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Hedge Funds Reveal How Much Puerto Rico Sales-Tax Debt They Hold

A group of hedge funds that hold about $3 billion of Puerto Rico sales-tax bonds released court documents showing how much of the commonwealth’s debt that each manages, Bloomberg reported yesterday. The disclosure is part of Puerto Rico’s record bankruptcy. The island is seeking to cut $74 billion sold by the commonwealth and its agencies that helped fill budget deficits as its economy shrunk in the past decade. Numerous agencies sold the bonds, which are repaid from various revenue pledges. Bondholders are now fighting over those different revenue sources. A key issue is which type of debt should receive a better recovery rate: $13.3 billion of general obligations, which have a constitutional guarantee of repayment, or $17.6 billion of bonds. The Cofina structure has a junior-lien component, and while the pool of bondholders designates itself as the senior Cofina group, some members hold junior sales-tax bonds. The firms hold a combined $2.5 billion of senior Cofinas and $602 million of junior sales-tax debt.

For updated news and analysis of Puerto Rico's debt crisis, along with current docket filings in Puerto Rico's case, be sure to visit ABI's "Puerto Rico in Distress" webpage: http://www.abi.org/PR-crisis.

Confidential

Mountain Creek Asks Court to OK Confidentiality in Bankruptcy Case

Mountain Creek Resort is asking a bankruptcy court to approve a "confidentiality and non-disclosure agreement" that would limit the ability of the township — and the public — to access certain bankruptcy-related documents, the New Jersey Herald reported today. The request comes as the resort seeks to be relieved of up to $26 million in contractually obligated sewer debt to the Vernon Township Municipal Utilities Authority assumed under the resort's prior ownership. If the court approves the request, it not only would render all financial statements and other material provided by Mountain Creek to the township as part of its chapter 11 filing off-limits to the public, but would also permit Mountain Creek, at its discretion, to declare certain records off-limits to the township's mayor, council and MUA commissioners. The terms indicate that Mountain Creek "shall have the right in [its] reasonable discretion to designate such Confidential Material as ‘for professionals' eyes only' or as ‘for attorneys' eyes only'" — meaning that the lawyers and other professionals working for Vernon would be prohibited from sharing the documentation with their own clients. Although the township could appeal any such designation, doing so would require the township to request a bankruptcy court hearing as to why the designation should be overturned. The proposed agreement would also allow Mountain Creek, at the conclusion of the proceedings, to compel Vernon's mayor, council and MUA to return any records provided to them by Mountain Creek or else destroy them, which would prevent any member of the public from later accessing them under the Open Public Records Act.

Gavel

Mother Uses Bankruptcy to Keep Daughter from Collecting $3.3 Million Verdict

Roberta Moberley Dickson is the 81-year-old widow of a prominent businessman and boasts more than $5 million in assets, but she filed for bankruptcy protection, citing a single creditor — her daughter, Mary Louise Dickson Shook — and a single debt: A $3.3 million judgment awarded last November by a Jefferson Circuit Court jury that found Dickson had cheated Shook out of her inheritance, the Courier-Journal reported yesterday. The verdict included $405,000 in punitive damages against Dickson for promising to give Shook $1.5 million if she would stop saying she was raped by her brother some 30 years earlier. By filing for bankruptcy, Dickson has halted collection on the judgment and avoided having to post a bond in the amount of the verdict while she appeals it to the Kentucky Court of Appeals. Shook has won an important ally: The U.S. Trustee has moved to dismiss Dickson’s petition, saying it was filed in “bad faith,” and that courts have defined bad faith to include “improper” prior conduct by the debtor and attempting to evade court orders. However, Dickson’s lawyer said there was “nothing bad faith” about the filing. He said the chapter 11 was needed to keep Shook, who lives out of state, from collecting the judgment, spending all of the money and then losing the appeal and being unable to repay it to her mother. In its motion, the U.S. Trustee's Office says that if Chief Bankruptcy Judge Tracey N. Wise doesn’t throw out the case altogether, she should appoint an outside lawyer to protect or liquidate the assets in “trustworthy fashion.”

Berkshire Hathaway

Elliott Wins More Time to Beat Berkshire Hathaway's Oncor Deal

A bankruptcy judge gave Elliott Management Corp. 11 more days to formalize its plans to bid on Oncor Electric Delivery Co. before the court approves the $9 billion offer for the utility from Berkshire Hathaway Inc., Reuters reported yesterday. Hon. Christopher Sontchi pushed back the hearing for the approval of Berkshire's merger agreement with Oncor, which carries a $270 million termination fee should it fall through, to Aug. 21 from Aug. 10. Elliott, the largest creditor of Oncor's bankrupt parent Energy Future Holdings Corp., said that it needed more time to finalize the financing for its $9.3 billion offer, after securing about $1.4 billion in new equity for its bid so far. It had asked for a delay of 35 to 40 days. If billionaire Warren Buffett's Berkshire has not won court approval of its offer from the bankruptcy court by Aug. 21, it will walk away from the deal, Patrick Goodman, the chief financial officer of Berkshire Hathaway Energy, told Judge Sontchi. Berkshire's all-cash bid already has regulators' support and promises to pull Oncor, the largest utility in Texas, out of its more than three-year bankruptcy. Regulatory hurdles scuttled two earlier deals for Oncor.

Catholic church

Diocese Sex Abuse Settlement: Proceedings Nearing as Deadline Looms for Filings

The window is closing for victims and survivors to file claims of abuse committed by church officials who served under the Great Falls-Billings Diocese, Great Falls Tribune reported yesterday. The diocese earlier this year filed for bankruptcy to begin financing a settlement fund for those reported to be abused by priests, brothers and nuns. More than 70 victims have emerged as alleged victims, claiming they were physically, emotionally and sexually abused by priests. "To be considered in part of the settlement in this pool of money, the plains would have to be made by July 31," said Molly Howard, an attorney representing about 40 victims in the Great Falls-Billings Diocese case. Forms for filing abuse claims are available on the Great Falls-Billings Diocese website and will be submitted to bankruptcy court. Following the claims deadline, parties will return to mediation in Reno during the first week of August before Hon. Greg Zive. Since the bankruptcy filing, a group of eight victims have voluntarily stepped forward to represent the 70-plus victims as a creditors' committee in the case during mediation with the church regarding the settlement. 

BitCoin

Bitcoin Exchange Was a Nexus of Crime, Indictment Says

A Russian man was charged with overseeing a black market Bitcoin exchange that helped launder billions of dollars and stood at the nexus of several criminal enterprises, The New York Times reported today. The indictment, which was unsealed in California on Wednesday, gave a long list of illegal activities that the Bitcoin exchange (BTC-E) facilitated, including ransomware fraud, identity theft, drug trafficking and public corruption. Alexander Vinnik was arrested in Greece; he had “directed and supervised” BTC-E’s operations and is said to have had co-conspirators. Justice Department officials said that the exchange appeared to have been responsible for laundering more than $4 billion for criminals, with most of the money turned into American dollars and Russian rubles. The site served 700,000 customers around the world, the officials said. The indictment may offer an explanation for a shock to the digital coin market in 2014. Vinnik and his partners are accused of stealing funds from the Tokyo-based Bitcoin exchange Mt. Gox, which declared bankruptcy in 2014 after disclosing a hacker intrusion. Mt. Gox’s chief executive, Mark Karpeles, said that year that it had lost more than 800,000 Bitcoins, some of which the company later said it had recovered. The indictment said that hundreds of thousands of Bitcoins moved from Mt. Gox into accounts at BTC-E that were directly controlled by Vinnik.

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