Puerto Rico bondholders withdraw temporary restraining order request

By Caroline Salls

Pittsburgh, April 13 – Government Development Bank of Puerto Rico bondholders withdrew their request for a temporary restraining order in the wake of an executive order signed by Puerto Rico Governor Alejandro J. Garcia Padilla, according to a release from bondholder representative Davis Polk & Wardwell LLP.

The firm said the governor’s order “largely provides the relief sought” in the temporary restraining order by stopping “non-essential withdrawals or transfers” by the bank.

On April 5, the bondholders filed the temporary restraining order request in the U.S. District Court for the District of Puerto Rico seeking to enjoin preferential transfers of assets by the bank that are prohibited under Puerto Rico law.

On April 6, the governor signed the Puerto Rico Emergency Moratorium and Financial Rehabilitation Act. Garcia Padilla issued an executive order on April 8 declaring an emergency period for the bank.

Davis Polk & Wardwell said the governor ordered the bank to honor withdrawals or transfers only if the funds will be used for essential services and only if the depositor expects not to have an alternate source of funds with which to pay for the essential services.

The executive order also authorizes the bank to impose weekly limitations of total withdrawals.

“While plaintiffs have serious concerns about the constitutionality and legality of other provisions of the executive order and the act, they hope to continue working with GDB to reach agreement on a long-term solution to its current financial difficulties,” the release said.

The plaintiffs are funds managed or advised by Brigade Capital Management, LP, Claren Road Asset Management, LLC, Fore Research & Management, LP and Solus Alternative Asset Management LP. They are represented by Davis Polk & Wardwell and Vicente & Cuebas and by Ducera Partners as financial adviser.

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