GoldenTree Asset Management LP v. Financial Oversight and Management Board, No. 23-1737 (1st Cir. 2024)
In GoldenTree Asset Management LP v. Financial Oversight and Management Board, the First Circuit Court of Appeals reviewed a dispute arising from the restructuring of the Puerto Rico Electric Power Authority’s (PREPA) debts under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). The appellants, GoldenTree Asset Management and Syncora Guarantee, who collectively held about $1 billion of PREPA’s $8 billion in bonds, sought relief from the automatic stay on actions against PREPA’s estate to appoint a receiver for PREPA.
The Bondholders contended that the automatic stay should have been lifted by operation of law because the district court denied their motion for relief without holding a hearing within the timeframe mandated by 11 U.S.C. § 362(e)(1). However, the First Circuit upheld the district court’s ruling, noting that the Bondholders had effectively waived their right to a prompt hearing by agreeing to a litigation schedule that delayed any hearing on their motion. This schedule was set to follow the resolution of a parallel proceeding concerning the extent of the Bondholders’ collateral.
The appellate court concluded that the Bondholders’ decision to accept the delayed schedule meant they forfeited the right to claim that the stay had lifted automatically due to the lack of a timely hearing. As a result, the First Circuit affirmed the district court’s judgment, maintaining the status quo in the ongoing restructuring process under PROMESA.
The court issued a subsequent related opinion or order on January 26, 2024.
