IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

In re:

PROMESA

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD OF PUERTO RICO,

 as representative of

THE COMMONWEALTH OF PUERTO RICO, et 

al.,

1

 

Title III

No. 17 BK 3283-LTS

(Jointly Administered)

 Debtors.

RESERVATION OF RIGHTS OF THE QTCB NOTEHOLDER GROUP TO MOTION 

FOR ENTRY OF THIRD ORDER EXTENDING TIME TO ASSUME OR REJECT 

UNEXPIRED LEASES OF NONRESIDENTIAL REAL PROPERTY PURSUANT TO 

BANKRUPTCY CODE SECTION 365(d)(4)

The QTCB Noteholder Group,

2 whose members collectively hold hundreds of millions

of dollars in principal amount of those certain Qualified School Construction Bonds and 

Qualified Zone Academy Bonds (collectively, the “QTCBs”) issued by the Puerto Rico Public 

Buildings Authority (the “PBA”), and guaranteed by the Commonwealth of Puerto Rico (the 

“Commonwealth”) pursuant to Act No. 56 of the Legislative Assembly of Puerto Rico, 

approved June 19, 1958, (as amended, the “PBA Enabling Act”) and under the provisions of 

PBA Resolution No. 468 adopted June 22, 1995, as supplemented by Resolution No. 1596 

 

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 (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); and (v) Puerto Rico Electric Power Authority (“PREPA”) (Bankruptcy Case No. 17 

BK 4780-LTS) (Last Four Digits of Federal Tax ID: 3747). (Title III case numbers listed as Bankruptcy Case

numbers due to software limitations).

2 The QTCB Noteholder Group shall have the same meaning as set forth in Notice of Appearance and 

Request for Notice [ECF No. 134] and Verified Statement of the QTCB Noteholder Group Pursuant to Bankruptcy 

Rule 2019 [ECF No. 1053].

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adopted August 10, 2011, and Resolution No. 1618 adopted December 19, 2011, (collectively, 

the “PBA Bond Resolution”) submits this reservation of rights (the “Reservation”)3in the 

above-captioned Title III cases (the “Title III Cases”) to the Motion for Entry of Third Order 

Extending Time to Assume or Reject Unexpired Leases of Nonresidential Real Property 

Pursuant to Bankruptcy Code Section 365(d)(4) [ECF No. 2494] (the “Motion”) and in support 

thereof, respectfully states as follows: 

First and foremost, the QTCB Noteholder Group recognizes and appreciates the 

continued difficulties facing Puerto Rico and its residents in the aftermath of the damage 

Hurricanes Maria and Irma caused and agree that a reasonable, limited extension of the deadline 

for the Commonwealth and/or any other Debtors to assume or reject the PBA Leases4under 

section 365(d)(4) of the Bankruptcy Code (the “Deadline”) is appropriate. 

Second, although no one reached out to discuss an extension of the Deadline in advance 

of filing the Motion, the QTCB Noteholder Group appreciates that the Oversight Board was 

responsive to the QTCB Noteholder Group’s request to reduce the extension request from 180 

days to 120 days.

Third, notwithstanding such collaboration and the QTCB Noteholder Group’s repeated 

efforts to promote a constructive and consensual path to the reorganization of PBA and the 

Commonwealth’s related obligations, including discussions with providing PBA with 

forbearances relating to ongoing payment defaults, the Debtors have not provided any 

meaningful third party beneficiary “creditor participation and transparency [ ] critical to 

ensur[ing] the integrity of any effort by the Commonwealth to further extend the deadline and/or 

 

3 Pursuant to the Order Extending Deadlines [ECF No. 2560], the time for the QTCB Noteholder Group to 

respond to the Motion is extended to February 26, 2018 at 12:00 p.m. AST. 

4 Capitalized terms not otherwise defined here in shall have the meanings ascribed to such terms in the 

Motion. 

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modify or restructure the PBA Leases.” See QTCB Noteholder Group’s Reservation of Rights 

Regarding Motion for Entry of Order Extending Time to Assume or Reject Unexpired Leases of 

Nonresidential Real Property [ECF No. 783] ¶ 7; and Objection of the QTCB Noteholder Group 

to Motion for Entry of Order Extending Time to Assume or Reject Unexpired Leases of 

Nonresidential Real Property Pursuant to Bankruptcy Code Section 365(d)(4) [ECF. No. 1584] 

at 3 (collectively the “QTCB Lease Motion Objections”). Neither the PBA nor the Debtors (i) 

consulted with the QTCB Noteholder Group regarding the need for an appropriate extension, or 

(ii) have disclosed whether the Debtors are satisfying their obligations under the PBA Leases, 

and what, if any, assurances the Debtors have provided of continued performance of those 

obligations until rejection or assumption occurs. This lack of transparency regarding the Debtors’ 

compliance with the obligations of the PBA Leases is indicative of the risks facing PBA and its 

creditors: that PBA’s statutory rights as lessor under section 365(d)(4) of the Bankruptcy Code

are in danger of being compromised in an “agreement” reached solely between related parties on 

terms that no third party lessor (or third party beneficiary) would ever accept. 

Fourth, the QTCB Noteholder Group, and other similarly situated bondholders, are third 

party beneficiaries under the PBA Leases. For example all four of the leases attached to the 

Official Creditors Committee’s recent filing included the following language:5

Benefits. This Master Sublease Contract shall inure to the benefit of and 

be binding on the parties hereto, their successors and assigns and shall 

also inure to the benefit of the holders of bonds issued under the Bond 

 

5 See Declaration of Nicholas A. Bassett in Support of Preliminary Objection of Official Committee of 

Unsecured Creditors to Motion of PBA Funds for Payment of Rent Dated February 13, 2018 [ECF No. 2586-1],

Lease Contract dated October 1, 1992 (Exhibit 1), § 7.05; Lease Contract dated August 1, 2009 (Exhibit 2), § 6.05; 

Master Sublease Contract dated August 24, 2011 (Exhibit 3), § 6.04; and Master Sublease Contract dated December 

22, 2011 (Exhibit 4), § 6.04.

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Resolution, as their respective interest may appear.” (emphasis added)

The exclusion of third party beneficiaries such as the QTCB Noteholder Group from 

consultation regarding the PBA Leases and enforcement thereof, impermissibly jeopardizes the 

rights and benefits of the QTCB Noteholder Group under the PBA Leases. 

As of the date of filing this Reservation of Rights, the QTCB Noteholder Group is 

engaged in discussions with AAFAF to implement arrangements to preserve the respective rights 

of PBA, the QTCB Noteholder Group, the Commonwealth and the Oversight Board and provide 

a platform for transparency and creditor input with respect to the relationship, claims and 

ultimate restructuring relating to PBA and the Commonwealth’s obligations related thereto.

For the foregoing reasons, the QTCB Noteholder Group requests that nothing in the 

Order, nor the passage of time in connection with the extension of the Deadline, prejudice, waive 

or compromise the rights of the PBA or the QTCB Noteholder Group to assert claims in 

connection with the PBA Leases, including, but not limited to, general unsecured claims, secured 

claims or administrative expense claims (including claims for unpaid postpetition rent), or to 

pursue any other right or remedies afforded to them under the PBA Leases, the PBA Enabling 

Act, the PBA Bond Resolution, or any other applicable contract, law or regulation. 

The QTCB Noteholder Group further expressly reserves any and all (direct or derivative) 

claims and rights to object, intervene, act, or bring or make any motion, request, or argument

regarding the PBA Leases arising under the PBA Leases, the PBA Enabling Act, the PBA Bond 

Resolution, the Bankruptcy Code, PROMESA and all other applicable laws.

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Dated: February 27, 2018

 

BRACEWELL LLP

/s/ Kurt A. Mayr

Kurt A. Mayr (pro hac vice)

David L. Lawton (pro hac vice)

City Place I, 34th Floor

185 Asylum Street

Hartford, CT 06103

Telephone: (860) 256-8534

Email: kurt.mayr@bracewell.com

Counsel for the QTCB Noteholder Group

CORREA ACEVEDO & ABESADA LAW 

OFFICES, P.S.C.

Centro Internacional de Mercadeo, Torre II

# 90 Carr. 165, Suite 407

Guaynabo, P.R. 00968

Tel. (787) 273-8300; Fax (787) 273-8379

/s/ Roberto Abesada-Agüet

USDC-PR No. 216706

E-Mail: ra@calopsc.com

 /s/ Sergio E. Criado

USDC-PR No. 226307

E-Mail: scriado@calopsc.com

Co-Counsel for the QTCB Noteholder Group

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I HEREBY CERTIFY that on February 27, 2018, I electronically filed the foregoing 

with the Clerk of the Court using the CM/ECF system which will send automatic notifications of 

such filing to all attorneys of record.

/s/ Roberto Abesada-Agüet 

Roberto Abesada-Agüet

USDC-PR No. 216706

/s/ Sergio E. Criado

USDC-PR No. 226307

E-Mail: scriado@calopsc.com

Centro Internacional de Mercadeo II

#90 Carr. 165 Suite 407

Guaynabo, Puerto Rico 00968-8064

ra@calopsc.com

(787) 273- 8300

/s/ Kurt A. Mayr 

Kurt A. Mayr

Bracewell LLP

City Place I, 34th Floor

185 Asylum Street

Hartford, CT 06103

Tel: (860) 254-8534

Email: kurt.mayr@bracewell.com

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