the Commonwealth, and I have as the

opening speaker Mr. Bernstein for six minutes.

Are you there, Mr. Bernstein?

MR. BERNSTEIN: I am. Can you hear me?

THE COURT: Yes. Good morning.

MR. BERNSTEIN: Good morning. Thank you, your Honor.

Don Bernstein from Davis Polk & Wardwell for the Bonistas Del

Patio, Inc.

A lot of this is going to seem like ancient history,

because it's related to the COFINA case, so I hope you'll bear

with me. So Bonistas Del Patio requested entry of an order for

payment of $2 million in professional expenses for their

lawyers, Davis Polk and $5 million of professional expenses of

their financial advisors, Ducera Partners. These were incurred

in connection with --

THE COURT: Mr. Bernstein, I need you to slow down,

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because the signal is not so consistent. You're breaking up a

little bit, so the court reporter is having trouble and I am,

too.

MR. BERNSTEIN: Okay. Hopefully I can get my comments

within the requested timeframe, but, if not, I hope you'll

indulge me at the end if necessary.

THE COURT: Yes. Also, bear in mind that, yes, I was

there in COFINA. I've also read all of your papers. I'm going

to stop the clock for a minute, because this may help you. My

particular issues of concern go to the -- well, first all, the

fact that Bonistas' sort of status within these proceedings,

2019, has never been filed for Bonistas' year, not -- your

client isn't itself a creditor, it's not an intervenor, and so

there's the 2019 question.

I do want to make sure that I understand well your

theory as to why these expenses should be considered as having

been incurred by the Commonwealth or COFINA within the meaning

of section 15.2, and if they weren't incurred by the

Commonwealth or COFINA, what basis there would be for approval

under section 15.2 of the plan.

Then I also have a concern about Bonistas' standing to

present the application given that the representation is that

Bonistas has no liability for these expenses. The other big

one is, to the extent the application's made under 503(b)(4),

Ducera is not an accountant and is not a law firm, and so how

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503(b)(4) would apply. I give you this preview without

prejudice of my ability to ask further questions as we go

along, but I'm hopeful that that will help you direct your

remarks in the most efficient way.

MR. BERNSTEIN: That is helpful, and I will use my

time accordingly. So let me address Bonistas' and -- the 2019

issue first. Now, Bonistas really is not for profit. It was

there to represent 60,000 bondholders, you know, who were

on-island holders. Everyone recognized that that was a proper

role for Bonistas, despite the fact it wasn't itself a

creditor.

And we also were extremely scrupulous about not

presenting ourselves as anything other than a not for profit

who was there in the interest of all bondholders on the island.

And, in fact, we took a role that was essentially an honest

broker role. And I think that's been commented on before you

by some of the creditors in the case, because we had

constituents who were in all three categories of bonds, we had

people who were Commonwealth bondholders, we had people who

were COFINA seniors, we had people who were COFINA juniors, so

we really were taking a point of view not of any individual

bondholders, but connectively on behalf of the island, not to

mention the fact that our constituents are taxpayers and also

suffer the reduction of services from any fiscal plan or

bargaining between COFINA and the Commonwealth.

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So, in terms of 2019, I don't think we were required

to file, but we had a role that was recognized by all parties

as an extremely important role, because parties had to

communicate with the on-island bondholders and also parties

needed to understand what the views were, because at one point

during these negotiations, the on-island bondholders had over

$10 million of bonds.

So there was nobody there to negotiate. The on-island

holders couldn't afford to be part of the mediation, or many of

them couldn't. So we were there as a way of conveying those

views, and also we were requested by the parties to be there.

We were requested to be party to the PSA. We were named

numerous times in the plan and disclosure statement. We were

referred to in the order of the Court confirming the plan. So

we were an essential component of this despite not being

creditors, so that's the first thing.

So let me -- and if you have questions on any of this,

let me know. On the question of being incurred -- so there was

a long history here, your Honor. It goes back even before

2017, and, you know, our role on behalf of the Bonistas started

in 2017, that summer. But Bonistas had been in conversations

with the government and even the Board about the fact that, to

participate in these negotiations, it needed professionals, and

of course, since it was a not for profit, it had no resources

to pay, so the expectation on the part of all parties,

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including the government parties, was that if Bonistas was

going to participate actively, resources would have to be found

for payment of their professionals. And, you know, over time,

again and again, the participation of Bonistas and their

professionals was requested by the parties. That included even

after the mediation deal was struck.

(Sound played)

MR. BERNSTEIN: Bonistas had to go out and communicate

with bondholders about the plan. They held a webinar. They

held conversations and meetings with bondholders at large.

They really were working on behalf of the government parties in

order to get the deal done, and, in fact, there were comments

made at the disclosure statement hearing and the confirmation

hearing about Bonistas' role in that regard. And, in fact,

Bonistas has helped to locate on-island bondholders who

appeared at the hearing, so they were able to express their

views.

So, your Honor, again, whether you call that -- that

sort of request to do things and expectation that the fees will

be paid as documented by the way -- by letters that were

received from AAFAF and also the stipulation that was filed

before the Court in 2019 --

THE COURT: That stipulation was withdrawn, correct?

MR. BERNSTEIN: It was withdrawn. It was withdrawn.

THE COURT: AAFAF said -- I'm interrupting you again.

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AAFAF said in the letter that it wouldn't object to some

obligation or provision that would obligate it, but I don't see

anything that is a written undertaking by AAFAF or any other

Commonwealth entity, either before the services were rendered

or indeed as we stand here today afterward, to pay these

expenses as Commonwealth expenses.

MR. BERNSTEIN: Your Honor, I'm not going to belabor

that point now. You've seen what we said in the brief about

it, but that was within the reasons that we were also making

this substantial contribution application. And of course if

the Court finds that we are entitled to payment for substantial

contribution, then the obligation is an obligation of either

COFINA or the Commonwealth or both. And under 15.2 in the

plan, it's been incurred and is supposed to be paid by the

Commonwealth.

So that's the second arrow in this quiver, is that, as

a substantial contribution, if there's an administrative

expense, that administrative expense is an incurred obligation

that's required to be paid under the plan.

(Sound played)

THE COURT: An incurred obligation not of the creditor

but of the Commonwealth, and your argument for it being

incurred is this atmosphere of expectation and invitation to

represent Bonistas as a participant in negotiations?

MR. BERNSTEIN: No, your Honor. Your Honor, I think

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it's two-fold. I think that is the first prong, which would be

sort of a quasi contract prong reliance and the like, but,

again, I don't want to belabor that. I think the second prong

is Bonistas itself made a substantial contribution to the case,

and if they did, they're entitled to have their professional

expenses paid to the extent approved by the Court under 503(b).

And once the Court reaches that conclusion, that

Bonistas is entitled to have them paid, as I said, because of

its substantial contribution, then they're an incurred

obligation of the Debtors. So at that point, once they've been

incurred, the plan provides that obligations with respect to

these negotiations that we're talking about, that have been

incurred by the Commonwealth, are supposed to be paid under

section 15.2 of the plan.

THE COURT: Thank you. You can go on.

MR. BERNSTEIN: Okay, your Honor. And that also I

think addresses to some degree the standing issue. Obviously,

one of the problems with representation of a party is that if

they don't have the wherewithal to pay, you know, you can still

work on a contingency, and one of the contingencies here was

getting approval for payment of expenses through the Court

proceedings and from the parties.

So, you know, I don't think the issue of incurrence is

a bar to standing to request substantial contribution approval

of the Bonistas' expenses.

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Let me address the Ducera Partners' issue under

503(b)(4). And this also covers some of the other issues that

perhaps the committee has raised in some of the pleadings a few

years ago. If you look at the First Circuit rulings on the

questions of the scope of 503(b), they focus on the fact that

503(b) is not exhaustive, it's not an exhaustive list of

expenses that are to be paid.

And, in fact, subsequent to the First Circuit's ruling

on that issue, the Sixth Circuit actually took up the scope of

503(b)(3), and in that particular case, and I can give you the

citations if you would like them, your Honor, the Sixth Circuit

actually looked at this question. And they took the same view

as the First Circuit about the word "including" in 503(b) so

it's a non-exhaustive list. And what they said was in that

particular case, even though Chapter Seven is not mentioned in

503(b)(3) on substantial contribution, the payment can still be

authorized because the list of people or situations where

payment is warranted under the substantial contribution test in

that subsection is not exhaustive.

And so the Court has discretion to allow, in cases of

substantial contribution, other than in a Chapter 7 case -- in

a Chapter 11 or Chapter 9, and the Court found that in a

Chapter 7, you would make those payments even though Chapter 7

wasn't referred to. And, in doing that, the Court also refers

to the fact that many, many parties can make a contribution to

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the case, and so the whole section is really illustrative and

non-exhaustive. And I can give you the citations to those

cases if you'd like.

THE COURT: Are the citations in your submission?

MR. BERNSTEIN: I think the citations are in our

submission, your Honor.

THE COURT: Alright. If they're in your submission,

then I don't need you to repeat them here.

MR. BERNSTEIN: Thank you, your Honor.

That applies to the Ducera issue, because the same

issue arises in reference to attorneys and accountants.

Financial advisors certainly have been considered for

compensation. Some courts have indicated that they would be

eligible. But a number if cases the financial advisors are

simply financial advisors for a bidder and they bid for the

company, a failed bid, and the question is, because they're a

stalking horse, can they get their professionals compensated,

did they make a substantial contribution.

I think the courts in those cases have denied by and

large the compensation, but the role here Ducera had was very

different. They were working here with the attorneys as part

of the negotiation. They were in the negotiations. You could

even say that they were working on behalf of the attorneys,

because we were working hand-in-hand with them, your Honor, in

order to conduct the negotiations on behalf of Bonistas.

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Mr. Myer has indicated there were 351 meetings and

calls in which he participated on this matter, and many of

those were, as other parties in the case have indicated, with

the professionals for those parties. And obviously some of

those professionals were expressly paid under the plan, because

they were professionals for creditors. And here we were

representing an extremely large creditor class, but because

none of them were in our client group, we did not share in any

of that compensation that went to creditors.

So, your Honor, I think -- I think the First Circuit

and Sixth Circuit precedents are very relevant to the scope of

503(b)(4). And I think, under that standard, certainly

Ducera's work should be included.

Your Honor, do you feel willing to accept the Resnick

Declaration, which was originally filed a number of years ago

but, again, was attached to our motion? We'd like to put that

in as Exhibit One. And Mr. Resnick is with me in the

conference room and is available for direct testimony should

you desire it, Judge. I know that you want to accelerate the

schedule here, but he is available and he's obviously available

to the extent anyone needs cross-examination.

THE COURT: Well, to the extent that I get across the

threshold issues of eligibility for payment, I do have a

concern -- I do accept the Resnick Declaration, which you've

tendered in your written submissions, but even that is -- it's

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a characterization at very high level of the work that was

done, and, yes, I'm not sure that -- yes, I don't think that

testimony here today would solve that issue --

MR. BERNSTEIN: Your Honor.

THE COURT: Yes.

MR. BERNSTEIN: I was just going to say we did supply

the Fee Examiner with extensive backup, and, as you've seen,

the Fee Examiner concluded that the fees were reasonable and

necessary, et cetera. So we'd -- I was personally involved in

all of the negotiations, and if you have questions for me, I'd

be delighted to answer them within the confines of mediation

confidentiality.

THE COURT: I accept that proffer. I will now turn to

the UCC's argument, and we'll talk about next steps when you

come back.

MR. BERNSTEIN: Okay. Thank you, your Honor.

THE COURT: Thank you.

MR. DESPINS: Good morning, your Honor.

We actually were going to rest on our pleadings, your

Honor.

THE COURT: Alright. I have reviewed those pleadings.

So, Mr. Bernstein, it seems that the -- and you may

even be saying this, the services that were provided were

similar to the type of involvement of a representative of

another creditor representing the creditor's interests, and so

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you were advocating for the membership of Bonistas as a

creditor and marshaling support for positions that you believed

were in the best interests of your clients. Typically, service

providers don't get paid for a substantial contribution for

doing what they should be doing as advocates for their clients,

and so would I be correct in hearing you to say that there was

an extraordinary gap in the circumstances that renders your

work a substantial contribution because it supplied advocacy

that was necessary for negotiations, because there was no other

source?

MR. BERNSTEIN: Your Honor, I would say that, and let

me explain why. Because this was a gating issue for the

Commonwealth Plan, that the COFINA case be resolved. The major

negotiating parties were the COFINA agent -- the Commonwealth

agent in the person of Mr. Despins, and also the three main

creditor constituencies, the senior COFINA bonds, the junior

COFINA bonds, and the Commonwealth GO bondholders. All of

those people had to be present, but every single one of them

had a monochromatic parochial interest. The only party that

stood among all of those parties who did not have a

monochromatic interest was Bonistas Del Patio, and that is why

they were so integral to the negotiation.

We had to see everything from all perspectives and try

to facilitate, as the mediators were trying to facilitate, a

fair deal, because, as I say, not only did we have billions of

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dollars of bondholders in all three classes, but we also had

60,000 taxpayers who were going to bear the cost of whatever

the result was. And the cost in -- are two different ways,

through taxes and through reductions in services.

So we had a role that was much more akin to -- I'm not

going to say a mediator, but an honest broker. And, frankly,

there were meetings at Davis Polk's offices among the creditor

groups because of the position Bonistas was in. 

Let me say that, without going further on the -- you

know, with respect to mediation confidentiality, but we were in

a pivotal role in that entire process. And I think the fact

that we were one -- you know, in addition to the bondholders,

we were one of the parties to the PSA. We had approval rights

under the plan over the documents. Just as with the government

parties and the bondholders, Bonistas were mentioned as having

approval rights over the confirmation order, which was a

condition, approval rights over any waivers. You know, our

consent was required for effectiveness, so, you know, it wasn't

a coincidence that we were there even though the three other

constituencies were all represented.

The fact is we had a unique perspective that wasn't

being brought to the table by any of those constituencies and

wasn't being brought to the table by the Commonwealth

Committee, as the Commonwealth Agent, or by the COFINA agent.

And, your Honor, again, nobody should take too much credit for

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anything, but I think Bonistas deserves a lot of credit for

keeping the parties together and moving things along. And I

can only say I think the people who were in the room would

agree.

(Sound played)

THE COURT: Thank you.

MR. BERNSTEIN: Your Honor, if you have any other

questions --

THE COURT: Pardon?

MR. BERNSTEIN: I said, if you have any other

questions, I'd be delighted to answer.

THE COURT: I actually have a question for the

representatives of the Oversight Board and AAFAF, who have not

made any submissions on this motion, which strikes me as

curious given the representations that all of this work that is

argued to be a substantial contribution for which the

Commonwealth had undertaken to pay. 

So right now, I will give first the Oversight Board

the opportunity to make any statement it wishes to make in this

connection.

Mr. Bernstein. I'm sorry. Mr. Bernstein, did you

want to say something?

MR. BERNSTEIN: Yes. He's on mute. I can't hear

Mr. Rosen.

THE COURT: Okay. I'm not even seeing Mr. Rosen. 

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So, Mr. Rosen, would you unmute yourself and have your

camera on? There you are, Mr. Rosen.

MR. BERNSTEIN: I'm seeing him, but I'm not hearing

him.

THE COURT: You still have to unmute, Mr. Rosen, or at

least I'm not hearing you. Still not hearing you.

It looks like he's going to telephone in.

MR. ROSEN: Your Honor, can you hear me now?

THE COURT: Yes, I can hear you now. Thank you.

MR. ROSEN: So we'll try to do it by phone until we

figure out our other issues.

You're going to have to mute that. Thanks.

Your Honor, can you still hear me?

THE COURT: Yes, I can.

MR. ROSEN: Okay. Thank you, your Honor.

Your Honor, yes, the Oversight Board -- as you know, I

was intimately involved in the COFINA confirmation process and

negotiation of the plan support agreement, and, actually, was

the draftsperson of that document. Your Honor, the Oversight

Board up until this moment in time has chosen to allow the

Bonistas to file their application and not take a position with

respect to it. While the Oversight Board does have a position,

I would ask that the Court allow me to go back to the Oversight

Board and to put together a statement that it would file with

the Court stating clearly stating what the Oversight Board's

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position is at this time.

I think for me to do it just now would -- I may not

capture all the views of the members of the Oversight Board and

the other professionals who are involved.

THE COURT: I will permit that. Thank you.

MR. ROSEN: Thank you, your Honor.

THE COURT: That was Mr. Brian Rosen representing the

Oversight Board.

I don't think we got your full name into the

transcript when you started speaking.

MR. ROSEN: Thank you, your Honor.

We'll start trying to fix the video for the subsequent

hearing.

THE COURT: Good. We'll have a break within the

subsequent hearing. 

Mr. Friedman, for AAFAF, is there anything you'd wish

to contribute here?

MR. FRIEDMAN: Good morning, your Honor. Peter

Friedman for O'Melveny & Myers on behalf of AAFAF.

What I would say is AAFAF was certainly involved in

the process of mediation, particularly after a deal was reached

on the economic split, but while many, many, many issues remain

to be resolved around the treatment of local bondholders, and

we did recognize Bonistas -- the real work they did,

particularly in that phase, which was the phase we were most

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involved with, we do believe that their joining the RSA was

important. They played an important role in the

Commonwealth-COFINA settlement, was extremely important with --

you know, we acknowledge their impact in bringing local

bondholders and representing local bondholders was really

important.

So we are sympathetic to their request, and, you know,

it's not something AAFAF has the power on its own to do. We

did file something early in the case seeking to have a payment

made. The Court raised, you know, it's concerns and sort of

put a halt to the process, but we don't have an objection to

this because we recognize the contribution that Davis Polk and

DCR made on behalf of their client, which we did think played

an important role here.

THE COURT: So you don't have an objection to the

argument that the services -- this important role was played at

the invitation and in the expectation that the Commonwealth

would ultimately -- well, this is an application in the

Commonwealth case.

MR. FRIEDMAN: Yes.

THE COURT: That the Commonwealth would ultimately pay

for the expenses of that representation and financial advice?

MR. FRIEDMAN: That's right, your Honor.

I would state two things: One, it can't be COFINA,

right? We definitely understood, thought, believed that COFINA

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would be the payor, so we think the Commonwealth is the right

payor, if there is a payor, because of the value this

settlement brought for the Commonwealth, and we also do think,

you know, we made representations that we would not be

objecting or that we understood that this work was being

undertaken with the prospect of them being paid by the

Commonwealth.

Certainly it's not something AAFAF could pay for. The

Commonwealth would be the logical payor. And so we don't have

an objection to their making that representation.

I wasn't there perfectly at the time -- you know,

exactly at the time, I can't testify, but it is my

understanding that's why they undertook this obligation and

that the work they did was helpful.

THE COURT: Thank you, Mr. Friedman.

Mr. Rosen has his hand up again.

MR. ROSEN: Thank you, your Honor. I only raised my

hand because I think we needed the Court to unmute us off of

the other system and then we could speak through that.

THE COURT: My deputy here is telling me that you were

unmuted on our system already.

MR. ROSEN: We'll try again. Hold on, your Honor.

Okay. So --

THE COURT: Yes. I'm seeing that our screen is giving

us the option of muting you, not unmuting you.

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So do you want to just click him mute and then unclick

him again just in case there's some glitch there?

Okay. We've just clicked you to mute, and now we're

going to find you and unmute you I think. Yes. You are now

unmuted again on our system. 

I still can't hear you. I can't hear you with the

phone now.

MR. ROSEN: Can you hear me, your Honor?

THE COURT: Yes.

MR. ROSEN: Your Honor, can you hear me?

THE COURT: Yes. Can you hear me?

MR. ROSEN: Alright. We will disconnect and re-login,

your Honor. We'll figure out what the problem is here.

THE COURT: Alright. So, before you disconnect and

before we break, I will take this matter under advisement.

I will not ask for any additional testimony today. I

will accept by December 28 a submission on behalf of the

Oversight Board as to its position, and any further

supplementation, written supplementation of legal arguments or

factual representations that the movant may wish to tender in

light of the discussion and the Court's questions, and then,

unless the Court reaches out for further input or there's a

request from the UCC or anyone else to make a further response,

the matter will be under advisement and decided on those

augmented submissions.

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Mr. Bernstein, is there anything further that you'd

like to say before we move away from this agenda item?

MR. BERNSTEIN: No, your Honor.

I just want to thank you for considering this

carefully, and we will review the questions you asked and take

you up on making another submission.

If we see something that is in Mr. Rosen's pleading

that we feel we need to respond to, could we get a day or two

to do that? 

We don't know what he's going to file or say, and it

would be helpful to have an opportunity to respond if

necessary.

THE COURT: Yes. So the first submission date is

December 28. Any response to that further submission -- we'll

give you another week, which I think would be January 4th or

January 5th, but I don't have my calendar up right in front of

me now. Actually, I figured out January 4th.

Is that okay?

MR. BERNSTEIN: Okay, your Honor. Thank you very

much. Yes.

THE COURT: Thank you.

Alright. At this point we have two contested claim

objections, and it is also 20 minutes past 10:00, so what we'll

do is take a break at this time of ten minutes and reconvene at

10:30 Eastern, 11:30 Atlantic Standard.

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Those who are on the listen-in line, please just put

your line on hold and come back in ten minutes. Thank you very

much. We are adjourned.

(Recess) 

THE COURT: Good morning again. This is Judge Swain.

We are now resuming the Omnibus Hearing. The next

agenda item, which is number IV.2, is the 453rd Omnibus

Objection to claims, which is Docket Entry No. 20784 in

relation to the response of Maria Figueroa-Torres.

So I have Ms. Osaben starting with remarks for the

Oversight Board.

MS. OSABEN: Good morning, your Honor. Can you hear

me?

THE COURT: Yes, I can. Good morning.

MS. OSABEN: Good morning. Libbie Osaben of Proskauer

Rose on behalf of the Oversight Board.

At the November Omnibus Hearing, the Court heard

argument regarding the objection to the 453rd Omnibus Objection

filed by Maria Torres with respect to Proof of Claim No.

179281-1 at ECF No. 21310. The Court may recall the claimant

asserts liabilities against the Commonwealth for wages for work

the plaintiff performed at the Ponce District Hospital. As the

Ponce District Hospital seems to be a part of the Department of

Health and thus seems to be a part of the Commonwealth, in

2000, bifurcated the claimant's claim into two claims, one

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claim for the period when the hospital was a part of the

Department of Health and one claim for the period when the

hospital was no longer a part of the Department of Health. 

At the hearing and in a subsequent order at ECF No.

22798, the Court directed the Oversight Board to file a

supplement brief providing evidence that the Ponce District

Hospital is not part of the Department of Health of the

Commonwealth. The Oversight Board on behalf of the

Commonwealth filed a supplement brief providing such evidence

as ECF No. 22928. The Oversight Board included as Exhibit A to

the supplemental brief a letter to the claimant dated May 26,

2000, which explains that pursuant to Act 31 of July 6, 1997,

the Ponce District Hospital was transferred to private

ownership for management and operation, and that such transfer

became effective on July 1st, 2000.

Accordingly, the Ponce District Hospital is not a

Title III debtor or an agency of any of the debtors. The

Oversight Board reiterates to the extent the Commonwealth is

liable to the claimant with respect to work performed by the

claimant for the Ponce District Hospital prior to July 1, 2000,

such liability will be determined in accordance with the

resolution of proof of claim 179281. That proof of claim has

been transferred to ACR and at this time is not subject to

objection.

For the foregoing reasons we respectfully request that

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the Court sustain the 453rd Omnibus Objection with respect to

Proof of Claim No. 179281-1 and disallow the claim.

THE COURT: Thank you.

I have a couple of questions for you. Just to be

clear, the claimant filed a claim as 179281 with supporting

documentation, and was it the Oversight Board that determined

to create 179281-1 as a bifurcated separate claim representing

claims in connection with employment, if any, after June 30th

of 2000?

MS. OSABEN: That is correct, your Honor.

THE COURT: That letter that the Oversight Board

referred to in the supplemental submission, the May 26, 2000,

letter, appears to have been part of the original submission by

this claimant which also included salary documentation and

other documentation of work at the Ponce District Hospital that

all seemed to predate the July 1, 2000, date, and so was there

anything concrete that gave the Oversight Board concern that

the claimant is, in fact, seeking to recover for compensation

after the DX session of the hospital facility?

MS. OSABEN: I believe it was out of an abundance of

caution.

THE COURT: Alright. Is Ms. Figueroa-Torres'

attorney, Vanessa Hernandez-Rodriguez, present to speak?

She is not signed into Zoom.

Did you have any indication, Ms. Osaben, that

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Ms. Hernandez-Rodriguez intended to come to speak?

MS. OSABEN: We did not. We reached out to her but

did not receive a response.

THE COURT: Alright. Very well. I will make a ruling

based on the record before the Court.

Pending before the Court is the 453rd Omnibus

Objection, non-substantive, of the Commonwealth of Puerto Rico,

the Employees Retirement System of the Government of the

Commonwealth of Puerto Rico, and the Puerto Rico Highways and

Transportation Authority to claims asserting liabilities owed

by entities that are not Title III debtors.

That is Docket Entry No. 20784 in case 17-3283, which

I'll refer to as the Omnibus Objection filed by the Financial

Oversight and Management Board for Puerto Rico. The Omnibus

Objection seeks disallowance of several proofs of claim,

including Proof of Claim No. 179281-1 filed by Maria C.

Figueroa-Torres, who I'll refer to as the claimant. The

objection is on the basis that the claims represented by that

claim number, arose out of debts allegedly owed by non-Title

III debtors.

This Claim No. 179281 was created as a place holder by

the Oversight Board by bifurcating the proof of claim that was

filed by the claimant. So the claimant currently has two

proofs of claim, one is No. 179281, which now represents

compensation allegedly owed by the Department of Health arising

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out of claimant's employment prior to July 1 of the year 2000

and claim no. 179281-1, representing any claim for compensation

owed by the Ponce District Hospital following the privatization

of the hospital and the termination of claimant's employment

with the Department of Health.

Only Claim No. 179281-1 is subject to the Omnibus

Objection, so I will refer to that in these remarks as the

"Subject Proof of Claim." In opposition to the Omnibus

Objection, the claimant contends that her claim arises from

services she provided to the Ponce District Hospital during a

time when the hospital was part of the Puerto Rico Department

of Health, which itself was part of the Commonwealth

Government.

The Court has carefully considered the pleadings

submitted by the Oversight Board and the claimant concerning

the Omnibus Objection, as well as the arguments on behalf of

the Oversight Board today, and for the following reasons the

Omnibus Objection is sustained as to the subject proof of

claim.

A proof of claim which comports with the requirements

of Bankruptcy Rule 3001(f) constitutes prima facie evidence of

the validity and amount of the claim. In re Hemingway

Transport, Inc., 993 F.2d 915, 925 (1st Cir. 1993). However,

if a debtor proffers an objection supported by substantial

evidence, the burden of demonstrating the validity of the claim

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shifts to the claimant.

Claimant's original proof of claim included, as part

of its documentation of the validity of her claim, a letter

dated May 26, 2000. That letter gave notice to the claimant

that her employment with the Puerto Rico Department of Health

would be terminated as of June 30th, 2000, because the

government had privatized the hospital at which she was

employed.

That state of affairs is consistent with the

certification from the Commonwealth Health Services and

Facility Administration that claimant included with her proof

of claim, which states that claimant's employment as a nurse

ended on June 30th, 2000. In light of that documentation,

stating that claimant's employment with the Commonwealth ended

on June 30th, 2000, the Oversight Board has established a

sufficient record that any services to the hospital provided by

claimant after that point are not liabilities of the

Commonwealth or any other Title III debtor.

The Oversight Board has, thus, rebutted any prima

facie validity that the Subject Proof of Claim, which covers

only claims against the Ponce District Hospital arising after

June 30th, 2000, may have had, and claimant has not

demonstrated any basis for any claim against the Commonwealth

or any other Title III debtor arising out of employment after

June 30th, 2000, with the Ponce District Hospital.

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Accordingly, the Omnibus Objection is sustained as to

Proof of Claim No. 179281-1, and the Oversight Board is

directed to submit a proposed order to chambers reflecting that

disposition when all outstanding responses to the Omnibus

Objection have been resolved. Thank you.

The next agenda item, number IV.3, is the 514th

Omnibus Objection, and that is filed at Docket Entry No. 22251,

and in this case an opposing response has been filed at 22770

by ICPR Junior College.

Ms. Osaben.

MR. SOSA: Good morning, your Honor. Actually it's

Javier Sosa of Proskauer Rose on behalf of the Oversight Board.

We'll address this one.

THE COURT: Good morning, Mr. Sosa.

MR. SOSA: Good morning, your Honor.

Your Honor, this morning I heard from counsel from

ICPR Junior College informing me that he was unaware until this

morning that the hearing had been changed to virtual and, thus,

neither he nor his client had any credentials to appear in

today's hearing. As such, unless the Court wishes to proceed,

we ask to adjourn the hearing with respect to the ICPR response

filed at ECF No. 22251 until the next Omnibus Hearing.

THE COURT: That adjournment request is granted.

Thank you.

MR. SOSA: Thank you, your Honor.

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THE COURT: Please, since it appears that ICPR's

counsel is not a regular participant in these proceedings, I'll

be grateful if you'll help to keep them up to speed on the

location and format of the hearing, which, in these pandemic

times, can change, so that we'll all be in the same place,

virtual or physical, for the next Omni.

Thank you, Mr. Sosa.

This concludes the matters scheduled for hearing at

the Omnibus Hearing in the Title III cases. Matters that are

adjourned, in addition to the one that was just adjourned, are

listed in the agenda filed by the Oversight Board and will be

taken up at future Omnis as they become ready for attention.

(Whereupon the Qualifying Modification Hearing was

held)

(Adjourned)

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