COFINA bondholders seek Supreme Court review

Bloomberg News

The U.S. Supreme Court is scheduled to consider a petition Friday for certiorari made by holders of subordinate Puerto Rico Sales Tax Finance Authority (COFINA) bonds.

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They argue the U.S. government is responsible for their losses and owes them compensation.

If the Supreme Court rules in favor of the petition, the court will entertain briefs and oral arguments this term.

The U.S. Court of Appeals for the Federal Circuit in July ruled against the bondholders, saying the Puerto Rico Oversight Board was not an “agency” of the federal government and the federal government didn’t “coerce” the board into accepting reduced bond payments. As a result, the court ruled, bondholders didn’t have a claim against the federal government for their losses from the restructuring of their bonds. 

Subordinate COFINA holders experienced a haircut of about 44% in the February 2019 restructuring negotiated between the board and law firms representing COFINA bondholders. 

Bondholders are seeking reimbursement for their losses under the Tucker Act, which allows claims against the federal government for its actions and laws.

Bondholder Mark Elliot has filed an amicus brief in support of the bondholders in the case, Johnathan H. Dinh, et al. v. United States. 

The Supreme Court is expected to release a list of cases accepted for review on Jan. 12.