UNITED STATES DISTRICT COURT

FOR THE 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)

ORDER APPROVING

PROCEDURE TO RESOLVE COMMONWEALTH-COFINA DISPUTE

Upon the Motion of Debtors for Order Approving Procedure to Resolve 

Commonwealth-COFINA Dispute (the “Motion”);2 and the Court having found it has subject 

matter jurisdiction over this matter pursuant to PROMESA section 306(a); and it appearing that 

venue is proper pursuant to PROMESA section 307(a); and the Court having found that the relief 

requested in the Motion is in the best interests of the Debtors, their creditors, and other parties in 

interest; and the Court having found that the Debtors provided adequate and appropriate notice of 

the Motion under the circumstances and that no other and further notice is required; and the 

Court having reviewed the Motion and having heard statements in support of the Motion at a 

hearing held before the Court (the “Hearing”); and the Court having determined that the legal 

and factual bases set forth in the Motion and at the Hearing establish just cause for the relief 

 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 (the “Commonwealth”) (Bankruptcy Case No. 17 BK 3283-LTS) (Last 

Four Digits of Federal Tax ID: 3481); and (ii) Puerto Rico Sales Tax Financing Corporation 

(“COFINA” and, together with the Commonwealth, the “Debtors”) (Bankruptcy Case No. 17 BK 3284-

LTS) (Last Four Digits of Federal Tax ID: 8474).

2

 Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the 

Motion. 

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granted herein; and any objections to the relief requested herein having been withdrawn or are 

overruled on the merits; and after due deliberation and sufficient cause appearing therefor, it is 

HEREBY ORDERED THAT:

1. The Motion is granted as set forth herein.

2. The Oversight Board may implement the following actions and procedures 

relating to the Commonwealth-COFINA Dispute:

a. The Oversight Board, as representative of title III debtor Commonwealth of 

Puerto Rico pursuant to PROMESA section 315(b), shall appoint an independent 

agent to serve as the Commonwealth representative to litigate and/or settle the 

Commonwealth-COFINA Dispute on behalf of the Commonwealth (the 

“Commonwealth Agent”).

b. The Oversight Board shall select the Commonwealth Agent from among the 

general statutory creditors’ committee that may be appointed in the 

Commonwealth’s title III case and at least two nominations made by the creditors 

of the Commonwealth listed on Exhibit B of the Motion.

c. An independent agent shall be appointed to serve as the COFINA representative

to litigate and/or settle the Commonwealth-COFINA Dispute on behalf of 

COFINA (the “COFINA Agent”).

d. The COFINA Agent must be an individual upon whom the COFINA Senior 

Bondholders’ Coalition, Ambac Assurance Corporation, and National Public 

Finance Guarantee Corporation (together, the “COFINA Senior Representatives”) 

unanimously agree. The COFINA Senior Representatives will submit the 

nominee to serve as the COFINA Agent within 10 days of entry of this Order, 

who shall be appointed as the COFINA Agent.

e. If the creditors on Exhibit B of the Motion fail to agree on two nominations, 

Oversight Board members Arthur J. Gonzalez and David A. Skeel shall select the 

Commonwealth Agent after consulting with creditors of the Commonwealth and 

considering potential persons that had and had not been nominated.

f. Each Agent shall be entitled to retain legal and other professionals it reasonably 

deems appropriate.

i. Each Agent and each of its retained advisors shall be compensated by the 

Debtor on whose behalf they are acting, in conformity with PROMESA 

section 316 and any interim compensation procedures ordered by the 

Court.

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g. In advance of the commencement of any litigation to resolve the CommonwealthCOFINA Dispute, the Agents shall agree to a schedule constructed to enable the

appropriate court to rule, on a final basis, on the Commonwealth-COFINA 

Dispute, on or before November 1, 2017, in the absence of a prior settlement. 

This Order does not impair or release any rights of the government or the 

Oversight Board under PROMESA or otherwise, including PROMESA section 

305.

h. Each of the COFINA Senior Representatives shall be authorized to intervene in 

any litigation commenced to resolve the Commonwealth-COFINA Dispute 

without any further order of the Court.

i. The COFINA Agent shall owe fiduciary duties to COFINA, and not to any 

individual creditor or creditor group. 

j. Each Agent shall endeavor to the best of the Agent’s ability under the 

circumstances to litigate and negotiate from the perspective of what result is best 

for the Debtor the Agent represents based on the Agent’s estimation of the 

probabilities of the potential outcomes, as opposed to what result is best for any 

particular type of creditor of the Debtor the Agent represents, consistent with the 

approach explained by Chancellor Allen of the Delaware Chancery Court in 

Credit Lyonnais Bank Nederland, N.V. v. Pathe Communications Corp., 1991 

Del. Ch. LEXIS 215*108 n. 55 (Del. Ch. 1991), and espoused in Protective 

Committee for Independent Shareholders of TMT Trailer Ferry, Inc. v. Anderson, 

390 U.S. 414, 424-425 (1968).

k. To the extent it is necessary or desirable to link a settlement to the treatment of 

creditors’ claims in a title III plan of adjustment, the Oversight Board may 

participate in the negotiations in an effort to reach such a settlement. For the 

avoidance of doubt, except upon further order of the Court, no Agent shall have 

the authority to litigate or settle any matter other than the CommonwealthCOFINA Dispute.

l. Any settlement negotiated by the Agents shall only be effective upon (i) an order 

of the Court granting a motion requesting approval of such settlement, or (ii) 

confirmation of a title III plan of adjustment incorporating such settlement.

m. Notwithstanding the appointment of Agents, the Oversight Board shall remain the 

only party authorized by PROMESA to propose a title III plan of adjustment, and 

to carry out that power and duty, the Oversight Board may, at any time, propose a 

title III plan of adjustment for the Commonwealth and/or COFINA that 

incorporates a settlement of the Commonwealth-COFINA Dispute developed by 

the Agents.

3. The mediation that began prior to the commencement of the above captioned title 

III cases among the COFINA senior bondholders, COFINA subordinate bondholders, monoline 

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insurers, general obligation bondholders, and the Oversight Board, among others, shall resume 

promptly. The mediator shall be selected from among the members of the Court-appointed 

Mediation Team.

4. Nothing herein shall deprive AAFAF and the government of any standing and 

other rights to appear that they have in any litigation relating to the Commonwealth-COFINA 

Dispute or any other litigations.

5. The Debtor and the Oversight Board, as the Debtors’ representative, are 

authorized to take all actions, and to execute all documents, necessary or appropriate, to 

effectuate the relief granted in this order in accordance with the Motion.

6. The Court retains exclusive jurisdiction with respect to all matters arising from or 

related to the implementation, interpretation, and enforcement of this order.

Dated: ___________, 2017 ______________________________

San Juan, Puerto Rico Honorable Laura Taylor Swain

United States District Judge

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