During the COFINA trial at the United States District Court in San Juan, Puerto Rico, the trial had a consistent tone. Brian Rosen, from Proskauer Rose LLP, stood up yesterday and provided an extensive statement on how any arguments made by Junior bond holders should not be considered at this point in the trial. For anyone who didn’t proactively participate in the earlier negotiations, he is quite right. Especially, if it is a vulture fund that has a history of manipulating legal proceedings to carve out larger payouts and making a mockery where there is human needs. Also, especially if they’re a vulture hedge fund of the likes of Elliot Management, which was able to litigate its way to higher profits and was in the center of Argentina’s financial crisis, as well as many other bullying tactics to make a buck around the world.
Mark Elliott is principle partner and representative of such vulture hedge fund that in one hand claims to be lefted out of the negotiating table and unfair treatment by the trial, while in the other hand blogging to investors on how profitable the COFINA junior bonds have been, in a personal article he titles “COFINA Sales Tax Revenue Bonds: After 400%+ Increase Year To Date, Another 300% Possible. Not Bad“, where he boosts about the bonds value of less than 15 cents. The article makes mention of an earlier article also written by Mr. Elliott, where he boosts potential earnings on the COFINA junior bonds of upwards of 1000% profits from its trading lows of 10 cents on the dollar. Based on the articles, one can conclude that bond holders of initial interest have already settled at a greater loss, and subsequent holders have had substantial gains by buying the notes at fractions of a dollar.
Access Mr. Mark Elliott letter to Judge Laura Taylor Swain on the following link:
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One can expect vulture funds to play the law and investor sentiments for higher yields. What was surprising, is that Mr. Brian Rosen who one would think has a dual responsibility to represent the interest of the Commonwealth and a fair negotiation, instead he pointed out that the interest in meeting basic services for the Commonwealth of Puerto Rico is not in trial, that the only issue being considered is the negotiation of the COFINA bonds. This is despite the FOMB charter to ensure that the island returns to financial solvency, and a letter sent by members of Congress reiterating FOMB’s responsibility to ensure that Puerto Rico can meet essential needs. In addition, they seem to ignore basic financial practices, as is to require audited financial statements of which the Commonwealth of Puerto Rico has not provided for years 2016, 2017 and 2018.
Mr. Rosen is the representing attorney for the Financial Oversight Management Board (FOMB). During the trial, he seemed to go back and forth very harmoniously while apparently sharing strategies with the defense team of the primary bond holders, making anyone who was observing reassured that the primary bondholders should get the sweet deal of 93 cents on the dollar. Judge Laura Taylor Swain who has been tasked this audience case, did mandate in the previous hearing for both bond holders and FOMB to come into a negotiated consensus prior to yesterday’s proceedings which continue today. So, the exchange could very well be base on the comfort that they have finally come to a consensus. Then why would it seem like something is out place?
The process raises many questions, especially when one of Mr. Rosen’s statements claim that bringing into conclusion the COFINA bond negotiations is essential for future negotiations of other Commonwealth bond debt. For one, the COFINA bonds are perhaps lowest in priorities at the moment when considered under the premise of legal debt while the legality of the COFINA bonds are brought into question as unconstitutional in a Supreme Court in San Juan. Secondly, offering such a small reduction to primary bondholders brings to mind the good old “give me something so I can say I did my job” type deal. The reduction is not only flawed, it will infact repay more than twice its value at a minimal according to analysts. In addition, there are various alternatives to settle the debts, not just COFINA, including a restructuring that will pay for it via a 30 year basic amortization. Solutions that won’t leave the island strap for cash and going back bankruptcy. But the FOMB either has overlooked other possibilities, or simply doesn’t care to take them into consideration. The fact that they can’t produce a legitimate fiscal plan that accounts for the island’s economic health, is enough to cast doubt on the FOMB’s intentions, and even questioned if there could be a possible conflict of interest. It’s by no surprise that the new motto in the streets could well be “Wallstreet’s Largest Offshore Heist” for the FOMB’s negotiations.