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 EXTENDING DEADLINE 

TO FILE OBJECTION TO PROOFS OF CLAIM

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 

 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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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 Extending 

Deadline to File Objection to Proofs of Claim [ECF No. 21705]3 (the “Response” or “Resp.”) and 

in support of the Debtors’ Motion for Order Extending Deadline to File Objection to Proofs of 

Claim [ECF No. 21601] (the “Motion”). In support of this Reply, the Oversight Board represents 

as follows:

PRELIMINARY STATEMENT

1. The Official Committee of Unsecured Creditors (the “Committee”) does not oppose

the extension requested in the Motion, and acknowledges “that extensions like the one requested 

in the Extension Motion are common in chapter 11 cases, and frequently (and routinely) granted.” 

Resp. ¶ 6. Curiously, however, the Committee requests that the extension “be conditioned on the 

Oversight Board providing a timeline or summary report detailing how it intends to bring the 

reconciliation of the Remaining Claims to an expeditious conclusion.” Id. The purported basis 

for this request is that “holders of valid general unsecured claims have an obvious and 

understandable interest in ensuring that the claims reconciliation process is brought to an 

expeditious conclusion, so that distributions can be made on account of their claims.” Id. ¶ 3.

2. While the Oversight Board and the Debtors wholeheartedly share the desire to make 

distributions as soon as possible, the Oversight Board is surprised by the Response for three basic 

reasons. First, prior to confirmation and consummation of the Modified Eighth Amended Title III 

Joint Plan of Adjustment of the Commonwealth of Puerto Rico, et al. [ECF No. 19813-1] (the 

“Plan”),

4 the Oversight Board and its advisors, including Alvarez and Marsal, the advisor primarily 

 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.

4 Unless otherwise defined herein, capitalized terms used herein shall have the meanings ascribed thereto in the Plan.

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responsible for the identification and reconciliation of proofs of claim, periodically met with the 

advisors to the Committee, provided claims updates and responded to numerous inquiries of the 

Committee’s financial and legal advisors. Second, 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. 

Atsuch time, the Oversight Board has referenced the inherent difficulty in the claims reconciliation 

process due to the multitude of proofs of claim filed in a “fully unliquidated” amount. Third, 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 who are fully apprised 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. 

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

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

interest as to the status of certain of the Remaining Claims which are preventing current 

distributions—namely, “fully unliquidated” claims associated with litigations. 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.

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4. To date, the Debtors have resolved nearly seventy percent (70%) of fully 

unliquidated claims associated with litigations, but, there are over 1,500 of these claims that are 

unresolved. These unresolved claims are preventing distributions because there is 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, the 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 make reasonable determinations as to whether the claims are 

appropriate for ADR or objection. This is true even though the Debtors have undertaken extensive 

outreach campaigns (including to over 38 different Commonwealth agencies) to obtain records 

relating to the litigations underlying the claims. Thus far, the Debtors’ outreach efforts have

largely been to no avail because, in many instances, the government’s records relating to the 

litigations have been destroyed as a result of Hurricanes Irma and Maria or are not available as a 

result of condemnation of the properties where the records were stored. 

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

outreach, including to opposing counsel representing plaintiffs in the underlying litigations, so that 

the Debtors make more fully informed decisions concerning the most efficient manner of resolving 

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these and other Remaining Claims in the interests of ensuring ratable distributions among, and 

maximizing value for, legitimate creditors.

REPLY

A. The Debtors Provide Regular Reports Regarding the Claims Reconciliation Process

7. The Committee asserts that the Debtors should be required to provide a “timeline 

or summary report detailing how [they] intend[] to bring the reconciliation of the Remaining 

Claims to an expeditious conclusion.” Resp. ¶ 6. The Committee, however, conveniently ignores 

that the Debtors already provide regular reports on the status and timeline of the claims 

reconciliation process.

8. Pursuant to Section 82.1 (b) of the Plan,5 since March 15, 2022, the Effective Date

of the Plan, and the establishment of the Avoidance Actions Trust Board, the Committee’s

appointees thereto, together with the financial advisor to the Avoidance Actions Trust Board 

(which just happens to be the same advisor to the Committee (Alix Partners)) have received

monthly updates on the claims reconciliation process. In addition to such monthly updates, the 

Debtors have filed with the Court status reports regarding the claims reconciliation process in 

connection with every omnibus objection hearing that has occurred since June 2020. See, e.g.,

Status Report of Financial Oversight and Management Board in Connection with June 3, 2020

Omnibus Hearing [ECF No. 13337]. 

9. These reports have addressed, among other things, the anticipated timing and 

volume of objections to claims, as well as the status of the ADR process. As an example, the 

Status Report of Financial Oversight and Management Board in Connection with June 29-30, 

 5 See Plan § 82.1(b) (“The two (2) Creditors’ Committee appointees to the Avoidance Actions Trust Board shall (i) 

receive monthly updates to the claims reconciliation process, which process shall continue to be administered by the 

Oversight Board, with the assistance of AAFAF, (ii) have the right to (A) review the claims objections and 

reconciliation process . . . .”).

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2022 Omnibus Hearing [ECF No. 21377], submitted in connection with the June 2022 omnibus 

objection hearing, advised the Court that the Debtors had “transferred approximately 960 claims

into the ADR Procedures,” and that “well over one hundred claims are currently in the OfferExchange (as defined in the ADR Order) phase of the ADR Procedures and have received either 

an Offer or an Information Request (as defined in the ADR Order).” Id.

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

Reconciliation But There Are Over 1,500 Fully Unliquidated Proofs of Claim Which 

Are Prohibiting Distributions

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

receive a monthly report providing the status of the claims reconciliation process (as described 

above), 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. 

11. By way of background, over 5,057 fully unliquidated proofs of claim asserting 

liabilities related to litigations have been filed against the Debtors. To date, 3,455 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. 

12. Of the claims that have been resolved through objections, 376 (the “ADR 

Designated Claims”) 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”). While in 

ADR, the ADR Designated Claims were the subject of outreach attempts by the Debtors. More 

specifically, the Debtors mailed Information Requests (as defined in the ADR Order) to the

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claimants associated with the ADR Designated Claims, as authorized by the ADR Order, because 

the claimants associated with the ADR Designated Claims provided only limited information in 

their claims forms and/or limited supporting documentation. See ADR Order ¶ 2f (“The 

Commonwealth or such other Debtor, as the case may be, may also request additional information 

or documentation (the ‘Information Request’) from the Designated Claimant.”). In addition to 

requesting information and/or documents necessary to reconcile the claims, the Information 

Requests required that each Claimant “provide additional documentation or information ... within 

twenty-one (21) days following receipt of such Request.” Id. Because the claimants either failed 

to respond to the Information Requests, or responded, but still failed to provide sufficient 

information, the Debtors removed the ADR Designated Claims from ADR and objected to them 

as deficient. 

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

unresolved fully unliquidated claims—of which there are 1,602—must be viewed. To begin, the 

Debtors cannot reasonably determine whether these 1,602 claims are suitable for objection or ADR 

because there is insufficient information and/or documentation regarding the underlying 

litigations. For this same reason, the unresolved fully unliquidated 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.

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

 6 There are approximately 9,000 claims subject to approximately seventy pending Notices of Presentment.

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

or provide a meaningful recovery.

14. As just one example, there is a class action litigation captioned Rosa Lydia Vélez et 

al. v. Puerto Rico Department of Education, No. KPE-1980-1738, that underlies hundreds of fully 

unliquidated claims pertaining to thousands of plaintiffs. This case 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 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. Those records were and are necessary so that the 

alleged damages purportedly owed to each plaintiff (and each claimant) can be ascertained. Absent 

this information, the Debtors cannot reasonably estimate a reserve in order to account for the 

hundreds of underlying unliquidated claims.

15. The Debtors have attempted 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) contacting claimants or claimants’ counsel via telephone and/or email, using 

the phone number and/or email address provided by the claimants in their proofs of claim; and (iii) 

sending letters on behalf of the Board to over 38 different Commonwealth agencies that were 

named as defendants in the litigations underlying the claims. By and large, however, the Debtors’ 

outreach has been to no avail because, for example, the government’s records relating to the 

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litigations have been destroyed as a result of Hurricanes Irma and Maria or are not available as a 

result of condemnation of the properties where the records were stored. 

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

outreach, including to opposing counsel representing plaintiffs in the underlying litigations, so that 

the Debtors can make more fully informed decisions 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.

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

Process 

17. The entire premise for the Committee’s request is that “holders of valid general 

unsecured claims have an obvious and understandable interest in ensuring that the claims 

reconciliation process is brought to an expeditious conclusion, so that distributions can be made 

on account of their claims.” Resp. ¶ 3. The Debtors are mindful of the importance of expeditiously 

conducting reconciliation 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 Order7 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 

 7 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 almost five months. 

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“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. 

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 isfully 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, it 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 Motion 

and such other and further relief as is just. 

Dated: August 10, 2022

San Juan, Puerto Rico

Respectfully submitted,

/s/ Martin J. Bienenstock

Martin J. Bienenstock (pro hac vice)

Brian S. Rosen (pro hac vice)

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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

/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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