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HOUSTON, March 20, 2019 (GLOBE NEWSWIRE) -- Lawyers with the firm Shepherd, Smith, Edwards & Kantas, LLP (SSEK Law Firm) are assisting Employee Retirement System (ERS) bondholders gain access to the collateral previously invalidated by the judge overseeing the Title III bankruptcy of Puerto Rico. According to Law360, the First Circuit Court of Appeals (First Circuit) issued a recent opinion overturning “a district court ruling that the bondholders had no claim” to the ERS pension fund’s collateral. In the Court of Appeal’s ruling, the panel found that through the revised financial statements, the bondholders did have “a perfected security interest in the [ERS] system’s property.”
The ERS is “a pension fund for Puerto Rico’s public employees”. It has been woefully underfunded since inception and, in 2008, started issuing secured bonds to make up for the shortfall. Ten years later, ERS, along with “other public entities, were forced to file for bankruptcy-like protections” in response to the Puerto Rico debt crisis, “stripping the investors [secured ERS bondholders] of their pledged revenues.” In August 2018, a federal judge ruled “that the creditors’ financing statements did not establish their exclusive security interest in the collateral.” That ruling effectively made ERS bonds worthless as they are not a general obligation of the Puerto Rico government. The bondholders appealed that ruling to the First Circuit. While the First Circuit upheld the lower court’s finding that the 2008 official statements failed the Universal Commercial Code (UCC) standards by not adequately describing the “types of property pledged”, the revised 2015 and 2016 financial statements “met requirements for perfection as of December 17, 2015.” Based on this ruling, the roughly $3 billion in bonds now has a valid lien on future employer contributions. However, the value of the ERS bonds is still far below their initial price and bondholders still stand to lose billions when the bankruptcy is finalized.
If you purchased ERS bonds, please contact the law firm of Shepherd, Smith, Edwards & Kantas, LLP today for a free, confidential evaluation of your account(s). We have a team of attorneys, consultants, and staff with over 100 years of combined experience in the securities industry and in securities law that are ready to assist you in recovering your investment losses today.