No.

22-

In the
Supreme Court of the United States

THE FINANCIAL OVERSIGHT AND MANAGEMENT

BOARD FOR PUERTO RICO, AS REPRESENTATIVE
OF THE COMMONWEALTH OF PUERTO RICO,
THE EMPLOYEES RETIREMENT SYSTEM OF THE
GOVERNMENT OF THE COMMONWEALTH OF
PUERTO RICO, AND THE PUERTO RICO PUBLIC
BUILDINGS AUTHORITY,
Petitioner,
v.
COOPERATIVE DE AHORRO Y CREDITO
ABRAHAM ROSA, et al.,
Respondents.

On Petition for a Writ of Certiorari to the United

States Court of A ppeals for the First Circuit

PETITION FOR A WRIT OF CERTIORARI

Timothy W. Mungovan Martin J. Bienenstock

John E. Roberts Counsel of Record
Elliot R. Stevens Mark D. Harris
Proskauer Rose LLP Ehud Barak
One International Place Shiloh Rainwater
Boston, Massachusetts 02110 Joshua A. Esses
(617) 526-9600 Proskauer Rose LLP
Eleven Times Square
New York, New York 10036
(212) 969-3000
mbienenstock@proskauer.com
Attorneys for Petitioner

315989
 i

QUESTION PRESENTED

The decision below is the first by a circuit court in

history to hold that the Constitution prohibits a cate-
gory of unsecured claims from being discharged in
bankruptcy. Specifically, the First Circuit held that
unsecured claims for just compensation that arise un-
der the Fifth Amendment’s Takings Clause before
bankruptcy cannot be adjusted in a bankruptcy case,
even though claims for money damages arising under
other constitutional provisions can. The court be-
lieved the Takings Clause mandates a remedy and
that unique feature renders the remedy non-dis-
chargeable. The First Circuit acknowledged it was
creating a split with the Ninth Circuit, which, when
faced with the identical question, held that pre-bank-
ruptcy unsecured claims for just compensation are
dischargeable. The First Circuit’s novel ruling frus-
trates both pillars of the Constitution’s bankruptcy
power—fresh starts for debtors and equitable treat-
ment of unsecured claimholders.

The Question Presented is: Are pre-bankruptcy

unsecured claims for just compensation under the
Takings Clause uniquely non-dischargeable, unlike
every other type of unsecured claim?
 ii

PARTIES TO THE PROCEEDING

The Financial Oversight and Management Board

for Puerto Rico (the “Board”), as representative of the
Commonwealth of Puerto Rico, the Employees Retire-
ment System of the Government of the Common-
wealth of Puerto Rico, and the Puerto Rico Public
Buildings Authority, is Petitioner here and was Ap-
pellant below.

Cooperativa de Ahorro y Credito Abraham Rosa;

Cooperativa de Ahorro y Credito de Ciales; Coopera-
tiva de Ahorro y Credito de Juana Diaz; Cooperativa
de Ahorro y Credito de Rincon; Cooperativa de Ahorro
y Credito de Vega Alta; Cooperativa de Ahorro y Cre-
dito Dr. Manuel Zeno Gandia; Suiza Dairy Corp.; Luis
F. Pabon Bosques; Raul Martinez Perez; Elvin A. Ro-
sado Morales; Carlos A. Rojas Rosario; Rafael Torres
Ramos; Desarrolladora Orama, S.E.; C.O.D. Tire Dis-
tributors Imports Asia, Inc.; Correa Tire Distributor
Inc.; World Wide Tire, Inc.; Sequeria Trading Corpo-
ration; Sabatier Tire Center, Inc.; Victor Lopez Cor-
tes, Inc.; Multi Gomas, Inc.; Jose Collazo Perez; Ive-
lisse Tavares Marrero; Manuel Perez Ortiz; Coral
Cove, Inc.; Sucesion Angel Alvarez Perez; Antonio Co-
lon Santiago; Cooperativa de Ahorro y Credito de
Aguada; Vilma Teresa Torres Lopez; Viviana Ortiz
Mercado; Orlando Torres Berrios; German Torres Be-
rrios; Juan Alberto Torres Berrios; Vhermanos To-
rres, Inc.; Corporacion Playa India, S.E.; Mariano Ra-
mos Gonzalez; Ramon Moran Loubriel; Rafael Moran
Loubriel; Ana Moran Loubriel; San Geronimo Caribe
Project, Inc.; Caribbean Airport Facilities Inc.; Estate
Of Raul de Pedro & Diana Martinez; Alfonso Fernan-
dez Cruz; Sun And Sand Investments, Corp.;
 iii

FDR1500, Corp.; Margareta Blondet; Sucesion Com-

puesto Por Maria I. Rubert Blondet; Sonia Rubert
Blondet; Margarita Rubert Blondet; Sonia Rubert,
Administradora; Manuel A. Rivera-Santos; Jorge Ri-
vera-Santos; Carlos Manuel Rivera-Santos; Pablo Me-
lendez Brulla; Sucesion Agustin Rodriguez Colon;
Gloria M. Esteva Marques; Sucesion Manuel Marti-
nez Rodriguez; Luis Reyes Feikert; Jorge Ramon Po-
zas; Miriam Sanchez Lebron; Juan A. Tapia Ortiz; An-
tonio Perez Colon; PFZ Properties, Inc.; Oscar Adolfo
Mandry Aparicio; Maria Del Carmen Amalia Mandry
Llombart; Selma Veronica Mandry Llombart; Maria
Del Carmen Llombart Bas; Oscar Adolfo Mandry Bo-
nilla; Gustavo Alejandro Mandry Bonilla; Yvelise He-
lena Fingerhut Mandry; Margaret Ann Fingerhut
Mandry; Victor Robert Fingerhut Mandry; Juan Car-
los Esteva Fingerhut; Pedro Miguel Esteva Fingerhut;
Mariano Javier Mcconnie Fingerhut; Janice Marie
Mcconnie Fingerhut; Victor Michael Fingerhut Coch-
ran; Michelle Elaine Fingerhut Cochran; Rosa Estela
Mercado Guzman; Eduardo Jose Mandry Mercado;
Salvador Rafael Mandry Mercado; Margarita Rosa
Mandry Mercado; Adrian Roberto Mandry Mercado;
Vicente Perez Acevedo; Corporacion Marcaribe In-
vestment; Demetrio Amador Inc.; Demetrio Amador
Roberts; Maruz Real Estate Corp.; Lortu-Ta Ltd., Inc.;
La Cuarterola, Inc.; Juaza, Inc.; Conjugal Partnership
Zalduondo-Machicote; Frank E. Torres Rodriguez;
Eva Torres Rodriguez; Finca Matilde, Inc.; Jorge Ra-
fael Eduardo Collazo Quinones; Antonio Martin Cer-
vera; Maria Teresita Martin; Wanda Ortiz Santiago;
Nancy I. Negron-Lopez; Group Wage Creditors; Yas-
hei Rosario; Ana A. Nunez Velazquez; Edgardo Mar-
 iv

quez Lizardi; Maria M. Ortiz Morales; Arthur Samo-

dovitz; Miguel Luna de Jesus; Ismael L. Purcell Soler;
Alys Collazo Bougeois; Mildred Batista De Leon; Ja-
vier Alejandrino Osorio; Service Employees Interna-
tional Union (SEIU); International Union, United Au-
tomobile, Aerospace and Agricultural Implement
Workers of America; MAPFRE PRAICO Insurance
Company; Certain Creditors Who Filed Actions in the
United States District Court for The District of Puerto
Rico; Med Centro, Inc., f/k/a Consejo de Salud de la
Comunidad de la Playa de Ponce, Inc.; Asociacion de
Jubilados de La Judicatura de Puerto Rico; Hon. Hec-
tor Urgell Cuebas; Cooperativa de Ahorro y Credito
Vegabajena; University of Puerto Rico Retirement
System Trust; Peter C. Hein; Miriam E. Lima Colon;
Betzaida Feliciano Concepcion; Angel L. Mendez Gon-
zalez; Asociacion de Maestros Puerto Rico; Asociacion
de Maestros de Puerto Rico-Local Sindical; Morgan
Stanley & Co. LLC; Goldman Sachs & Co. LLC; J.P.
Morgan Securities LLC; Santander Securities LLC;
Sidley Austin LLP; BMO Capital Markets GKST, Inc.;
Citigroup Global Markets Inc.; Samuel A. Ramirez &
Co., Inc.; Mesirow Financial, Inc.; Merrill Lynch,
Pierce, Fenner & Smith Inc.; Merrill Lynch Capital
Services, Inc.; Barclays Capital Inc.; RBC Capital
Markets, LLC; Raymond James & Associates, Inc.;
Community Health Foundation of P.R. Inc.; Quest Di-
agnostics of Puerto Rico, Inc.; U.S. Bank Trust Na-
tional Association, as Trustee for the PRPFC Out-
standing Bonds and PRIFA Bonds, and Fiscal Agent
for PRPBA Bonds; U.S. Bank National Association, as
Trustee for the PRPFC Outstanding Bonds and
PRIFA Bonds, and Fiscal Agent for PRPBA Bonds;
Nilsa Candelario; El Ojo de Agua Development, Inc.;
 v

Pedro Jose Nazario Serrano; Joel Rivera Morales; Ma-

ria de Lourdes Gomez Perez; Hector Cruz Villanueva;
Lourdes Rodriguez; Luis M. Jordan Rivera; Taconic
Capital Advisors LP; Aurelius Capital Management,
LP; Canyon Capital Advisors LLC; First Ballantyne
LLC; Moore Capital Management, LP; Puerto Rico
Fiscal Agency and Financial Advisory Authority; Hon.
Pedro R. Pierluisi Urrutia; United States, on behalf of
the Internal Revenue Service; Asociacion Puertor-
riquena de la Judicatura, Inc.; Federacion de Maes-
tros de Puerto Rico, Inc.; Grupo Magisterial Educa-
dores(as) por la Democracia, Unidad, Cambio, Mili-
tancia y Organizacion Sindical, Inc.; Union Nacional
de Educadores y Trabajadores de la Educacion, Inc.;
Maria A. Clemente Rosa; Jose N. Tirado Garcia, as
President of the United Firefighters Union of Puerto
Rico, Vaqueria Tres Monjitas, Inc.; Blackrock Finan-
cial Management, Inc.; Emso Asset Management Lim-
ited; Mason Capital Management, LLC; Silver Point
Capital, L.P.; VR Advisory Services, Ltd; Aurelius
Capital Management, LP, on behalf of its managed
entities; GoldenTree Asset Management LP, on behalf
of funds under management; Whitebox Advisors LLC,
on behalf of funds under management; Monarch Al-
ternative Capital LP, on behalf of funds under man-
agement; Taconic Capital Advisors L.P., on behalf of
funds under management; Aristeia Capital, LLC, on
behalf of funds under management; Farmstead Capi-
tal Management, LLC, on behalf of funds under man-
agement; Foundation Credit, on behalf of funds under
management; Canyon Capital Advisors LLC, in its ca-
pacity as a member of the QTCB Noteholder Group;
Davidson Kempner Capital Management LP, in its ca-
pacity as a member of the QTCB Noteholder Group;
 vi

Sculptor Capital LP, in its capacity as a member of the

QTCB Noteholder Group; Sculptor Capital II LP, in
its capacity as a member of the QTCB Noteholder
Group; Ambac Assurance Corporation; Andalusian
Global Designated Activity Company; Crown Man-
aged Accounts, for and on behalf of Crown/PW SP;
LMA SPC, for and on behalf of Map 98 Segregated
Portfolio; Mason Capital Master Fund LP; Oaktree-
Forrest Multi-Strategy, LLC (Series B); Oaktree Op-
portunities Fund IX, L.P.; Oaktree Opportunities
Fund IX (Parallel), L.P.; Oaktree Opportunities Fund
IX (Parallel 2), L.P.; Oaktree Huntington Investment
Fund II, L.P.; Oaktree Opportunities Fund X, L.P.;
Oaktree Opportunities Fund X (Parallel), L.P.; Oak-
tree Opportunities Fund X (Parallel 2), L.P.; Oaktree
Value Opportunities Fund Holdings, L.P.; Oceana
Master Fund Ltd.; Ocher Rose, LLC; Pentwater Mer-
ger Arbitrage Master Fund Ltd.; PWCM Master Fund
Ltd.; Redwood Master Fund, Ltd.; Bank Of New York
Mellon; Official Committee Of Unsecured Creditors;
Assured Guaranty Corp.; Assured Guaranty Munici-
pal Corp.; Official Committee Of Retired Employees;
National Public Finance Guarantee Corp.; Financial
Guaranty Insurance Company; AmeriNational Com-
munity Services, LLC, as servicer for the GDB Debt
Recovery Authority; Cantor-Katz Collateral Monitor
LLC, as Collateral Monitor for the GDB Debt Recov-
ery Authority; Atlantic Medical Center, Inc.; Camuy
Health Services, Inc.; Centro de Salud Familiar Dr.
Julio Palmieri Ferri, Inc.; Ciales Primary Health Care
Services, Inc.; Corp. de Serv. Medicos Primarios y Pre-
vencion de Hatillo, Inc.; Costa Salud, Inc.; Centro de
Salud de Lares, Inc.; Centro de Servicios Primarios de
Salud de Patillas, Inc.; Hospital General Castaner,
 vii

Inc.; GNMA & US Government Target Maturity Fund

for Puerto Rico Residents, Inc., f/k/a Puerto Rico
GNMA & U.S. Government Target Maturity Fund,
Inc.; Mortgage-Backed & US Government Securities
Fund for Puerto Rico Residents, Inc., f/k/a Puerto Rico
Mortgage-Backed & U.S. Government Securities
Fund, Inc.; Puerto Rico Residents Bond Fund I, f/k/a
Puerto Rico Investors Bond Fund I; Puerto Rico Resi-
dents Tax-Free Fund, Inc., f/k/a Puerto Rico Investors
Tax-Free Fund, Inc.; Puerto Rico Residents Tax-Free
Fund II, Inc., f/k/a Puerto Rico Investors Tax-Free
Fund II, Inc.; Puerto Rico Residents Tax-Free Fund
III, Inc., f/k/a Puerto Rico Investors Tax-Free Fund
III, Inc.; Puerto Rico Residents Tax-Free Fund IV,
Inc., f/k/a Puerto Rico Investors Tax-Free Fund IV,
Inc.; Puerto Rico Residents Tax-Free Fund V, Inc.,
f/k/a Puerto Rico Investors Tax-Free Fund V, Inc.;
Puerto Rico Residents Tax-Free Fund VI, Inc., f/k/a
Puerto Rico Investors Tax-Free Fund VI, Inc.; Tax-
Free Fixed Income Fund for Puerto Rico Residents,
Inc., f/k/a Puerto Rico Fixed Income Fund, Inc.; Tax-
Free Fixed Income Fund II for Puerto Rico Residents,
Inc., f/k/a Puerto Rico Fixed Income Fund II, Inc.; Tax-
Free Fixed Income Fund III for Puerto Rico Residents,
Inc., f/k/a Puerto Rico Fixed Income Fund III, Inc.;
Tax-Free Fixed Income Fund IV for Puerto Rico Resi-
dents, Inc., f/k/a Puerto Rico Fixed Income Fund IV,
Inc.; Tax-Free Fixed Income Fund V for Puerto Rico
Residents, Inc., f/k/a Puerto Rico Fixed Income Fund
V, Inc.; Tax-Free Fixed Income Fund VI for Puerto
Rico Residents, Inc., f/k/a Puerto Rico Fixed Income
Fund VI, Inc.; Tax Free Fund for Puerto Rico Resi-
dents, Inc., f/k/a Tax-Free Puerto Rico Fund, Inc.; Tax
Free Fund II for Puerto Rico Residents, Inc., f/k/a Tax-
 viii

Free Puerto Rico Fund II, Inc.; Tax-Free High Grade

Portfolio Bond Fund for Puerto Rico Residents, Inc.,
f/k/a Puerto Rico AAA Portfolio Bond Fund, Inc.; Tax-
Free High Grade Portfolio Bond Fund II for Puerto
Rico Residents, Inc., f/k/a Puerto Rico AAA Portfolio
Bond Fund II, Inc.; Tax-Free High Grade Portfolio
Target Maturity Fund for Puerto Rico Residents, Inc.,
f/k/a Puerto Rico AAA Portfolio Target Maturity
Fund, Inc.; Tax Free Target Maturity Fund for Puerto
Rico Residents, Inc., f/k/a Tax-Free Puerto Rico Target
Maturity Fund, Inc.; UBS IRA Select Growth & In-
come Puerto Rico Fund; Servicios Integrales en la
Montana (SIM); and the United States are Respond-
ents here and were Appellees below.

CORPORATE DISCLOSURE STATEMENT

Petitioner is not a nongovernmental corporation

and is therefore not required to file a statement under
Supreme Court Rule 29.6.

RELATED PROCEEDINGS

U.S. District Court for the District of Puerto Rico:

In re Fin. Oversight & Mgmt. Bd. for P.R., No. 17-

bk-03283 (order entered Jan. 18, 2022).

U.S. Court of Appeals for the First Circuit:

Fin. Oversight & Mgmt. Bd. for P.R., No. 22-1119

(judgment entered July 18, 2022).
 ix

TABLE OF CONTENTS

Page

QUESTION PRESENTED.......................................... i
PARTIES TO THE PROCEEDING ........................... ii
CORPORATE DISCLOSURE STATEMENT ........ viii
TABLE OF CONTENTS ........................................... ix
TABLE OF APPENDICES ....................................... xi
TABLE OF CITED AUTHORITIES ........................ xii
PETITION FOR A WRIT OF CERTIORARI .............1
INTRODUCTION ........................................................1
OPINIONS BELOW ....................................................4
STATEMENT OF JURISDICTION............................4
CONSTITUTIONAL PROVISIONS INVOLVED ......4
STATEMENT OF THE CASE ....................................5
REASONS FOR GRANTING THE PETITION .........8
I. THE DECISION BELOW CREATES A
CIRCUIT SPLIT ON AN ISSUE OF
EXCEPTIONAL IMPORTANCE. ........................8
II. THE DECISION BELOW IS
INCONSISTENT WITH TWO LINES OF
CONSTITUTIONAL PRECEDENT
INVOLVING THE TAKINGS CLAUSE AND
THE BANKRUPTCY POWER. .......................... 12
A. The First Circuit’s View of Just
Compensation as a Guarantee of
 x

Payment Notwithstanding Bankruptcy

Contradicts the Teachings of This
Court. ......................................................... 12

B. The Decision Below Creates an

Unprecedented Exception to the Rule
that Unsecured Claims May Be
Discharged in Bankruptcy. ....................... 16
C. The Decision Below Runs Counter to
Established Bankruptcy Practice and
Will Lead to Anomalous Outcomes........... 20
III. WHETHER JUST-COMPENSATION
CLAIMS MAY BE DISCHARGED CARRIES
ENORMOUS FINANCIAL
CONSEQUENCES FOR GOVERNMENTAL
BANKRUPTCIES. .............................................. 22
CONCLUSION ..........................................................24
 xi

TABLE OF APPENDICES

Page

APPENDIX A — OPINION OF THE UNITED

STATES COURT OF APPEALS FOR THE
FIRST CIRCUIT, FILED JULY 18, 2022 ................ 1a
APPENDIX B — JUDGMENT OF THE
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT, FILED JULY
18, 2022.......................................................................... 34a
APPENDIX C — FINDINGS OF FACT AND
CONCLUSIONS OF LAW OF THE UNITED
STATES DISTRICT COURT FOR THE
DISTRICT OF PUERTO RICO, FILED
JANUARY 18, 2022 ..................................................... 46a
APPENDIX D — CONFIRMATION ORDER
OF THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF PUERTO
RICO, FILED JANUARY 18, 2022 ........................ 242a
APPENDIX E — ORDER OF THE UNITED
STATES DISTRICT COURT FOR THE
DISTRICT OF PUERTO RICO, FILED
DECEMBER 14, 2021 .............................................. 363a
 xii

TABLE OF CITED AUTHORITIES

Page(s)

Cases

Americredit Fin. Servs. v. Nichols (In re

Nichols),
440 F.3d 850 (6th Cir. 2006) ................................ 18

Ballinger v. City of Oakland,

24 F.4th 1287 (9th Cir. 2022) .............................. 17

Bank of N.Y. v. Treco (In re Treco),

240 F.3d 148 (2d Cir. 2001) ................................. 19

Bivens v. Six Unknown Fed. Narcotics

Agents,
403 U.S. 388 (1971) ........................................ 12, 15

Block v. North Dakota,

461 U.S. 273 (1983) .............................................. 15

Butz v. Economou,
438 U.S. 478 (1978) .............................................. 15

Cobb v. City of Stockton (In re City of

Stockton),
909 F.3d 1256 (9th Cir. 2018) ...................... 8, 9, 10

Davis v. Passman,
442 U.S. 228 (1979) .............................................. 15

Dimare Fresh, Inc. v. United States,

808 F.3d 1301 (Fed. Cir. 2015) ............................ 21
 xiii

E. Enters. v. Apfel,
524 U.S. 498 (1998) .............................................. 17

Egbert v. Boule,
142 S. Ct. 1793 (2022) .......................................... 15

Faitoute Iron & Steel Co. v. Asbury

Park,
316 U.S. 502 (1942) .............................................. 22

Fin. Oversight & Mgmt. Bd. for P.R. v.

Cooperativa de Ahorro y Credito
Abraham Rosa (In re Fin. Oversight
& Mgmt. Bd. for P.R.),
41 F.4th 29 (1st Cir. 2022) ..................................... 4

Hawkins v. Hall,
453 F. App’x 208 (3d Cir. 2011) ........................... 21

Lend Lease v. Briggs Transp. Co. (In re

Briggs Transp. Co.),
780 F.2d 1339 (8th Cir. 1985) .............................. 19

In re Fin. Oversight & Mgmt. Bd. for

P.R.,
636 B.R. 1 (D.P.R. 2022) ........................................ 4

In re Fin. Oversigth & Mgmt. Bd. for

P.R.,
637 B.R. 223 (D.P.R. 2022) .................................... 4

In re Quanta Res. Corp.,

739 F.2d 912 (3d Cir. 1984) ................................. 19

Jacobs v. United States,

290 U.S. 13 (1933) ................................................ 14
 xiv

Keystone Bituminous Coal Ass’n v.

DeBenedictis,
480 U.S. 470 (1987) .............................................. 17

Knick v. Twp. of Scott,

139 S. Ct. 2162 (2019) ........................ 12, 13, 14, 15

Koontz v. St. Johns River Water Mgmt.

Dist.,
570 U.S. 595 (2013) .............................................. 17

Kuehner v. Irving Tr. Co.,

299 U.S. 445 (1937) .............................................. 18

Lingle v. Chevron USA Inc.,

544 U.S. 528 (2005) .............................................. 14

Louisville Joint Stock Land Bank v.

Radford,
295 U.S. 555 (1935) ...................................... passim

Mac’Avoy v. Smithsonian Inst.,

757 F. Supp. 60 (D.D.C. 1991) ............................. 21

Poinsett Lumber Mfg. v. Drainage Dist.

No. 7,
119 F.2d 270 (8th Cir. 1941) ................................ 11

Till v. SCS Credit Corp.,

541 U.S. 465 (2004) .............................................. 22

United States v. N. Am. Transp. &

Trading Co.,
253 U.S. 330 (1920) .............................................. 21
 xv

United States v. Russell,

80 U.S. 623 (1871) ................................................ 14

United States v. Sec. Indus. Bank,

459 U.S. 70 (1982) .......................................... 16, 18

Williamson Cty. Reg’l Planning Comm’n

v. Hamilton Bank of Johnson City,
473 U.S. 172 (1985) ........................................ 13, 14

Wright v. Union Cent. Life Ins. Co.,

304 U.S. 502 (1938) .............................................. 19

Constitutions and Statutes

U.S. Const. art. I, § 8, cl. 4 ................................ passim

U.S. Const. amend. V ........................................ passim

32 L.P.R.A. § 2907 ....................................................... 6

28 U.S.C. § 1254(1) ...................................................... 4

42 U.S.C. § 1983 ........................................ 9, 10, 12, 15

48 U.S.C. § 2121(a) ...................................................... 5

48 U.S.C. § 2164(a) ...................................................... 5

48 U.S.C. § 2194(m)(1) ................................................ 5

 1

PETITION FOR A WRIT OF CERTIORARI

The Financial Oversight and Management Board

for Puerto Rico respectfully petitions for a writ of cer-
tiorari to review the judgment of the United States
Court of Appeals for the First Circuit.

INTRODUCTION

The decision below creates a circuit split on a con-

stitutional question of exceptional importance—
namely, whether the Takings Clause of the Fifth
Amendment prohibits the discharge of pre-bank-
ruptcy unsecured claims for just compensation in a
bankruptcy case. Respondents allege that the Puerto
Rico government took their property before the Com-
monwealth filed for bankruptcy—in some cases, years
beforehand. Although the court below recognized that
unsecured claims arising under other constitutional
provisions can be discharged, it held that the dis-
charge of Respondents’ pre-bankruptcy unsecured
claims for just compensation under the Taking Clause
would conflict with and violate the Fifth Amendment.
In so ruling, the First Circuit acknowledged that it
was creating a split with the Ninth Circuit, which
reached the opposite conclusion that unsecured just-
compensation claims are dischargeable. See App. 30a.
This Court should grant certiorari to resolve this ir-
reconcilable disagreement that the Fifth Amendment
conflicts with the bankruptcy power, as opposed to the
Fifth Amendment creating a claim before bankruptcy
 2

and the bankruptcy power restructuring and dis-

charging it.

The question concerning whether just-compensa-

tion claims are dischargeable is critical in municipal
bankruptcy cases. Since 2000, one hundred seventy
governmental debtors have filed for bankruptcy. In
many cases, unsecured claims for just compensation
comprise a significant portion of the claims against
the municipal debtor. Unless those claims can be dis-
charged in a bankruptcy case, many municipal re-
structurings may prove impossible, thus violating
both the fresh-start and the equitable-treatment prin-
ciples of bankruptcy. In this case alone, the decision
below excepting just-compensation claims from dis-
charge will cost Puerto Rico more than $300 million
that otherwise could be used to provide much-needed
public services and to support the Commonwealth’s
fiscal recovery.

The decision below is unprecedented. No other

circuit court has ever held that the Constitution for-
bids the discharge of a class of pre-bankruptcy unse-
cured claims. In ruling that just-compensation claims
are uniquely non-dischargeable, the court below mis-
construed this Court’s Takings jurisprudence. The
court believed that the Takings Clause expressly spec-
ifies the remedy for a violation (i.e., just compensa-
tion), which sets it apart from all other constitutional
provisions. But this Court has explained that the de-
nial of just compensation is an element of a takings
claim, not a remedy. Although just compensation is
typically awarded for a Takings Clause violation, the
Takings Clause does not expressly provide a remedy
any more than the Fourth Amendment or any other
 3

provision does. There was thus no principled reason

for the court below to hold that claims under the Tak-
ings Clause are not dischargeable while claims under
other constitutional provisions are.

The court below also mistakenly thought that the

Takings Clause and Congress’s bankruptcy power are
in conflict when a debtor seeks to discharge a just-
compensation claim. There is no conflict, however.
When the government takes property without paying
just compensation, the Takings Clause gives the prop-
erty owner a claim for that constitutional violation. If
the municipal debtor later files for bankruptcy, the
bankruptcy power can allow, restructure, and dis-
charge that claim. Both the Takings Clause and the
Bankruptcy Clause are given full effect to fulfill their
respective objectives.

This Court has never required full payment of

claims for just compensation that arose before a bank-
ruptcy case. While the Court has held that the bank-
ruptcy power is subject to the Fifth Amendment, it
rendered that ruling in the context of specific property
interests taken during the bankruptcy case. The
Court’s point was that the bankruptcy power cannot
be exercised in a manner that takes a secured interest
in property during a bankruptcy case unless just com-
pensation is provided. But the Court has never sug-
gested that the bankruptcy power cannot be exercised
to discharge an unsecured claim that arose from a pre-
bankruptcy taking.

For hundreds of years, this Court has recognized

that the essence of Congress’s bankruptcy power is
the power to discharge the debtor from unsecured
 4

claims that arose before the bankruptcy case. The de-

cision below imposes new, unprecedented limitations
on that authority. In so holding, the court below cre-
ated a circuit split, subverted this Court’s precedents,
frustrated the reasons for bankruptcy, and rendered
municipalities powerless to restructure an important
category of debt. Review is warranted.

OPINIONS BELOW

The opinion of the court of appeals is reported at

41 F.4th 29 (1st Cir. 2022) and is reprinted in the Ap-
pendix (“App.”) beginning at page 1a. The judgment
of the court of appeals is reprinted at App. 34a–45a.

The district court’s order confirming the Common-

wealth’s plan of adjustment is reported at 636 B.R. 1
(D.P.R. 2022) and is reprinted at App. 242a–362a.
The district court’s findings of fact and conclusions of
law, which were incorporated by reference into the
confirmation order, are reported at 637 B.R. 223
(D.P.R. 2022) and are reprinted at App. 46a–241a.

STATEMENT OF JURISDICTION

The court of appeals issued its judgment on

July 18, 2022. App. 45a. This Court has jurisdiction
to review this timely petition under 28 U.S.C.
§ 1254(1).

CONSTITUTIONAL PROVISIONS INVOLVED

The Bankruptcy Clause of the U.S. Constitution

provides, in relevant part, “The Congress shall have
 5

Power . . . [t]o establish . . . uniform Laws on the sub-

ject of Bankruptcies throughout the United States;
. . . .” U.S. Const. art. I, § 8, cl. 4.

The Takings Clause of the Fifth Amendment pro-

vides: “[N]or shall private property be taken for public
use, without just compensation.” U.S. Const. amend.
V.

STATEMENT OF THE CASE

1. Congress enacted PROMESA in 2016 to ad-

dress what it deemed a “fiscal emergency” in Puerto
Rico stemming from the Commonwealth’s massive
debt and inability to provide basic essential services.
48 U.S.C. § 2194(m)(1). PROMESA established the
Financial Oversight and Management Board for
Puerto Rico (the “Board”) and tasked it with develop-
ing a method for the Commonwealth “to achieve fiscal
responsibility and access to the capital markets.” Id.
§ 2121(a). Under Title III of PROMESA, the Board is
authorized to commence debt-restructuring cases on
behalf of the Commonwealth and its covered instru-
mentalities. See id. § 2164(a).

In May 2017, the Board filed a Title III debt-re-

structuring case on the Commonwealth’s behalf. Fol-
lowing years of protracted negotiations and litigation,
the Board filed a plan of adjustment (the “Plan”) in
November 2021 that proposed to reduce the Common-
wealth’s debt by 80%, saving more than $50 billion in
debt-service payments and addressing nearly $55 bil-
lion in unfunded pension liabilities.
 6

2. Respondents are claimants who asserted claims

for just compensation based on alleged takings of their
property by the Commonwealth before its Title III
case. Those claims arose either from eminent-domain
proceedings under Puerto Rico’s “quick take” statute,
32 L.P.R.A. § 2907, or from inverse-condemnation pro-
ceedings. Eminent-domain claims are partially se-
cured by monies deposited by the Commonwealth
with the Puerto Rico Court of First Instance pursuant
to 32 L.P.R.A. § 2907. Inverse-condemnation claims
are not secured by any specific property.

Under the proposed Plan, eminent-domain claims

would have received full recovery of the funds depos-
ited in their favor to the extent the claims are secured.
Otherwise, the claims would have been discharged
and treated the same as other general unsecured
claims. Inverse-condemnation claims similarly would
have been discharged and treated as general unse-
cured claims.

3. Respondents objected to confirmation of the

Plan, arguing that the Takings Clause mandates full
payment of claims for just compensation notwith-
standing the subsequent filing of a bankruptcy case.
In response, the Board proffered authority from this
Court limiting the Takings Clause’s protections in
bankruptcy to secured interests in specific property.
The Board argued that unsecured just-compensation
claims are dischargeable in the same way as any other
damages claim, as every circuit to consider the issue
has ruled.
 7

4. In a December 2021 order, the Title III court

held that Respondents’ claims were non-dischargea-
ble because “the constitution itself mandates a rem-
edy of ‘just compensation’” for a taking. App. 376a.
The court therefore directed the Board either to show
cause why confirmation of the Plan should not be de-
nied or revise the Plan to provide full payment for
just-compensation claims. Id. at 384a. In response,
the Board preserved its argument that the Takings
Clause does not preclude the discharge of unsecured
claims for just compensation but nevertheless
amended the Plan to provide full payment for such
claims to comply with the court’s order.

On January 18, 2022, the Title III court confirmed

the Plan. App. 242a–362a. In its findings of fact and
conclusions of law, the court reiterated its determina-
tion that the Takings Clause guarantees a “constitu-
tional right to just compensation” that is non-dis-
chargeable in bankruptcy. Id. at 174a. The Board
timely appealed that ruling.1

5. A panel of the First Circuit affirmed the Ti-

tle III court’s ruling that an unsecured claim for just
compensation arising from a prepetition taking may
not be discharged in bankruptcy. App. 22a–33a. In
the panel’s view, just-compensation claims differ from
all other unsecured damages claims because “the Con-
stitution clearly spells out both a monetary remedy
and even the necessary quantum of compensation
due” for a taking. Id. at 30a. Thus, the panel held, a

1 Various creditors appealed other unrelated aspects of the Title

III court’s order confirming the Commonwealth’s Plan.
 8

taking gives rise to a “constitutional requirement to

pay just compensation” that cannot be “trump[ed]” by
the bankruptcy power. Id. at 23a.

The panel acknowledged that its decision con-

flicted with the Ninth Circuit’s decision in Cobb v. City
of Stockton (In re City of Stockton), 909 F.3d 1256,
1268 (9th Cir. 2018). See App. 30a. Nevertheless, it
found the dissent in Stockton “more persuasive,” and
therefore rejected the Ninth Circuit’s ruling. Id. The
panel further acknowledged that this Court’s bank-
ruptcy cases have found Takings Clause violations
only where the bankruptcy itself effects an uncompen-
sated taking of secured interests in specific property—
not where, as here, a claim arising from a pre-bank-
ruptcy taking is discharged. Id. at 26a–27a. The
panel found this Court’s cases “inapposite,” however,
because they did not address “whether the denial of
just compensation for . . . a taking violates the Fifth
Amendment.” Id. at 27a.

This timely petition for a writ of certiorari fol-

lowed.

REASONS FOR GRANTING THE PETITION

I. THE DECISION BELOW CREATES A CIR-

CUIT SPLIT ON AN ISSUE OF EXCEP-
TIONAL IMPORTANCE.

In ruling that pre-bankruptcy unsecured claims

for just compensation cannot be discharged in bank-
ruptcy, the First Circuit acknowledged that it was cre-
ating a circuit split. App. 30a–31a. The identical
question was presented to the Ninth Circuit in Cobb
 9

v. City of Stockton (In re City of Stockton), 909 F.3d

1256 (9th Cir. 2018), which reached precisely the op-
posite conclusion. The resulting divide is deep and
unbridgeable.

In Stockton, the city of Stockton, California exer-

cised its power of eminent domain to take a portion of
a parcel of land. Id. at 1260–61. The city deposited a
sum with the state treasurer based on the property’s
appraised value, but the landowner’s son (who inher-
ited the parcel) asserted a claim that the deposited
amount did not constitute just compensation. Id. at
1261. While his claim for additional compensation
was pending, the city filed for bankruptcy under
Chapter 9. Id. at 1262. The city’s plan of adjustment
treated and discharged the son’s claim for just com-
pensation. Id. at 1262–63.

The Ninth Circuit affirmed the confirmation of

the plan of adjustment, while rejecting the claimant’s
argument that his claim for just compensation could
not be impaired and discharged in bankruptcy. Id. at
1266. The court reasoned that constitutionally based
claims for money damages, such as § 1983 claims, are
“routinely adjusted” in bankruptcy—as, indeed, they
were in that very case. Id. at 1268. Unsecured claims
for just compensation arising under the Fifth Amend-
ment should be no different. Id. While it acknowl-
edged the general rule that the “bankruptcy power is
subject to the Fifth Amendment,” Louisville Joint
Stock Land Bank v. Radford, 295 U.S. 555 (1935), the
court read Radford to prohibit only a bankruptcy stat-
ute that “compromis[ed] security interests created be-
fore the statute was enacted” and continued to exist
during bankruptcy. Id. Because the taking preceded
 10

Stockton’s bankruptcy, by the time Stockton filed un-

der Chapter 9, the claimant no longer had any prop-
erty interest in the parcel of land. Id. That interest
had been “extinguished long before the bankruptcy
was filed,” when the property was taken by the debtor.
Id. at 1268–69. All that remained was an “unsecured
claim for greater compensation,” which could be ad-
justed in bankruptcy like “other constitutionally
based lawsuits seeking money damages.” Id. at 1268.
Accordingly, the impairment and discharge of his un-
secured claim for just compensation did not violate the
Fifth Amendment. Id. at 1268–69. In a dissenting
opinion, Judge Friedland argued that the claimant
had a “constitutional claim for just compensation”
that must be paid in full “regardless of the bankruptcy
laws.” Id. at 1270–71 (Friedland, J., dissenting).

The First Circuit expressly rejected both Stock-

ton’s holding and its reasoning, openly siding with the
Stockton dissent over the majority. App. 30a & n.7.2
The First Circuit spurned Stockton’s analogy to § 1983
actions because in the case of the Takings Clause, the
Constitution spells out “both a monetary remedy and
even the necessary quantum of compensation due,”
hence (it believed) the denial of just compensation was
constitutionally prohibited. Id. at 30a. It also re-
buffed the idea that “just compensation” could mean
anything besides “full compensation.” Id. at 22a n.4.
And where the Ninth Circuit understood Radford as

2 Significantly, the dissent contended that the creditor still

owned the property taken during the bankruptcy and that its
taking claim arose during the bankruptcy, Stockton, 909 F.3d at
1273 (Friedland, J., dissenting), which renders the dissent sup-
portive of Petitioner’s position here.
 11

laying down only a general principle regarding protec-

tions of secured interests in bankruptcy, the First Cir-
cuit considered it to apply in all cases. Id. at 23a–24a.
In short, the split between the decisions runs deep and
reaches first principles. There is no reason to think
that further percolation within either circuit will nar-
row the divide or yield some reconciliation.

The decision below further conflicts with the

Eighth Circuit’s decision in Poinsett Lumber Mfg. v.
Drainage Dist. No. 7, 119 F.2d 270 (8th Cir. 1941).
There, a claimant asserted that its claim for just com-
pensation was “invested with a constitutional sanctity
beyond other forms of liability” that precludes its ad-
justment in bankruptcy. Id. at 272–73. The Eighth
Circuit rejected that argument and held that the
claim for just compensation could be discharged. Id.;
see also id. at 274 (finding the claim “subject to adjust-
ment”). The First Circuit’s decision below clashes
with that holding, too. App. 27a.

Accordingly, as matters stand, the law concerning

the discharge of claims for just compensation varies in
different parts of the country. Such claims are dis-
chargeable in San Francisco and Minneapolis, but not
dischargeable in Boston and San Juan. This Court
should grant certiorari to resolve this circuit split and
ensure the uniformity of bankruptcy law.
 12

II. THE DECISION BELOW IS INCONSISTENT

WITH TWO LINES OF CONSTITUTIONAL
PRECEDENT INVOLVING THE TAKINGS
CLAUSE AND THE BANKRUPTCY POWER.

The First Circuit’s decision collides with estab-

lished precedent from this Court regarding the Tak-
ings and the Bankruptcy Clauses. The premise of the
decision below was that claims for just compensation
are fundamentally different from every other kind of
unsecured claim including unsecured claims arising
under the Constitution. That view cannot be recon-
ciled either with this Court’s decision in Knick v.
Township of Scott, 139 S. Ct. 2162 (2019), and related
cases; nor with long-standing principles of bankruptcy
law that pre-bankruptcy unsecured claims of every
sort may be discharged. The First Circuit’s radical de-
parture from these doctrines will cause confusion and
uncertainty and undermine the law in these areas.

A. The First Circuit’s View of Just Com-

pensation as a Guarantee of Payment
Notwithstanding Bankruptcy Contra-
dicts the Teachings of This Court.

The First Circuit acknowledged that claims for

money damages stemming from constitutional viola-
tions are “routinely” discharged and adjusted in bank-
ruptcy. App. 30a. It contended that the Takings
Clause is different, however, because there “the Con-
stitution clearly spells out both a monetary remedy
and even the necessary quantum of compensation
due.” Id. In the court’s view, unlike suits under
Bivens v. Six Unknown Fed. Narcotics Agents, 403
U.S. 388 (1971), or § 1983, which also seek to enforce
 13

constitutional rights, claims for just compensation

“rest on a provision of the Constitution that mandates
a specific remedy[.]” Id. at 32a (emphasis added). Ac-
cording to the court, allowing the bankruptcy process
to impair the remedy of just compensation for a taking
would be “itself constitutionally prohibited.” Id. at
30a.

That understanding of the Takings Clause and

the just-compensation requirement runs afoul of this
Court’s recent jurisprudence, which teaches that the
term “just compensation” refers to an element of a tak-
ings claim, and only by extension a remedy. Knick
held that a Takings Clause violation occurs as soon as
the government takes property without simultane-
ously paying just compensation—rather than when
the government denies compensation in a post-taking
proceeding. Id. at 2172 (overruling Williamson Cty.
Reg’l Planning Comm’n v. Hamilton Bank of Johnson
City, 473 U.S. 172 (1985)). As Knick put it, the denial
of just compensation at the time of the taking makes
the constitutional violation “complete.” Id. at 2177.
That makes sense because the purpose of the Takings
Clause is principally to “prohibit [the government]
from taking property without paying for it,” not to pro-
vide recompense if the government does. Id. at 2176
(emphasis omitted); id. at 2180 (Thomas, J., concur-
ring) (calling just compensation a “prerequisite” to the
government’s authority to take property for public
use).3

3 Even the dissenting Justices in Knick agreed that the denial of

just compensation is an “element[]” of a Takings Clause viola-
 14

Indeed, Knick showed that historically, money

damages were an alternative remedy and never the
exclusive remedy for a Fifth Amendment taking. See
id. at 2175–76. Until the modern era, property own-
ers typically had no avenue to obtain money damages
for a taking and could seek at most equitable relief to
set aside the taking and restore the property. See id.
Today, most jurisdictions have enacted procedures to
award damages for takings, making equitable relief
unavailable. See id. at 2176. But that does not mean
the Takings Clause requires a damages remedy. The
previous availability of equitable remedies corrobo-
rates that just compensation was originally under-
stood as a “condition precedent” to a taking, not a
guarantee of a specific remedy for a constitutional vi-
olation. See United States v. Russell, 80 U.S. 623, 627
(1871) (“[T]he provision for [just] compensation . . . is
a condition precedent annexed to the right of the gov-
ernment to deprive the owner of his property without
his consent.”); see also Lingle v. Chevron USA Inc., 544
U.S. 528, 536 (2005) (noting that the Takings Clause
“condition[s]” any taking on the provision of just com-
pensation (citation omitted)); Jacobs v. United States,
290 U.S. 13, 17 (1933) (construing the Takings Clause
to require “contemporaneous[]” just compensation).

Thus, the notion that the Takings Clause is some-

how unique because the text itself guarantees a rem-

tion. Id. at 2181 (Kagan, J., dissenting); see also id. at 2184 (de-
scribing the taking and the denial of just compensation as the
“dual elements” of a violation). They simply believed that the
violation is not complete until the government denies just com-
pensation in post-taking proceedings, as this Court had held in
Williamson County, supra.
 15

edy is incorrect. Claims to just compensation for un-

constitutional takings are analogous to claims for
damages under 42 U.S.C. § 1983 to “vindicate federal
constitutional rights,” Butz v. Economou, 438 U.S.
478, 504 (1978), and to those “implied directly under
the Constitution” for certain constitutional violations,
such as unreasonable searches and seizures, see
Bivens, 403 U.S. at 396; Davis v. Passman, 442 U.S.
228, 230 (1979); see generally Egbert v. Boule, 142 S.
Ct. 1793, 1802 (2022) (discussing cases in which “the
Court [has] fashioned new causes of action under the
Constitution” for damages). Ordinarily, claimants
who can establish violations and show injury are enti-
tled to damages under those cases. But in the rare
situation where the defendant is a governmental en-
tity in bankruptcy, the claims may be impaired in
bankruptcy.4

4 For similar reasons, the First Circuit erred in holding that just
compensation is not a “mere monetary obligation that may be
dispensed with by statute.” App. 26a. Just-compensation claims
are routinely modified by operation of law after an uncompen-
sated taking occurs without running afoul of the Fifth Amend-
ment. For example, such claims “can become time-barred just as
any other [constitutional] claim can.” Block v. North Dakota, 461
U.S. 273, 292 (1983). Knick explains why: an uncompensated
taking gives rise to a standard claim for relief—not some kind of
inviolable guarantee—which is subject to modification by statute
the same as “any other claim grounded in the Bill of Rights.” See
139 S. Ct. at 2173.
 16

B. The Decision Below Creates an Unprec-

edented Exception to the Rule that Un-
secured Claims May Be Discharged in
Bankruptcy.

The decision below is the first ever by a circuit

court to hold that the Constitution forbids the dis-
charge of a class of unsecured claims. Centuries of
bankruptcy precedent recognized that any pre-bank-
ruptcy unsecured claim can be discharged in bank-
ruptcy unless excepted by statute or a plan of reorgan-
ization. Now, claims for just compensation in the
First Circuit stand alone among pre-bankruptcy unse-
cured claims as uniquely non-dischargeable.

In reaching its decision, the court below latched

onto this Court’s statement that “[t]he bankruptcy
power . . . is subject to the Fifth Amendment.” App.
23a (quoting United States v. Sec. Indus. Bank, 459
U.S. 70, 75 (1982), and Radford, 295 U.S. at 589). But
that statement was made in cases involving a com-
pletely different issue—namely, a discharge of a claim
secured during bankruptcy by specific property. See
Sec. Indus. Bank, 459 U.S. at 74 (construing statute
that would destroy lien on personal property); Rad-
ford, 295 U.S. at 601 (Frazier-Lemke Act of 1934 ef-
fected a taking by substantially impairing a mortga-
gee’s security interest). Here, the only claims being
discharged are pre-bankruptcy unsecured rights to
payment untethered to any present specific property
interest. The Fifth Amendment has no application in
such a situation, where no specific property right is
impaired.
 17

As a general matter, the Takings Clause protects

only interests in specific property. E. Enters. v. Apfel,
524 U.S. 498, 541–42 (1998) (Kennedy, J., concurring
in the judgment and dissenting in part) (collecting
cases illustrating this “constant limitation”)5; see also
Keystone Bituminous Coal Ass’n v. DeBenedictis, 480
U.S. 470, 495 (1987) (explaining that the inquiry un-
der the Takings Clause “must be conducted with re-
spect to specific property” (citation omitted)). As a re-
sult, the “destruction of an existing obligation[] must
relate to a specific property interest to implicate the
Takings Clause.” E. Enters., 524 U.S. at 544 (Ken-

5 In Eastern Enterprises, the plaintiff challenged a statute that

imposed retroactive payment obligations as effectuating an un-
constitutional taking of its money. See 524 U.S. at 514–15 (ma-
jority opinion). A four-Justice plurality found a Takings Clause
violation, id. at 528–29, but five Justices, including Justice Ken-
nedy’s concurrence and four dissenters, deemed the Takings
Clause inapplicable because no specific property interest was at
issue, id. at 541 (Kennedy, J., concurring) (examining whether a
“specific property right or interest [was] at stake”); id. at 554
(Breyer, J., joined by Stevens, Souter, and Ginsburg, JJ., dissent-
ing) (“The ‘private property’ upon which the [Takings] Clause
traditionally has focused is a specific interest in physical or in-
tellectual property.”). Justice Kennedy’s discussion of specific
property interests is thus “controlling.” Koontz v. St. Johns River
Water Mgmt. Dist., 570 U.S. 595, 623 (2013) (Kagan, J., dissent-
ing); see also Ballinger v. City of Oakland, 24 F.4th 1287, 1295
(9th Cir. 2022) (noting that “‘all circuits that have addressed the
issue’ of the precedential value of Eastern Enterprises ‘have uni-
formly found that a taking does not occur when the statute in
question . . . does not affect a specific interest in property’” (cita-
tion omitted)).
 18

nedy, J., concurring). Otherwise, virtually “all gov-

ernmental action” would be constitutionally suspect.
Id. at 543.

This Court long ago recognized the “fundamen-

tal[]” difference in bankruptcy between “the position
of a secured creditor, who has rights in specific prop-
erty,” and “that of an unsecured creditor, who has
none.” Radford, 295 U.S. at 588. That is because the
exercise of the bankruptcy power is “subject to” the
Fifth Amendment’s protection of specific property in-
terests. Id. at 589. Thus, while “Congress may dis-
charge the debtor’s personal obligation,” it is con-
strained from using the bankruptcy power to “tak[e]
. . . substantive rights in specific property.” Id. at
589–90.

In Kuehner v. Irving Trust Co., the Court reiter-

ated that the Fifth Amendment prohibits the impair-
ment in bankruptcy of a “property right in[] the
debtor’s assets” but not of the debtor’s personal obli-
gations. 299 U.S. 445, 451–52 (1937). And in Security
Industrial Bank, the Court observed that a creditor’s
right to repayment of a debt is “quite different” from
a property right in specific collateral of the debtor.
459 U.S. at 75. Only when the bankruptcy power is
“used to defeat traditional property interests” in such
collateral does a taking of “property within the prohi-
bition of the Fifth Amendment” occur. Id.6

6 The Courts of Appeals are in accord that the Takings Clause

prohibits the impairment and discharge of only secured interests
in specific property. See, e.g., Americredit Fin. Servs. v. Nichols
(In re Nichols), 440 F.3d 850, 854 (6th Cir. 2006) (explaining that
 19

In Wright v. Union Central Life Insurance Co., to

show that bankruptcy law can constitutionally affect
property rights, this Court pointed out that valid pay-
ments the debtor makes to creditors under state law
before bankruptcy are taken away by the bankruptcy
law. 304 U.S. 502, 517 (1938). The creditors losing
the moneys are not and cannot be paid just compen-
sation because that would undermine the bankruptcy
power’s whole purpose of promoting equitable distri-
butions of a debtor’s property. This is an inherent
bankruptcy power, just like the discharge at issue
here, that existed hundreds of years before the Con-
stitution. The First Circuit dismissed this showing
that this Court acknowledged the bankruptcy power
can take property, describing it as a “hypothetical
challenge[].” App. 27a.

The ruling below that the Takings Clause immun-

izes pre-bankruptcy unsecured just-compensation
claims from discharge runs contrary to all that au-
thority. The Takings Clause merely constrains the
bankruptcy power from effectuating a deprivation of
secured interests in specific property during bank-
ruptcy. But here, the bankruptcy power is not being
used in a way that takes any specific property. To the

the Takings Clause protects only a “property right . . . in the col-

lateral that secures the debt”); Bank of N.Y. v. Treco (In re Treco),
240 F.3d 148, 161 (2d Cir. 2001) (“If the claim is unsecured, it is
not ‘property’ for purposes of the Takings Clause.”); Lend Lease
v. Briggs Transp. Co. (In re Briggs Transp. Co.), 780 F.2d 1339,
1342 (8th Cir. 1985) (finding no unconstitutional taking absent
impairment of “substantive rights in specific property”); In re
Quanta Res. Corp., 739 F.2d 912, 922 n.11 (3d Cir. 1984) (“The
rights of a secured creditor in the debtor’s assets are ‘property’
subject to a ‘taking.’”).
 20

contrary, any alleged taking of Respondents’ property

indisputably occurred well before the Common-
wealth’s Title III case. Respondents now possess only
an unsecured right to payment of just compensation
for those prepetition takings lacking a nexus to spe-
cific property.7 Under those circumstances, the Com-
monwealth’s obligation to pay those Respondents can
be discharged without offending the Fifth Amend-
ment.

The court below found Radford and its progeny

“inapposite” because they address only “whether a
bankruptcy law has effected a taking of property,” not
“whether the denial of just compensation for such a
taking violates the Fifth Amendment.” App. 27a.
That is precisely the point: This Court has never sug-
gested that the discharge of a just-compensation claim
or any other unsecured claim violated the Fifth
Amendment because there is no conflict between the
Fifth Amendment’s creation of a claim and the bank-
ruptcy power’s restructuring of a claim.

C. The Decision Below Runs Counter to

Established Bankruptcy Practice and
Will Lead to Anomalous Outcomes.

The decision below is not only contrary to this

Court’s Takings jurisprudence, but it also will yield
illogical results. For example, it rewards unlawful
takings while penalizing lawful takings. A govern-
ment is liable under the Takings Clause to pay just

7 To the extent some Respondents’ claims are partially secured

by funds deposited at the Commonwealth Court of First In-
stance, those claims will be paid in full under the Plan.
 21

compensation only if it exercises legal authority when

it takes private property. United States v. N. Am.
Transp. & Trading Co., 253 U.S. 330, 333 (1920). Oth-
erwise, a taking necessarily lacks legal effect and is
“not compensable under the Fifth Amendment, but is
a claim sounding in tort.” Hawkins v. Hall, 453 F.
App’x 208, 211 (3d Cir. 2011) (citation omitted); see
also Dimare Fresh, Inc. v. United States, 808 F.3d
1301, 1308–09 (Fed. Cir. 2015).

Accordingly, if a municipality unlawfully took a

painting to display it in a city museum, it would not
be liable under the Takings Clause to pay just com-
pensation but instead would have liability under the
tort of conversion. See Mac’Avoy v. Smithsonian Inst.,
757 F. Supp. 60, 70 (D.D.C. 1991) (allegation that mu-
seum wrongfully took plaintiffs’ paintings not a tak-
ing because it is wrongful). Such tort liability can be
discharged in bankruptcy like any other tort liability.
But, under the First Circuit’s ruling, if the municipal-
ity went through all the necessary procedures to take
the painting for public use in accordance with govern-
ing law, the claim against the government would be
non-dischargeable. The First Circuit’s ruling, there-
fore, rewards unlawful takings by a government—i.e.,
state-law claims for conversion of private property—
while punishing takings following the applicable emi-
nent-domain laws.

By mandating full payment of pre-bankruptcy un-

secured damage claims arising from violations of the
Takings Clause, the decision below also necessitates
that insolvent governments surrender resources they
simply do not have. In Puerto Rico, the extra $300
million is coming out of money otherwise devoted to
 22

public services. In effect, the decision attempts to

“draw blood from a stone.” Till v. SCS Credit Corp.,
541 U.S. 465, 493 (2004) (Scalia, J., dissenting). And
it has that effect even though, outside bankruptcy, un-
secured claimholders have only “paper rights” to as-
sert claims for payment from a distressed govern-
ment, along with countless competing creditors seek-
ing satisfaction from a limited pot. See Faitoute Iron
& Steel Co. v. Asbury Park, 316 U.S. 502, 514 (1942).
There is no sound reason for bankruptcy to “realize
paper values” that, outside bankruptcy, would be
worth far less because of a distressed government’s
limited resources. See id.

III. WHETHER JUST-COMPENSATION

CLAIMS MAY BE DISCHARGED CARRIES
ENORMOUS FINANCIAL CONSEQUENCES
FOR GOVERNMENTAL BANKRUPTCIES.

The split among the circuits concerning whether

claims for just compensation are dischargeable is not
a mere academic disagreement. The resolution of that
question will have significant implications not only for
the Commonwealth’s Title III case but for municipal
bankruptcies generally.

In this case alone, the allocation of hundreds of

millions of dollars turns on whether unsecured claims
for just compensation can be discharged. By ruling
that such claims are not dischargeable, the First Cir-
cuit diverted over $300 million to claimants that oth-
erwise would have been available to the Common-
wealth government to provide essential public ser-
vices to its residents. That diversion will significantly
impede the Commonwealth’s fiscal recovery.
 23

The dischargeablity of just-compensation claims

is an important issue in the other Title III cases in
Puerto Rico, too. Takings claims totaling tens of mil-
lions of dollars have already been submitted in the re-
structuring cases of other Title III debtors, including
the Puerto Rico Highways and Transportation Au-
thority and the Puerto Rico Electric Power Authority.
The decision below requires those claims to be paid in
full, which will make it much more difficult for those
Title III debtors to successfully restructure their
debts.

The discharge issue also has tremendous im-

portance outside Puerto Rico. The number of munici-
pal bankruptcies is increasing each year, with more
than 170 of such cases having been filed over the past
two decades.8 Claims for just compensation represent
a significant share of the total claims in many of those
cases. Unless this Court resolves the split created by
the decision below, many municipal debtors (including
those within the First Circuit and any other jurisdic-
tion that follows the decision below) may find them-
selves unable to restructure their debts.

What’s more, the decision below will multiply lit-

igation in municipal bankruptcies by encouraging
claimholders to recast their claims as “takings” that
are immunized from discharge by the Fifth Amend-
ment. That concern is not hypothetical. In the Title
III case below, there has been significant litigation
over whether claims for fraud or breach of contract

8 See https://www.statista.com/statistics/1118479/bankruptcy-
filings-us-chapter-9-municipality/ (last accessed Sept. 13, 2022)
 24

qualify as “takings” requiring payment in full. See,

e.g., Appeal No. 22-1048 (1st Cir.); Appeal No. 22-1092
(1st Cir.). Municipal debtors and courts throughout
the country would benefit from a bright-line rule that
pre-bankruptcy unsecured claims for just compensa-
tion are dischargeable, just like every other type of un-
secured claim not specifically excepted from discharge
by a statute or a restructuring plan.

CONCLUSION

For the foregoing reasons, the Court should grant

certiorari to review the decision of the court of appeals
below.

October 17, 2022 Respectfully submitted,

MARTIN J. BIENENSTOCK
Counsel of Record
MARK D. HARRIS
EHUD BARAK
SHILOH RAINWATER
JOSHUA A. ESSES
PROSKAUER ROSE LLP
Eleven Times Square
New York, NY 10036
(212) 969-3000 (voice)
(212) 969-2900 (fax)
mbienenstock@proskauer.com
 25

TIMOTHY W. MUNGOVAN
JOHN E. ROBERTS
ELLIOT R. STEVENS
PROSKAUER ROSE LLP
One International Place
Boston, MA 02110
(617) 526-9600 (voice)
(617) 526-9899 (fax)

Attorneys for Petitioner

APPENDIX
 1a

APPENDIX A — Appendix
OPINIONAOF THE UNITED
STATES COURT OF APPEALS FOR THE
FIRST CIRCUIT, FILED JULY 18, 2022
UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
No. 22-1119

IN RE: THE FINANCIAL OVERSIGHT AND

MANAGEMENT BOARD FOR PUERTO RICO, AS
REPRESENTATIVE FOR THE COMMONWEALTH
OF PUERTO RICO; THE FINANCIAL OVERSIGHT
AND MANAGEMENT BOARD FOR PUERTO
RICO, AS REPRESENTATIVE FOR THE PUERTO
RICO SALES TAX FINANCING CORPORATION,
A/K/A COFINA; THE FINANCIAL OVERSIGHT
AND MANAGEMENT BOARD FOR PUERTO
RICO, AS REPRESENTATIVE FOR THE
EMPLOYEES RETIREMENT SYSTEM OF THE
GOVERNMENT OF THE COMMONWEALTH OF
PUERTO RICO; THE FINANCIAL OVERSIGHT
AND MANAGEMENT BOARD FOR PUERTO
RICO, AS REPRESENTATIVE FOR THE PUERTO
RICO HIGHWAYS AND TRANSPORTATION
AUTHORITY; THE FINANCIAL OVERSIGHT
AND MANAGEMENT BOARD FOR PUERTO
RICO, AS REPRESENTATIVE FOR THE
PUERTO RICO ELECTRIC POWER AUTHORITY
(PREPA); THE FINANCIAL OVERSIGHT AND
MANAGEMENT BOARD FOR PUERTO RICO,
AS REPRESENTATIVE OF THE PUERTO RICO
PUBLIC BUILDINGS AUTHORITY,
Debtors,
 2a

Appendix A

THE FINANCIAL OVERSIGHT AND

MANAGEMENT BOARD FOR PUERTO RICO, AS
REPRESENTATIVE FOR THE COMMONWEALTH
OF PUERTO RICO; THE FINANCIAL OVERSIGHT
AND MANAGEMENT BOARD FOR PUERTO RICO,
AS REPRESENTATIVE OF THE PUERTO RICO
PUBLIC BUILDINGS AUTHORITY,

Debtors, Appellees, Cross-Appellants,

THE FINANCIAL OVERSIGHT AND

MANAGEMENT BOARD FOR PUERTO RICO,
AS REPRESENTATIVE FOR THE EMPLOYEES
RETIREMENT SYSTEM OF THE GOVERNMENT
OF THE COMMONWEALTH OF PUERTO RICO,

Debtor, Appellee,
v.

COOPERATIVA DE AHORRO Y CREDITO

ABRAHAM ROSA; COOPERATIVA DE AHORRO
Y CREDITO DE CIALES; COOPERATIVA
DE AHORRO Y CREDITO DE JUANA DIAZ;
COOPERATIVA DE AHORRO Y CREDITO DE
RINCON; COOPERATIVA DE AHORRO Y CREDITO
DE VEGA ALTA; COOPERATIVA DE AHORRO Y
CREDITO DR. MANUEL ZENO GANDIA,

Objectors, Appellants, Cross-Appellees,

SUIZA DAIRY CORP.,

Objector, Claimant, Appellant, Cross-Appellee,

 3a

Appendix A

LUIS F. PABON BOSQUES; RAUL MARTINEZ

PEREZ; ELVIN A. ROSADO MORALES; CARLOS
A. ROJAS ROSARIO; RAFAEL TORRES RAMOS,

Creditors, Appellants, Cross-Appellees,

DESARROLLADORA ORAMA, S.E.; C.O.D. TIRE

DISTRIBUTORS IMPORTS ASIA, INC.; CORREA
TIRE DISTRIBUTOR INC.; WORLD WIDE TIRE,
INC.; SEQUERIA TRADING CORPORATION;
SABATIER TIRE CENTER, INC.; VICTOR
LOPEZ CORTES, INC.; MULTI GOMAS, INC.;
JOSE COLLAZO PEREZ; IVELISSE TAVARES
MARRERO; MANUEL PEREZ ORTIZ; CORAL
COVE, INC.; SUCESION ANGEL ALVAREZ
PEREZ; ANTONIO COLON SANTIAGO;
COOPERATIVA DE AHORRO Y CREDITO DE
AGUADA; VILMA TERESA TORRES LOPEZ;
VIVIANA ORTIZ MERCADO; ORLANDO TORRES
BERRIOS; GERMAN TORRES BERRIOS; JUAN
ALBERTO TORRES BERRIOS; VHERMANOS
TORRES TORRES, INC.; CORPORACION
PLAYA INDIA, S.E.; MARIANO RAMOS
GONZALEZ; RAMON MORAN LOUBRIEL;
RAFAEL MORAN LOUBRIEL; ANA MORAN
LOUBRIEL; SAN GERONIMO CARIBE PROJECT,
INC.; CARIBBEAN AIRPORT FACILITIES
INC.; ESTATE OF RAUL DE PEDRO & DIANA
MARTINEZ; ALFONSO FERNANDEZ CRUZ; SUN
AND SAND INVESTMENTS, CORP.; FDR1500,
CORP.; MARGARETA BLONDET; SUCESION
COMPUESTO POR MARIA I. RUBERT BLONDET;
 4a

Appendix A

SONIA RUBERT BLONDET; MARGARITA

RUBERT BLONDET; SONIA RUBERT,
ADMINISTRADORA; MANUEL A. RIVERA-
SANTOS; JORGE RIVERA-SANTOS; CARLOS
MANUEL RIVERA-SANTOS; PABLO MELENDEZ
BRULLA; SUCESION AGUSTIN RODRIGUEZ
COLON; GLORIA M. ESTEVA MARQUES;
SUCESION MANUEL MARTINEZ RODRIGUEZ;
LUIS REYES FEIKERT; JORGE RAMON POZAS;
MIRIAM SANCHEZ LEBRON; JUAN A. TAPIA
ORTIZ; ANTONIO PEREZ COLON,

Claimants, Appellees,

PFZ PROPERTIES, INC.; OSCAR ADOLFO

MANDRY APARICIO; MARIA DEL CARMEN
AMALIA MANDRY LLOMBART; SELMA
VERONICA MANDRY LLOMBART; MARIA DEL
CARMEN LLOMBART BAS; OSCAR ADOLFO
MANDRY BONILLA; GUSTAVO ALEJANDRO
MANDRY BONILLA; YVELISE HELENA
FINGERHUT MANDRY; MARGARET ANN
FINGERHUT MANDRY; VICTOR ROBERT
FINGERHUT MANDRY; JUAN CARLOS ESTEVA
FINGERHUT; PEDRO MIGUEL ESTEVA
FINGERHUT; MARIANO JAVIER MCCONNIE
FINGERHUT; JANICE MARIE MCCONNIE
FINGERHUT; VICTOR MICHAEL FINGERHUT
COCHRAN; MICHELLE ELAINE FINGERHUT
COCHRAN; ROSA ESTELA MERCADO GUZMAN;
EDUARDO JOSE MANDRY MERCADO;
SALVADOR RAFAEL MANDRY MERCADO;
 5a

Appendix A

MARGARITA ROSA MANDRY MERCADO;

ADRIAN ROBERTO MANDRY MERCADO;
VICENTE PEREZ ACEVEDO; CORPORACION
MARCARIBE INVESTMENT; DEMETRIO
AMADOR INC.; DEMETRIO AMADOR ROBERTS;
MARUZ REAL ESTATE CORP.; LORTU-TA LTD.,
INC.; LA CUARTEROLA, INC.; JUAZA, INC.;
CONJUGAL PARTNERSHIP ZALDUONDO-
MACHICOTE; FRANK E. TORRES RODRIGUEZ;
EVA TORRES RODRIGUEZ; FINCA MATILDE,
INC.; JORGE RAFAEL EDUARDO COLLAZO
QUINONES,

Objectors, Claimants, Appellees,

ANTONIO MARTIN CERVERA; MARIA TERESITA

MARTIN; WANDA ORTIZ SANTIAGO; NANCY I.
NEGRON-LOPEZ; GROUP WAGE CREDITORS;
YASHEI ROSARIO; ANA A. NUNEZ VELAZQUEZ;
EDGARDO MARQUEZ LIZARDI; MARIA M. ORTIZ
MORALES; ARTHUR SAMODOVITZ; MIGUEL
LUNA DE JESUS; ISMAEL L. PURCELL SOLER;
ALYS COLLAZO BOUGEOIS; MILDRED BATISTA
DE LEON; JAVIER ALEJANDRINO OSORIO;
SERVICE EMPLOYEES INTERNATIONAL
UNION (SEIU); INTERNATIONAL UNION,
UNITED AUTOMOBILE, AEROSPACE AND
AGRICULTURAL IMPLEMENT WORKERS OF
AMERICA; MAPFRE PRAICO INSURANCE
COMPANY; CERTAIN CREDITORS WHO FILED
ACTIONS IN THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF PUERTO RICO;
 6a

Appendix A

MED CENTRO, INC., F/K/A CONSEJO DE SALUD

DE LA COMUNIDAD DE LA PLAYA DE PONCE,
INC.; ASOCIACION DE JUBILADOS DE LA
JUDICATURA DE PUERTO RICO; HON. HECTOR
URGELL CUEBAS; COOPERATIVA DE AHORRO
Y CREDITO VEGABAJENA; UNIVERSITY OF
PUERTO RICO RETIREMENT SYSTEM TRUST;
PETER C. HEIN; MIRIAM E. LIMA COLON;
BETZAIDA FELICIANO CONCEPCION; ANGEL
L. MENDEZ GONZALEZ; ASOCIACION DE
MAESTROS PUERTO RICO; ASOCIACION DE
MAESTROS DE PUERTO RICO-LOCAL SINDICAL;
MORGAN STANLEY & CO. LLC; GOLDMAN
SACHS & CO. LLC; J.P. MORGAN SECURITIES
LLC; SANTANDER SECURITIES LLC; SIDLEY
AUSTIN LLP; BMO CAPITAL MARKETS GKST,
INC.; CITIGROUP GLOBAL MARKETS INC.;
SAMUEL A. RAMIREZ & CO., INC.; MESIROW
FINANCIAL, INC.; MERRILL LYNCH, PIERCE,
FENNER & SMITH INC.; MERRILL LYNCH
CAPITAL SERVICES, INC.; BARCLAYS CAPITAL
INC.; RBC CAPITAL MARKETS, LLC; RAYMOND
JAMES & ASSOCIATES, INC.; COMMUNITY
HEALTH FOUNDATION OF P.R. INC.; QUEST
DIAGNOSTICS OF PUERTO RICO, INC.; U.S. BANK
TRUST NATIONAL ASSOCIATION, AS TRUSTEE
FOR THE PRPFC OUTSTANDING BONDS AND
PRIFA BONDS, AND FISCAL AGENT FOR PRPBA
BONDS; U.S. BANK NATIONAL ASSOCIATION,
AS TRUSTEE FOR THE PRPFC OUTSTANDING
BONDS AND PRIFA BONDS, AND FISCAL AGENT
FOR PRPBA BONDS; NILSA CANDELARIO; EL
OJO DE AGUA DEVELOPMENT, INC.; PEDRO
 7a

Appendix A

JOSE NAZARIO SERRANO; JOEL RIVERA

MORALES; MARIA DE LOURDES GOMEZ PEREZ;
HECTOR CRUZ VILLANUEVA; LOURDES
RODRIGUEZ; LUIS M. JORDAN RIVERA;
TACONIC CAPITAL ADVISORS LP; AURELIUS
CAPITAL MANAGEMENT, LP; CANYON CAPITAL
ADVISORS LLC; FIRST BALLANTYNE LLC;
MOORE CAPITAL MANAGEMENT, LP; PUERTO
RICO FISCAL AGENCY AND FINANCIAL
ADVISORY AUTHORITY; HON. PEDRO R.
PIERLUISI URRUTIA; UNITED STATES, ON
BEHALF OF THE INTERNAL REVENUE
SERVICE; ASOCIACION PUERTORRIQUENA
DE LA JUDICATURA, INC.; FEDERACION DE
MAESTROS DE PUERTO RICO, INC.; GRUPO
MAGISTERIAL EDUCADORES(AS) POR LA
DEMOCRACIA, UNIDAD, CAMBIO, MILITANCIA
Y ORGANIZACION SINDICAL, INC.; UNION
NACIONAL DE EDUCADORES Y TRABAJADORES
DE LA EDUCACION, INC.; MARIA A. CLEMENTE
ROSA; JOSE N. TIRADO GARCIA, AS PRESIDENT
OF THE UNITED FIREFIGHTERS UNION OF
PUERTO RICO,

Objectors, Appellees,

VAQUERIA TRES MONJITAS, INC.; BLACKROCK

FINANCIAL MANAGEMENT, INC.; EMSO ASSET
MANAGEMENT LIMITED; MASON CAPITAL
MANAGEMENT, LLC; SILVER POINT CAPITAL,
L.P.; VR ADVISORY SERVICES, LTD; AURELIUS
CAPITAL MANAGEMENT, LP, ON BEHALF
OF ITS MANAGED ENTITIES; GOLDENTREE
 8a

Appendix A

ASSET MANAGEMENT LP, ON BEHALF OF

FUNDS UNDER MANAGEMENT; WHITEBOX
ADVISORS LLC, ON BEHALF OF FUNDS UNDER
MANAGEMENT; MONARCH ALTERNATIVE
CAPITAL LP, ON BEHALF OF FUNDS
UNDER MANAGEMENT; TACONIC CAPITAL
ADVISORS L.P., ON BEHALF OF FUNDS UNDER
MANAGEMENT; ARISTEIA CAPITAL, LLC, ON
BEHALF OF FUNDS UNDER MANAGEMENT;
FARMSTEAD CAPITAL MANAGEMENT, LLC, ON
BEHALF OF FUNDS UNDER MANAGEMENT;
FOUNDATION CREDIT, ON BEHALF OF FUNDS
UNDER MANAGEMENT; CANYON CAPITAL
ADVISORS LLC, IN ITS CAPACITY AS A MEMBER
OF THE QTCB NOTEHOLDER GROUP; DAVIDSON
KEMPNER CAPITAL MANAGEMENT LP, IN
ITS CAPACITY AS A MEMBER OF THE QTCB
NOTEHOLDER GROUP; SCULPTOR CAPITAL
LP, IN ITS CAPACITY AS A MEMBER OF THE
QTCB NOTEHOLDER GROUP; SCULPTOR
CAPITAL II LP, IN ITS CAPACITY AS A MEMBER
OF THE QTCB NOTEHOLDER GROUP; AMBAC
ASSURANCE CORPORATION; ANDALUSIAN
GLOBAL DESIGNATED ACTIVITY COMPANY;
CROWN MANAGED ACCOUNTS, FOR AND ON
BEHALF OF CROWN/PW SP; LMA SPC, FOR
AND ON BEHALF OF MAP 98 SEGREGATED
PORTFOLIO; MASON CAPITAL MASTER FUND
LP; OAKTREE-FORREST MULTISTRATEGY,
LLC (SERIES B); OAKTREE OPPORTUNITIES
FUND IX, L.P.; OAKTREE OPPORTUNITIES
FUND IX (PARALLEL), L.P.; OAKTREE
OPPORTUNITIES FUND IX (PARALLEL 2), L.P.;
 9a

Appendix A

OAKTREE HUNTINGTON INVESTMENT FUND

II, L.P.; OAKTREE OPPORTUNITIES FUND
X, L.P.; OAKTREE OPPORTUNITIES FUND X
(PARALLEL), L.P.; OAKTREE OPPORTUNITIES
FUND X (PARALLEL 2), L.P.; OAKTREE VALUE
OPPORTUNITIES FUND HOLDINGS, L.P.;
OCEANA MASTER FUND LTD.; OCHER ROSE,
L.L.C.; PENTWATER MERGER ARBITRAGE
MASTER FUND LTD.; PWCM MASTER FUND
LTD.; REDWOOD MASTER FUND, LTD.;
BANK OF NEW YORK MELLON; OFFICIAL
COMMITTEE OF UNSECURED CREDITORS;
ASSURED GUARANTY CORP.; ASSURED
GUARANTY MUNICIPAL CORP.; OFFICIAL
COMMITTEE OF RETIRED EMPLOYEES;
NATIONAL PUBLIC FINANCE GUARANTEE
CORP.; FINANCIAL GUARANTY INSURANCE
COMPANY; AMERINATIONAL COMMUNITY
SERVICES, LLC, AS SERVICER FOR THE GDB
DEBT RECOVERY AUTHORITY; CANTOR-KATZ
COLLATERAL MONITOR LLC, AS COLLATERAL
MONITOR FOR THE GDB DEBT RECOVERY
AUTHORITY; ATLANTIC MEDICAL CENTER,
INC.; CAMUY HEALTH SERVICES, INC.; CENTRO
DE SALUD FAMILIAR DR. JULIO PALMIERI
FERRI, INC.; CIALES PRIMARY HEALTH CARE
SERVICES, INC.; CORP. DE SERV. MEDICOS
PRIMARIOS Y PREVENCION DE HATILLO,
INC.; COSTA SALUD, INC.; CENTRO DE SALUD
DE LARES, INC.; CENTRO DE SERVICIOS
PRIMARIOS DE SALUD DE PATILLAS, INC.;
HOSPITAL GENERAL CASTANER, INC.; GNMA
& US GOVERNMENT TARGET MATURITY FUND
 10a

Appendix A

FOR PUERTO RICO RESIDENTS, INC., F/K/A

PUERTO RICO GNMA & U.S. GOVERNMENT
TARGET MATURITY FUND, INC.; MORTGAGE-
BACKED & US GOVERNMENT SECURITIES
FUND FOR PUERTO RICO RESIDENTS, INC.,
F/K/A PUERTO RICO MORTGAGE-BACKED &
U.S. GOVERNMENT SECURITIES FUND, INC.;
PUERTO RICO RESIDENTS BOND FUND I,
F/K/A PUERTO RICO INVESTORS BOND FUND
I; PUERTO RICO RESIDENTS TAX-FREE FUND,
INC., F/K/A PUERTO RICO INVESTORS TAX-
FREE FUND, INC.; PUERTO RICO RESIDENTS
TAX-FREE FUND II, INC., F/K/A PUERTO RICO
INVESTORS TAX-FREE FUND II, INC.; PUERTO
RICO RESIDENTS TAX-FREE FUND III, INC.,
F/K/A PUERTO RICO INVESTORS TAX-FREE
FUND III, INC.; PUERTO RICO RESIDENTS
TAX-FREE FUND IV, INC., F/K/A PUERTO RICO
INVESTORS TAX-FREE FUND IV, INC.; PUERTO
RICO RESIDENTS TAX-FREE FUND V, INC.,
F/K/A PUERTO RICO INVESTORS TAX-FREE
FUND V, INC.; PUERTO RICO RESIDENTS TAX-
FREE FUND VI, INC., F/K/A PUERTO RICO
INVESTORS TAX-FREE FUND VI, INC.; TAX-
FREE FIXED INCOME FUND FOR PUERTO RICO
RESIDENTS, INC., F/K/A PUERTO RICO FIXED
INCOME FUND, INC.; TAX-FREE FIXED INCOME
FUND II FOR PUERTO RICO RESIDENTS, INC.,
F/K/A PUERTO RICO FIXED INCOME FUND
II, INC.; TAX-FREE FIXED INCOME FUND III
FOR PUERTO RICO RESIDENTS, INC., F/K/A
PUERTO RICO FIXED INCOME FUND III, INC.;
TAX-FREE FIXED INCOME FUND IV FOR
 11a

Appendix A

PUERTO RICO RESIDENTS, INC., F/K/A PUERTO

RICO FIXED INCOME FUND IV, INC.; TAX-
FREE FIXED INCOME FUND V FOR PUERTO
RICO RESIDENTS, INC., F/K/A PUERTO RICO
FIXED INCOME FUND V, INC.; TAX-FREE
FIXED INCOME FUND VI FOR PUERTO RICO
RESIDENTS, INC., F/K/A PUERTO RICO FIXED
INCOME FUND VI, INC.; TAX FREE FUND FOR
PUERTO RICO RESIDENTS, INC., F/K/A TAX-
FREE PUERTO RICO FUND, INC.; TAX FREE
FUND II FOR PUERTO RICO RESIDENTS,
INC., F/K/A TAX-FREE PUERTO RICO FUND
II, INC.; TAX-FREE HIGH GRADE PORTFOLIO
BOND FUND FOR PUERTO RICO RESIDENTS,
INC., F/K/A PUERTO RICO AAA PORTFOLIO
BOND FUND, INC.; TAX-FREE HIGH GRADE
PORTFOLIO BOND FUND II FOR PUERTO RICO
RESIDENTS, INC., F/K/A PUERTO RICO AAA
PORTFOLIO BOND FUND II, INC.; TAX-FREE
HIGH GRADE PORTFOLIO TARGET MATURITY
FUND FOR PUERTO RICO RESIDENTS,
INC., F/K/A PUERTO RICO AAA PORTFOLIO
TARGET MATURITY FUND, INC.; TAX FREE
TARGET MATURITY FUND FOR PUERTO RICO
RESIDENTS, INC., F/K/A TAX-FREE PUERTO
RICO TARGET MATURITY FUND, INC.; UBS
IRA SELECT GROWTH & INCOME PUERTO
RICO FUND; SERVICIOS INTEGRALES EN LA
MONTANA (SIM),
Creditors, Appellees,
UNITED STATES,
Respondent, Appellee.
 12a

Appendix A

APPEAL FROM THE UNITED STATES DISTRICT

COURT FOR THE DISTRICT OF PUERTO RICO
[Hon. Laura Taylor Swain,* U.S. District Judge]

Before
Thompson, Howard, and Kayatta, Circuit Judges.

July 18, 2022

K AYATTA, Circuit Judge. This appeal raises

important questions about the interplay between the
power to equitably restructure debts in bankruptcy and
the Constitution’s requirement that just compensation be
paid whenever the government takes private property
for public use. It arises against the backdrop of perhaps
the largest and most consequential public bankruptcy in
the nation’s history: the years-long effort to adjust the
sovereign debt of the Commonwealth of Puerto Rico under
Title III of the Puerto Rico Oversight, Management,
and Economic Stability Act. Earlier this year, the court
charged with overseeing the Title III proceedings
confirmed a plan of adjustment for the debts of the
Commonwealth and two of its instrumentalities. Several
stakeholders brought different, but contemporaneously
argued, appeals challenging various aspects of the court’s
order confirming that plan.

* Of the Southern Distr ict of New York, sitting by

designation.
 13a

Appendix A

In this instance, we consider the appeal of the

Financial Oversight and Management Board of Puerto
Rico (the “Board”), which serves as the representative of
the debtor in the Title III proceedings. The Board takes
issue with the Title III court’s conclusion that claimants
owed just compensation for takings of real property by
the debtors are entitled to receive such payments in full.
The Board proposes, instead, to treat claims for just
compensation that arose prior to the commencement of
the bankruptcy proceedings largely as general unsecured
claims, subject to payment at potentially a fraction of what
the taken property was worth. For the following reasons,
we agree with the Title III court and hold that otherwise
valid Fifth Amendment takings claims arising prepetition
cannot be discharged in Title III bankruptcy proceedings
without payment of just compensation.

I.

We assume some familiarity with the lengthy factual

background and circumstances surrounding the fiscal
crisis in Puerto Rico and Congress’s subsequent decision
to enact the Puerto Rico Oversight, Management, and
Economic Stability Act, 48 U.S.C. § 2101 et seq., known
commonly as PROMESA. A more detailed account of that
history has been described in several of our prior opinions
pertaining to PROMESA. See, e.g., In re Fin. Oversight
& Mgmt. Bd. for P.R., 32 F.4th 67, 74-75 (1st Cir. 2022);
In re Fin. Oversight & Mgmt. Bd. for P.R., 916 F.3d 98,
103-04 (1st Cir. 2019). We repeat now only the essential
details relevant to this appeal.
 14a

Appendix A

As we have explained previously, PROMESA “created

in Title III a modified version of the municipal bankruptcy
code for territories and their instrumentalities,” which
“authorized the Board to place the Commonwealth and its
instrumentalities into bankruptcy proceedings.” In re Fin.
Oversight & Mgmt. Bd. for P.R., 32 F.4th at 75. Pursuant
to Title III, the Board stands in as the representative
of the debtors and is tasked with, among other things,
proposing and modifying a plan of adjustment for the
debtor. See 48 U.S.C. § 2175; see also id. §§ 2172-73. A
plan of adjustment under PROMESA, like the more
typical Chapter 11 plan of reorganization, designates
classes of claims to be adjusted and specifies treatments
for any class of claims that is impaired. See id. § 2161(a)
(incorporating section 1123(a)(1) and (3) of the Bankruptcy
Code into Title III). PROMESA provides that the Title III
court shall confirm a plan of adjustment if it meets certain
conditions, including that “the debtor is not prohibited
by law from taking any action necessary to carry out the
plan.” Id. § 2174(b)(3).

Beginning in 2017, the Board filed a series of petitions

under Title III to commence proceedings to restructure
the debts of the Commonwealth and a number of its
instrumentalities. After nearly five years of extensive
mediation, negotiation, and litigation involving a vast array
of stakeholders, the Board proposed a plan of adjustment
for the Commonwealth and two of its instrumentalities
(the Employees Retirement System and the Puerto Rico
Buildings Authority).

In the lead up to the plan’s development, several

groups of creditors (the “takings claimants”) filed proofs
 15a

Appendix A

of claim with the Title III court seeking just compensation

for alleged prepetition takings of their private property by
the Commonwealth. Their claims arose in two contexts.
One set of claims -- the “eminent domain claims” --
resulted from proceedings initiated by the Commonwealth
under its “quick take” eminent domain statute. See P.R.
Laws Ann. tit. 32, § 2907. That statute permits the
Commonwealth to acquire private property through
eminent domain by depositing an estimated compensation
amount with the Puerto Rico court of first instance. If
the owner of the taken property regards the deposit as
insufficient, the owner may seek a court determination
of just compensation. Should just compensation exceed
the amount of the deposit, the Commonwealth must pay
the difference. A second set of claims -- the “inverse
condemnation claims” -- arose out of takings in which the
Commonwealth allegedly curtailed an owner’s property
right without first tendering a deposit. In such instances,
the owner may simply sue the Commonwealth for payment
in full of just compensation after the physical taking
has occurred. Although eminent domain and inverse
condemnation claims (collectively, the “takings claims”)
differ procedurally, as relevant to this appeal, each seeks
just compensation for an alleged government taking that
occurred prior to the initiation of the Commonwealth’s
bankruptcy proceedings (i.e., prepetition).

An earlier version of the plan of adjustment submitted

by the Board (the fifth modified eighth amended version)
proposed to treat these takings claims in the following
way. First, for eminent domain claims, the plan proposed
to treat any amounts held on deposit with the court of
 16a

Appendix A

first instance as secured claims entitled to full recovery.

The plan proposed to treat any claims for amounts in
excess of the deposited funds -- i.e., any additional claimed
amount owed to the property owner to provide full just
compensation for the taking -- as general unsecured claims
entitled to be paid out at a pro-rata share of the overall
recovery for general unsecured creditors. Second, for
inverse condemnation claims, the plan proposed to treat
such claims entirely as general unsecured claims.

Various claimants with takings claims objected to

this earlier version of the plan on the grounds that the
Fifth Amendment prohibits the impairment of any valid
takings claim unless just compensation is paid to the
holder of the claim. Accordingly, they argued that the
plan could not be confirmed unless their eminent domain
and inverse condemnation claims were satisfied in full.
The Title III court agreed, concluding that it could not
confirm the then-proposed plan because impairing the
takings claims would violate the Fifth Amendment. See
48 U.S.C. § 2174(b)(3)) (allowing plan confirmation only if
“the debtor is not prohibited by law from taking any action
necessary to carry out the plan”). The Title III court then
directed the Board to modify the plan of adjustment to
provide for full payment of any valid eminent domain and
inverse condemnation claims if the Board wished to make
the plan confirmable.1

1.  The Title III court did not purport to decide the quantum
of just compensation owed to any particular takings claimant,
concluding only that the Fifth Amendment prohibits a plan of
adjustment from providing less than just compensation for allowed
takings claims through impairment or discharge in bankruptcy. See
 17a

Appendix A

The Board, while claiming to preserve its right to

appeal, obliged by filing the current (and operative) version
of the plan, which the Title III court promptly confirmed.
The plan provides for full payment of the takings claims,
to the extent they are ultimately allowed, subject to the
proviso that:

in the event that [the Board] appeals from

the . . . Title III Court’s ruling that Allowed
Eminent Domain / Inverse Condemnation
Claims must be paid in full or otherwise be
rendered unimpaired pursuant to the Plan,
. . . such appeal is successful, and . . . a Final
Order is entered holding that Allowed Eminent
Domain/Inverse Condemnation Claims may be
impaired, . . . each holder of an Allowed Eminent
Domain/Inverse Condemnation Claim shall be
entitled to receive . . . payments [consistent with
the treatment provided for general unsecured
claims].

Several creditors appealed various other aspects of

the Title III court’s order confirming the plan that are
unrelated to the present appeal. The Board, in turn,
cross-appealed the portion of the court’s order pertaining
to the treatment of the eminent domain and inverse
condemnation claims. We consolidated the Board’s cross-
appeal with other pending appeals of the confirmation

In re Fin. Oversight & Mgmt. Bd. for P.R., 637 B.R. 223, 298 n.42
(D.P.R. 2022). Our opinion should not be construed as speaking to how
much (or even whether) just compensation is due to any particular
claimant.
 18a

Appendix A

order for the purposes of oral argument and ordered

expedited briefing. We now address in this opinion only
the Board’s cross-appeal challenging the ruling of the Title
III court that the Fifth Amendment precludes the plan
from impairing prepetition claims for just compensation
that arise under the Takings Clause. 2 We review the Title
III court’s legal conclusions de novo and factual findings
for clear error. See In re Fin. Oversight & Mgmt. Bd. for
P.R., 32 F.4th at 76. 3

II.

As an initial matter, we consider whether we (and

the Title III court) can or should avoid addressing the
Fifth Amendment question at all. The United States,
as intervenor, invites us to read the Title III court’s
conclusion that the takings claims are not dischargeable as
an exercise of the court’s equitable powers under section
944(c)(1) of the Bankruptcy Code and not as a holding on
an issue of constitutional law. Section 944(c)(1) -- which

2.  One set of appellants, cross-appellees -- a group of credit

unions -- contends that we lack jurisdiction to consider the Board’s
appeal because it would have no practical effect on the confirmed plan
of adjustment as the plan provides for full payment of the takings
claims and would therefore result in an advisory opinion from this
court. However, as we explained, the plan expressly provides for
such full payment only if the Title III court’s ruling on the takings
claims is upheld on appeal. Accordingly, we have no doubt that a live
controversy exists.
3.  No party contests the Board’s claim that it preserved its
right to appeal the Title III court’s order holding that the plan need
be modified on this matter to be confirmed.
 19a

Appendix A

is incorporated into Title III of PROMESA by 48 U.S.C.

§ 2161(a) -- provides that “[t]he debtor is not discharged
. . . from any debt . . . excepted from discharge by the
plan or order confirming the plan.” 11 U.S.C. § 944(c)(1).
Because the Fifth Amendment question is complex, and
one of first impression for this circuit, the United States
suggests that we might sidestep the constitutional issue
by interpreting the Title III court’s confirmation order as
categorically exempting takings claims from discharge as
an exercise of discretion under section 944(c)(1).

The record is clear, though, that the Title III court

did not exempt takings claims from impairment in its
confirmation order as a matter of discretion. Rather,
the court found that the Board’s previously proposed
treatment of the takings claims did not “comport with the
requirements of the Takings Clause” and would therefore
compel the Commonwealth to take actions prohibited
by law. In re Fin. Oversight & Mgmt. Bd. for P.R., 637
B.R. 223, 292 (D.P.R. 2022). This in turn would violate
PROMESA’s mandate that a plan be confirmed only if
“the debtor is not prohibited by law from taking any action
necessary to carry out the plan.” 48 U.S.C. § 2174(b)(3).
In the Title III court’s view, the plan of adjustment thus
only became confirmable after the Board modified it to
provide for full payment of the takings claims.

Accordingly, we read the Title III court’s ruling to say

precisely what it appears to say: that discharging valid,
prepetition takings claims for less than just compensation
would violate the Fifth Amendment and render a plan
providing for such discharge unconfirmable under
 20a

Appendix A

PROMESA. Our conclusion is reinforced by the fact that

the Title III court never once mentioned section 944(c)
(1) or purported to exercise any authority under that
provision in its confirmation order. Cf. In re Fin. Oversight
& Mgmt. Bd. for P.R., No. 17-BK-3283, 2021 U.S. Dist.
LEXIS 254163, 2021 WL 7162427, at *11 (D.P.R. Dec. 27,
2021) (addressing expressly the Title III court’s power to
exempt certain claims from discharge under section 944(c)
(1) and concluding in a separate adversary proceeding that
a group of creditors were not entitled to such exception).

One might nevertheless posit that if the Title III

court did not exercise any discretion under section 944(c)
(1), it erred by declining to do so and choosing to address
the constitutional question instead. Hence, perhaps
we ourselves might avoid tackling the knotty Fifth
Amendment issue by vacating the ruling and remanding
the matter to the Title III court to do what it clearly did
not do: decide whether to reject the Board’s proposed
treatment of the takings claims by relying on what the
United States asserts is within the court’s “discretion.”
But such an approach would simply lead us around
the barn and back. To exempt the takings claims from
discharge, the Title III court would have to have a reason
for exercising its discretion in that manner. Cf. Darden
v. Ill. Bell Tel. Co., 797 F.2d 497, 502 (7th Cir. 1986) (“[A]
decision made in the absence of a basis is an abuse of
discretion.”); Schwarz v. Folloder, 767 F.2d 125, 133 (5th
Cir. 1985) (explaining that “[w]here a district court fails
to explain its decision,” the reviewing court does “not
know whether the decision was within the bounds of its
discretion or was based on an erroneous legal theory”).
And the only possible reason one can glean from the
 21a

Appendix A

record is the court’s statement that the Fifth Amendment

precludes the Board’s proposed treatment.

Moreover, we question the premise underlying the

United States’ argument that section 944(c)(1) authorizes
a court to reject a plan of adjustment merely because
confirmation would require the court to determine
whether the plan is lawful. Section 944(c)(1) contains no
express grant of any discretion. Rather, it simply confirms
a general rule that debts are not discharged except as
provided by a plan or confirmation order. We need look
elsewhere in the statute to see whether and when a
plan or order may discharge a debt. In so doing, we find
section 2174(b)(3) in Title III. That section conditions plan
confirmation on a finding that the debtor “is not prohibited
by law from taking any action” -- such as discharging
a debt -- “necessary to carry out the plan.” 48 U.S.C.
§ 2174(b)(3). It does not preclude confirmation merely
because it requires the court to determine whether the
proposed action is lawful. It is therefore unsurprising that
the only federal court to expressly invoke section 944(c)(1)
to exempt takings claims from discharge explicitly held
that discharging prepetition claims for just compensation
in bankruptcy would violate the Fifth Amendment; that
is, it effectively answered the constitutional question the
United States would have us avoid here. See In re City of
Detroit, 524 B.R. 147, 268-70 (Bankr. E.D. Mich. 2014).

Thus, while we appreciate the wisdom of declining to

venture into a constitutional thicket when the resolution
of an independent issue would present a clearer path, we
see no such opportunity to do so here.
 22a

Appendix A

III.

Satisfied that we must answer the constitutional

question presented by this appeal, we move on to assessing
whether the Fifth Amendment precludes the impairment
or discharge of prepetition claims for just compensation
in Title III bankruptcy. For the following reasons, we
conclude that it does.

For purposes of this appeal, all parties agree that the

Commonwealth (or one of the instrumentalities governed
by the plan) took private property from at least some of
the takings claimants before petitioning for relief under
Title III. All parties also assume that a factfinder could
reasonably determine that the claimants have not yet
received just compensation despite their requests for
such.4 The Board’s position, reduced to its nub, is that,
by reorganizing in bankruptcy, the debtors can eliminate
their obligation to pay just compensation and instead pay
only reduced amounts based on a formula applicable to
most unsecured creditors.

4.  As the Supreme Court has explained, “just compensation”

is “the full monetary equivalent of the property taken”; that is,
“[t]he owner is to be put in the same position monetarily as he
would have occupied if his property had not been taken.” Almota
Farmers Elevator & Warehouse Co. v. United States, 409 U.S. 470,
473-74, 93 S. Ct. 791, 35 L. Ed. 2d 1 (1973) (quoting United States v.
Reynolds, 397 U.S. 14, 16, 90 S. Ct. 803, 25 L. Ed. 2d 12 (1970)); see
also United States v. 125.2 Acres of Land, More or Less, Situated
In Town & Cnty. of Nantucket, 732 F.2d 239, 244 (1st Cir. 1984) (“It
is well settled that just compensation under the fifth amendment is
fair market value as of the date of the taking.”).
 23a

Appendix A

To support this assertion, the Board points first to the

fact that bankruptcy laws themselves claim an express
toehold in the text of the Constitution: Clause 4 of Article
I, Section 8, expressly authorizes Congress to establish
“uniform Laws on the subject of Bankruptcies.” But most
laws can claim a toehold in the Constitution’s text. Indeed,
Article I expressly grants Congress the power to do a
great many things, including to collect taxes, to regulate
commerce, and so on. See U.S. Const. art. I, § 8. The Board
does not claim -- nor could it reasonably claim -- that any
laws enacted pursuant to such powers would trump the
constitutional requirement to pay just compensation for
taken property merely by nature of their mention in the
Constitution. Otherwise, Congress might largely do away
with the requirement to pay just compensation altogether.

We must therefore consider the relationship between

the Takings Clause and the bankruptcy laws. And on
that point, the Supreme Court has been very clear: The
bankruptcy laws are subordinate to the Takings Clause.
See United States v. Sec. Indus. Bank, 459 U.S. 70, 75,
103 S. Ct. 407, 74 L. Ed. 2d 235 (1982) (“The bankruptcy
power is subject to the Fifth Amendment’s prohibition
against taking private property without compensation.”);
Louisville Joint Stock Land Bank v. Radford, 295 U.S.
555, 589, 55 S. Ct. 854, 79 L. Ed. 1593 (1935) (“The
bankruptcy power, like the other great substantive
powers of Congress, is subject to the Fifth Amendment.”).
Accordingly, although the Constitution grants Congress
the express authority to enact “uniform Laws on the
subject of Bankruptcies,” U.S. Const. art. I, § 8, cl. 4, those
laws are not categorically exempt from the requirements
 24a

Appendix A

of the Fifth Amendment (any more than they are exempt

from, for example, the First Amendment).

The Board’s fallback argument proffers a narrow

view of the Takings Clause itself as not including a
requirement to pay just compensation so long as such a
claim for payment arose prior to the start of bankruptcy
proceedings. That position rests on two key propositions:
first, that the Fifth Amendment prohibits in bankruptcy
only the impairment of rights in specific property held
at the time of filing, not the impairment of unsecured
prepetition claims for money; and second, that despite the
express invocation of “just compensation” in the Takings
Clause, a claim for just compensation is the same as any
other claim for monetary compensation resulting from a
constitutional violation. We take each of these propositions
in turn.

A.

The Board first contends that the Takings Clause

protects only rights to specific property held at the time
the debtor petitions for relief in bankruptcy. Because
the takings claimants no longer possessed any such
property rights by the time the Title III proceedings
began, the Board asserts that the takings claimants now
merely possess unsecured claims for money, which may
be adjusted in bankruptcy without issue.

To support its position, the Board points us to

language in the Supreme Court’s opinion in Knick v.
Township of Scott, which held that a Takings Clause claim
 25a

Appendix A

“arises at the time of the taking, regardless of post-taking

remedies that may be available to the property owner.”
139 S. Ct 2162, 2170, 204 L. Ed. 2d 558 (2019). Knick
rejected an interpretation of the Fifth Amendment from
an earlier Supreme Court case finding that a Takings
Clause violation does not ripen until just compensation
is denied and requiring a property owner to exhaust
state procedures for obtaining compensation for a taking
before suing in federal court, see Williamson Cnty. Reg’l
Plan. Comm’n v. Hamilton Bank of Johnson City, 473
U.S. 172, 194-95, 105 S. Ct. 3108, 87 L. Ed. 2d 126 (1985).
See Knick, 139 S. Ct. at 2170-75 (overruling Williamson
County). The Board seizes on this portion of Knick to
press its view that a Takings Clause violation is keyed
only on the actual taking of property rather than on any
subsequent denial of just compensation. And because the
takings at issue here all occurred prepetition, the Board
contends, any constitutional violation would have arisen
only at the time of the taking. The Board would thus have
us understand just compensation as an entitlement to
payment that is untethered from the substantive Takings
Clause violation itself.

The Boa rd over reads Knick . Knick rejected

Williamson County’s conclusion that a Takings Clause
claim vests only after a property owner is denied just
compensation and held instead that a Fifth Amendment
violation occurs “as soon as a government takes . . .
property for public use without paying for it.” Id. at 2170.
But nothing in Knick’s holding casts doubt on the Fifth
Amendment’s requirement that just compensation be
paid. Recognizing that the “right to full compensation
 26a

Appendix A

arises at the time of the taking,” id., does not imply that
the subsequent denial of that compensation does not also
raise Fifth Amendment concerns. We decline to read
Knick as changing the Fifth Amendment right to receive
just compensation into a mere monetary obligation that
may be dispensed with by statute.

Next, the Board provides examples of instances

in which the Takings Clause has not required the full
payment of unsecured prepetition claims for money that
are unconnected to secured rights in specific property.
In particular, the Board relies on language in Kuehner
v. Irving Trust Co. explaining that the Fifth Amendment
“does not prohibit bankruptcy legislation affecting the
creditor’s remedy for [the] enforcement [of a contract
for payments] against the debtor’s assets.” 299 U.S.
445, 452, 57 S. Ct. 298, 81 L. Ed. 340 (1937). Kuehner
involved a statute that capped the amount a landlord
could recover from a debtor-tenant in bankruptcy for lost
rent. Landlords argued that that the law worked a taking
of their property in violation of the Fifth Amendment
because it “partially destroy[ed] [their] remedy for
enforcement of [their] contract[s].” Id. at 450. The Supreme
Court rejected this argument, noting that, with respect
to the bankruptcy power, there is “a significant difference
between a property interest and a contract since the
Constitution does not forbid impairment of the obligation
of the latter.” Id. at 452. The Board urges us to read
Kuehner and a set of lower court cases as standing for the
proposition that the Fifth Amendment only protects rights
in specific property and not unsecured claims for money.
See, e.g., In re Nichols, 440 F.3d 850, 854 (6th Cir. 2006)
(distinguishing between property rights and contractual
 27a

Appendix A

rights to payment); In re Treco, 240 F.3d 148, 161 (2d Cir.

2001) (noting that “[i]f the claim is unsecured, it is not
‘property’ for purposes of the Takings Clause”).

These cases, however, are inapposite. They speak

only to the question of whether a bankruptcy law has
effected a taking of property at all. That is, there was
a question of whether a taking had even occurred. But,
as we have explained, the issue on appeal here is not
whether a taking has occurred -- no one disputes that
the government engaged in prepetition takings of some
property -- the relevant question is whether the denial
of just compensation for such a taking violates the Fifth
Amendment. Thus, Kuehner and the other cases the Board
cites are only relevant if we assume that claims for just
compensation are the same as any contractual claim for
payments due, which begs the very question raised by this
appeal. Cases that involve no impairment in bankruptcy
of claims for just compensation shed no useful light on
the Board’s contention that Fifth Amendment protection
applies only to rights in “specific property.”

Along a similar vein, the Board also points to

provisions in the Bankruptcy Code that permit debtors
to sometimes avoid full payment of otherwise valid
obligations, including certain property-based interests.
See, e.g., 11 U.S.C. § 547 (allowing a trustee to avoid
certain transfers of interests in property of the debtor).
The Board implies that prohibiting a debtor from escaping
full payment of the takings claims here raises serious
constitutional questions about these other provisions of
the Bankruptcy Code. But these hypothetical challenges
involve questions not present in this appeal, including
 28a

Appendix A

whether the specific provisions work a taking at all and

whether any creditor failed to receive just compensation.
Unless a provision prevented the full payment of a claim
for just compensation, it would not implicate the issues
we decide here. 5

Accordingly, we are not persuaded that the Fifth

Amendment should be read to permit the impairment of
prepetition claims for just compensation simply because
the claimants no longer possess rights in the taken
property postpetition.

B.

We turn next to the Board’s contention that nothing

about a claim for just compensation makes it any different
for bankruptcy purposes than a claim for money damages
for any other kind of constitutional violation. The Board
argues that because the latter can be adjusted in
bankruptcy without issue,6 so too can the former.

5.  For corresponding reasons, the Board can find no help

for its position in Poinsett Lumber & Mfg. Co. v. Drainage Dist.
No. 7. See 119 F.2d 270 (8th Cir. 1941). That case appears to raise
only a question about whether a reorganization proceeding would
itself work a taking, see id. at 272-73 (relying on Luehrmann v.
Drainage Dist. No. 7, 104 F.2d 696, 702-03 (8th Cir. 1939)), not the
question we consider today: whether an otherwise valid claim for
just compensation may be impaired in bankruptcy.
6.  No party asserts that other claims for monetary compensation
for constitutional violations cannot be impaired or discharged, and
we assume without deciding that such claims may be adjusted in
bankruptcy without violating the Constitution.
 29a

Appendix A

The language and nature of the Takings Clause,

however, suggests to us that just compensation is
different in kind from other monetary remedies. The
Fifth Amendment specifies that “private property” shall
not “be taken for public use, without just compensation.”
U.S. Const. amend. V. Thus, as the Supreme Court has
explained, the Takings Clause “does not prohibit the
taking of private property, but instead places a condition
on the exercise of that power.” First English Evangelical
Lutheran Church of Glendale v. Los Angeles Cnty., 482
U.S. 304, 314, 107 S. Ct. 2378, 96 L. Ed. 2d 250 (1987).
Just compensation then does not serve only as a remedy
for a constitutional wrong; it serves also as a structural
limitation on the government’s very authority to take
private property for public use. As the Court has stated,
“where the government’s activities have already worked
a taking . . . , no subsequent action by the government
can relieve it of the duty to provide compensation.” Id.
at 321. Simply put, the Fifth Amendment contemplates a
“constitutional obligation to pay just compensation.” Id.
at 315 (quoting Armstrong v. United States, 364 U.S. 40,
49, 80 S. Ct. 1563, 4 L. Ed. 2d 1554 (1960)).

This makes the payment of just compensation unlike

most other instances in which the government engages
in a constitutional violation and is required to remedy
that violation by paying money. For instance, nothing in
the Constitution itself specifies any particular remedy
that must be provided when the government engages in
a Fourth Amendment violation. Indeed, absent remedies
provided for by statute or federal common law, there is no
right to monetary relief for most constitutional violations.
 30a

Appendix A

See Egbert v. Boule, 142 S. Ct. 1793, 1802-03, 213 L. Ed.

2d 54 (2022). And because they lack an express basis
in the Constitution, claims under 42 U.S.C. § 1983 for
money damages stemming from constitutional violations
are “routinely adjusted in bankruptcy.” In re City of
Stockton, 909 F.3d 1256, 1268 (9th Cir. 2018). But, in the
case of the Takings Clause, the Constitution clearly spells
out both a monetary remedy and even the necessary
quantum of compensation due. Accordingly, the denial of
adequate (read: just) compensation for a taking is itself
constitutionally prohibited. See First English, 482 U.S.
at 316 (reaffirming the Supreme Court’s “frequently
repeated” view that “in the event of a taking, the
compensation remedy is required by the Constitution”).

In defense of its position, the Board relies chiefly

on the Ninth Circuit’s majority opinion in In re City of
Stockton, which addressed (favorably to the Board’s
position here) a similar question in the context of the
municipal bankruptcy of Stockton, California. See 909
F.3d at 1266. For the reasons stated above, however, we
find the dissenting opinion of Judge Friedland in that case
to be more persuasive. See id. at 1273-79 (Friedland, J.,
dissenting).7 The only other federal court to have squarely
7.  The Board’s principal objection to Judge Friedland’s dissent
is that her opinion cites to reasoning from the since-overruled
Williamson County. But this jab is misplaced. Judge Friedland
invoked Williamson County only in discussing whether the claimant
in City of Stockton “had an outstanding constitutional claim for just
compensation” at all, not in assessing whether such a claim could be
impaired in bankruptcy. 909 F.3d at 1276 (Friedland, J., dissenting).
Judge Friedland’s analysis does not rely on the repudiated proposition
that “no constitutional violation occurs until just compensation has
been denied.” Williamson Cnty., 473 U.S. at 194 n.13.
 31a

Appendix A

addressed the question of whether the Fifth Amendment

prohibits the discharge or impairment of claims for just
compensation in bankruptcy confirms our view that it
does. See In re City of Detroit, 524 B.R. at 269-70.

C.

The Board has three other brief rejoinders meriting

our attention. First, the Board argues that claims for just
compensation are routinely modified by the operation of
law after takings occur, all apparently without offending
the Fifth Amendment. For instance, the Board notes that
just compensation claims can become time-barred without
violating the Fifth Amendment. And the Board explains
that a claim for just compensation may be waived or settled
at less than full value.

In making this argument, however, the Board

conflates what makes the denial of just compensation
substantively unlawful with what may make a claim for just
compensation procedurally inactionable or waivable by the
claimant. A statute of limitations concerns the procedural
bounds in which litigation may proceed; it “plays no role
in ascertaining whether conduct is wrongful,” but “merely
sets the deadline by which a legal challenge to that conduct
need be initiated.” Monsarrat v. Newman, 28 F.4th 314,
319-20 (1st Cir. 2022). Moreover, compliance with a statute
of limitations, along with the choice of whether to waive or
settle a claim, are litigation decisions that a claimant has
control over. The impairment or discharge in bankruptcy
of that claimant’s entitlement to just compensation is
not. And, as to waiver or settlement, no one claims that
 32a

Appendix A

the Title III court’s order bars any such action by the
claimants.

Second, the Board contends that the Takings Clause

is not the only constitutional provision for which the
Constitution itself prescribes a remedy. Specifically,
the Board points to suits brought under Bivens and its
progeny that recognize causes of actions for damages
that are “implied directly under the Constitution.” Davis
v. Passman, 442 U.S. 228, 230, 99 S. Ct. 2264, 60 L. Ed.
2d 846 (1979); see also Bivens v. Six Unknown Named
Agents of Fed. Bureau of Narcotics, 403 U.S. 388, 389,
91 S. Ct. 1999, 29 L. Ed. 2d 619 (1971). And the Board
references actions brought under 42 U.S.C. § 1983, which
provides a statutory remedy for constitutional violations.
But, as we explained above, a claim under the Takings
Clause is different in kind from actions under Bivens
and section 1983. Neither Bivens nor section 1983 rest on
a provision of the Constitution that mandates a specific
remedy in the same way the Takings Clause mandates
just compensation; nor do Bivens or section 1983 prescribe
the quantum of compensation required in the event of a
violation. 8

8.  The Board contends that distinguishing among Takings

Clause claims and other constitutional claims in this way somehow
creates a “hierarchy among[] constitutional rights.” Caplin &
Drysdale, Chartered v. United States, 491 U.S. 617, 628, 109 S. Ct.
2646, 105 L. Ed. 2d 528 (1989). But we do not create a “hierarchy”
of constitutional rights simply by recognizing that such rights are
safeguarded in different ways. All we make clear today is that the
Fifth Amendment itself expressly provides that just compensation
must be paid whenever the government works a taking.
 33a

Appendix A

Finally, the Board marches through a parade of

horribles, suggesting that our ruling will endanger the
ability of municipalities to restructure debt in the future.
These horribles all presume that a substantial portion of
a hypothetical municipality’s debt obligations is unpaid
compensation for takings. In other words, the municipality
apparently owes a considerable amount of money to
property owners for past takings and files for bankruptcy
in the hopes that it may leave the takings in place without
paying anything like just compensation for the property.
On the whole, interpreting the law to create an incentive
to pursue such a gambit strikes us as poor policy and
certainly not a reason to adopt the Board’s position.

Reduced to its nub, the issue we decide is rather

simple. The Fifth Amendment provides that if the
government takes private property, it must pay just
compensation. Because the prior plan proposed by the
Board rejected any obligation by the Commonwealth to
pay just compensation, the Title III court properly found
that the debtor was prohibited by law from carrying out
the plan as proposed. See 48 U.S.C. § 2174(b)(3).

IV.

Accordingly, with respect to the challenges presented

in the Board’s cross-appeal, we affirm the Title III court’s
order confirming the plan.
 34a

Appendix B OF THE UNITED

APPENDIX B — JUDGMENT
STATES COURT OF APPEALS FOR THE FIRST
CIRCUIT, FILED JULY 18, 2022

UNITED STATES COURT OF APPEALS

FOR THE FIRST CIRCUIT

No. 22-1119

IN RE: THE FINANCIAL OVERSIGHT AND

MANAGEMENT BOARD FOR PUERTO RICO, AS
REPRESENTATIVE FOR THE COMMONWEALTH
OF PUERTO RICO; THE FINANCIAL OVERSIGHT
AND MANAGEMENT BOARD FOR PUERTO
RICO, AS REPRESENTATIVE FOR THE PUERTO
RICO SALES TAX FINANCING CORPORATION,
A/K/A COFINA; THE FINANCIAL OVERSIGHT
AND MANAGEMENT BOARD FOR PUERTO
RICO, AS REPRESENTATIVE FOR THE
EMPLOYEES RETIREMENT SYSTEM OF THE
GOVERNMENT OF THE COMMONWEALTH OF
PUERTO RICO; THE FINANCIAL OVERSIGHT
AND MANAGEMENT BOARD FOR PUERTO
RICO, AS REPRESENTATIVE FOR THE PUERTO
RICO HIGHWAYS AND TRANSPORTATION
AUTHORITY; THE FINANCIAL OVERSIGHT
AND MANAGEMENT BOARD FOR PUERTO
RICO, AS REPRESENTATIVE FOR THE
PUERTO RICO ELECTRIC POWER AUTHORITY
(PREPA); THE FINANCIAL OVERSIGHT AND
MANAGEMENT BOARD FOR PUERTO RICO,
AS REPRESENTATIVE OF THE PUERTO RICO
PUBLIC BUILDINGS AUTHORITY,

Debtors,
 35a

Appendix B

THE FINANCIAL OVERSIGHT AND

MANAGEMENT BOARD FOR PUERTO RICO, AS
REPRESENTATIVE FOR THE COMMONWEALTH
OF PUERTO RICO; THE FINANCIAL OVERSIGHT
AND MANAGEMENT BOARD FOR PUERTO RICO,
AS REPRESENTATIVE OF THE PUERTO RICO
PUBLIC BUILDINGS AUTHORITY,

Debtors-Appellees-Cross-Appellants,

THE FINANCIAL OVERSIGHT AND

MANAGEMENT BOARD FOR PUERTO RICO,
AS REPRESENTATIVE FOR THE EMPLOYEES
RETIREMENT SYSTEM OF THE GOVERNMENT
OF THE COMMONWEALTH OF PUERTO RICO,

Debtor-Appellee,

v.

COOPERATIVA DE AHORRO Y CREDITO

ABRAHAM ROSA; COOPERATIVA DE AHORRO
Y CREDITO DE CIALES; COOPERATIVA
DE AHORRO Y CREDITO DE JUANA DIAZ;
COOPERATIVA DE AHORRO Y CREDITO DE
RINCON; COOPERATIVA DE AHORRO Y CREDITO
DE VEGA ALTA; COOPERATIVA DE AHORRO Y
CREDITO DR. MANUEL ZENO GANDIA,

Objectors-Appellants-Cross-Appellees,
 36a

Appendix B

SUIZA DAIRY CORP.,

Objector-Claimant-Appellant-Cross-Appellee,

LUIS F. PABON BOSQUES; RAUL MARTINEZ

PEREZ; ELVIN A. ROSADO MORALES; CARLOS
A. ROJAS ROSARIO; RAFAEL TORRES RAMOS,

Creditors-Appellants-Cross-Appellees,

DESARROLLADORA ORAMA, S.E.; C.O.D. TIRE

DISTRIBUTORS IMPORTS ASIA, INC.; CORREA
TIRE DISTRIBUTOR INC.; WORLD WIDE TIRE,
INC.; SEQUERIA TRADING CORPORATION;
SABATIER TIRE CENTER, INC.; VICTOR
LOPEZ CORTES, INC.; MULTI GOMAS, INC.;
JOSE COLLAZO PEREZ; IVELISSE TAVARES
MARRERO; MANUEL PEREZ ORTIZ; CORAL
COVE, INC.; SUCESION ANGEL ALVAREZ PEREZ;
ANTONIO COLON SANTIAGO; COOPERATIVA
DE AHORRO Y CREDITO DE AGUADA; VILMA
TERESA TORRES LOPEZ; VIVIANA ORTIZ
MERCADO; ORLANDO TORRES BERRIOS;
GERMAN TORRES BERRIOS; JUAN ALBERTO
TORRES BERRIOS; VHERMANOS TORRES
TORRES, INC.; CORPORACION PLAYA INDIA,
S.E.; MARIANO RAMOS GONZALEZ; RAMON
MORAN LOUBRIEL; RAFAEL MORAN LOUBRIEL;
ANA MORAN LOUBRIEL; SAN GERONIMO
CARIBE PROJECT, INC.; CARIBBEAN AIRPORT
FACILITIES INC.; ESTATE OF RAUL DE PEDRO
& DIANA MARTINEZ; ALFONSO FERNANDEZ
 37a

Appendix B

CRUZ; SUN AND SAND INVESTMENTS, CORP.;

FDR1500, CORP.; MARGARETA BLONDET;
SUCESION COMPUESTO POR MARIA I.
RUBERT BLONDET; SONIA RUBERT BLONDET;
MARGARITA RUBERT BLONDET; SONIA
RUBERT, ADMINISTRADORA; MANUEL A.
RIVERA-SANTOS; JORGE RIVERA-SANTOS;
CARLOS MANUEL RIVERA-SANTOS; PABLO
MELENDEZ BRULLA; SUCESION AGUSTIN
RODRIGUEZ COLON; GLORIA M. ESTEVA
MARQUES; SUCESION MANUEL MARTINEZ
RODRIGUEZ; LUIS REYES FEIKERT; JORGE
RAMON POZAS; MIRIAM SANCHEZ LEBRON;
JUAN A. TAPIA ORTIZ; ANTONIO PEREZ COLON,

Claimants-Appellees,

PFZ PROPERTIES, INC.; OSCAR ADOLFO

MANDRY APARICIO; MARIA DEL CARMEN
AMALIA MANDRY LLOMBART; SELMA
VERONICA MANDRY LLOMBART; MARIA DEL
CARMEN LLOMBART BAS; OSCAR ADOLFO
MANDRY BONILLA; GUSTAVO ALEJANDRO
MANDRY BONILLA; YVELISE HELENA
FINGERHUT MANDRY; MARGARET ANN
FINGERHUT MANDRY; VICTOR ROBERT
FINGERHUT MANDRY; JUAN CARLOS ESTEVA
FINGERHUT; PEDRO MIGUEL ESTEVA
FINGERHUT; MARIANO JAVIER MCCONNIE
FINGERHUT; JANICE MARIE MCCONNIE
FINGERHUT; VICTOR MICHAEL FINGERHUT
COCHRAN; MICHELLE ELAINE FINGERHUT
 38a

Appendix B

COCHRAN; ROSA ESTELA MERCADO GUZMAN;

EDUARDO JOSE MANDRY MERCADO; SALVADOR
RAFAEL MANDRY MERCADO; MARGARITA
ROSA MANDRY MERCADO; ADRIAN ROBERTO
MANDRY MERCADO; VICENTE PEREZ
ACEVEDO; CORPORACION MARCARIBE
INVESTMENT; DEMETRIO AMADOR INC.;
DEMETRIO AMADOR ROBERTS; MARUZ REAL
ESTATE CORP.; LORTU-TA LTD., INC.; LA
CUARTEROLA, INC.; JUAZA, INC.; CONJUGAL
PARTNERSHIP ZALDUONDO-MACHICOTE;
FRANK E. TORRES RODRIGUEZ; EVA TORRES
RODRIGUEZ; FINCA MATILDE, INC.; JORGE
RAFAEL EDUARDO COLLAZO QUINONES,

Objectors-Claimants-Appellees,

ANTONIO MARTIN CERVERA; MARIA TERESITA

MARTIN; WANDA ORTIZ SANTIAGO; NANCY I.
NEGRON-LOPEZ; GROUP WAGE CREDITORS;
YASHEI ROSARIO; ANA A. NUNEZ VELAZQUEZ;
EDGARDO MARQUEZ LIZARDI; MARIA M. ORTIZ
MORALES; ARTHUR SAMODOVITZ; MIGUEL
LUNA DE JESUS; ISMAEL L. PURCELL SOLER;
ALYS COLLAZO BOUGEOIS; MILDRED BATISTA
DE LEON; JAVIER ALEJANDRINO OSORIO;
SERVICE EMPLOYEES INTERNATIONAL
UNION (SEIU); INTERNATIONAL UNION,
UNITED AUTOMOBILE, AEROSPACE AND
AGRICULTURAL IMPLEMENT WORKERS OF
AMERICA; MAPFRE PRAICO INSURANCE
COMPANY; CERTAIN CREDITORS WHO FILED
 39a

Appendix B

ACTIONS IN THE UNITED STATES DISTRICT

COURT FOR THE DISTRICT OF PUERTO RICO;
MED CENTRO, INC., F/K/A CONSEJO DE SALUD
DE LA COMUNIDAD DE LA PLAYA DE PONCE,
INC.; ASOCIACION DE JUBILADOS DE LA
JUDICATURA DE PUERTO RICO; HON. HECTOR
URGELL CUEBAS; COOPERATIVA DE AHORRO
Y CREDITO VEGABAJENA; UNIVERSITY OF
PUERTO RICO RETIREMENT SYSTEM TRUST;
PETER C. HEIN; MIRIAM E. LIMA COLON;
BETZAIDA FELICIANO CONCEPCION; ANGEL
L. MENDEZ GONZALEZ; ASOCIACION DE
MAESTROS PUERTO RICO; ASOCIACION DE
MAESTROS DE PUERTO RICO-LOCAL SINDICAL;
MORGAN STANLEY & CO. LLC; GOLDMAN
SACHS & CO. LLC; J.P. MORGAN SECURITIES
LLC; SANTANDER SECURITIES LLC; SIDLEY
AUSTIN LLP; BMO CAPITAL MARKETS GKST,
INC.; CITIGROUP GLOBAL MARKETS INC.;
SAMUEL A. RAMIREZ & CO., INC.; MESIROW
FINANCIAL, INC.; MERRILL LYNCH, PIERCE,
FENNER & SMITH INC.; MERRILL LYNCH
CAPITAL SERVICES, INC.; BARCLAYS CAPITAL
INC.; RBC CAPITAL MARKETS, LLC; RAYMOND
JAMES & ASSOCIATES, INC.; COMMUNITY
HEALTH FOUNDATION OF P.R. INC.; QUEST
DIAGNOSTICS OF PUERTO RICO, INC.; U.S. BANK
TRUST NATIONAL ASSOCIATION, AS TRUSTEE
FOR THE PRPFC OUTSTANDING BONDS AND
PRIFA BONDS, AND FISCAL AGENT FOR PRPBA
BONDS; U.S. BANK NATIONAL ASSOCIATION,
AS TRUSTEE FOR THE PRPFC OUTSTANDING
 40a

Appendix B

BONDS AND PRIFA BONDS, AND FISCAL AGENT

FOR PRPBA BONDS; NILSA CANDELARIO; EL
OJO DE AGUA DEVELOPMENT, INC.; PEDRO
JOSE NAZARIO SERRANO; JOEL RIVERA
MORALES; MARIA DE LOURDES GOMEZ
PEREZ; HECTOR CRUZ VILLANUEVA; LOURDES
RODRIGUEZ; LUIS M. JORDAN RIVERA;
TACONIC CAPITAL ADVISORS LP; AURELIUS
CAPITAL MANAGEMENT, LP; CANYON CAPITAL
ADVISORS LLC; FIRST BALLANTYNE LLC;
MOORE CAPITAL MANAGEMENT, LP; PUERTO
RICO FISCAL AGENCY AND FINANCIAL
ADVISORY AUTHORITY; HON. PEDRO R.
PIERLUISI URRUTIA; UNITED STATES, ON
BEHALF OF THE INTERNAL REVENUE
SERVICE; ASOCIACION PUERTORRIQUENA
DE LA JUDICATURA, INC.; FEDERACION DE
MAESTROS DE PUERTO RICO, INC.; GRUPO
MAGISTERIAL EDUCADORES(AS) POR LA
DEMOCRACIA, UNIDAD, CAMBIO, MILITANCIA
Y ORGANIZACION SINDICAL, INC.; UNION
NACIONAL DE EDUCADORES Y TRABAJADORES
DE LA EDUCACION, INC.; MARIA A. CLEMENTE
ROSA; JOSE N. TIRADO GARCIA, AS PRESIDENT
OF THE UNITED FIREFIGHTERS UNION OF
PUERTO RICO,

Objectors-Appellees,

VAQUERIA TRES MONJITAS, INC.; BLACKROCK

FINANCIAL MANAGEMENT, INC.; EMSO ASSET
MANAGEMENT LIMITED; MASON CAPITAL
 41a

Appendix B

MANAGEMENT, LLC; SILVER POINT CAPITAL,

L.P.; VR ADVISORY SERVICES, LTD; AURELIUS
CAPITAL MANAGEMENT, LP, ON BEHALF
OF ITS MANAGED ENTITIES; GOLDENTREE
ASSET MANAGEMENT LP, ON BEHALF OF
FUNDS UNDER MANAGEMENT; WHITEBOX
ADVISORS LLC, ON BEHALF OF FUNDS UNDER
MANAGEMENT; MONARCH ALTERNATIVE
CAPITAL LP, ON BEHALF OF FUNDS
UNDER MANAGEMENT; TACONIC CAPITAL
ADVISORS L.P., ON BEHALF OF FUNDS UNDER
MANAGEMENT; ARISTEIA CAPITAL, LLC, ON
BEHALF OF FUNDS UNDER MANAGEMENT;
FARMSTEAD CAPITAL MANAGEMENT, LLC, ON
BEHALF OF FUNDS UNDER MANAGEMENT;
FOUNDATION CREDIT, ON BEHALF OF FUNDS
UNDER MANAGEMENT; CANYON CAPITAL
ADVISORS LLC, IN ITS CAPACITY AS A MEMBER
OF THE QTCB NOTEHOLDER GROUP; DAVIDSON
KEMPNER CAPITAL MANAGEMENT LP, IN
ITS CAPACITY AS A MEMBER OF THE QTCB
NOTEHOLDER GROUP; SCULPTOR CAPITAL
LP, IN ITS CAPACITY AS A MEMBER OF THE
QTCB NOTEHOLDER GROUP; SCULPTOR
CAPITAL II LP, IN ITS CAPACITY AS A MEMBER
OF THE QTCB NOTEHOLDER GROUP; AMBAC
ASSURANCE CORPORATION; ANDALUSIAN
GLOBAL DESIGNATED ACTIVITY COMPANY;
CROWN MANAGED ACCOUNTS, FOR AND ON
BEHALF OF CROWN/PW SP; LMA SPC, FOR
AND ON BEHALF OF MAP 98 SEGREGATED
PORTFOLIO; MASON CAPITAL MASTER FUND
 42a

Appendix B

LP; OAKTREE-FORREST MULTI-STRATEGY,

LLC (SERIES B); OAKTREE OPPORTUNITIES
FUND IX, L.P.; OAKTREE OPPORTUNITIES
FUND IX (PARALLEL), L.P.; OAKTREE
OPPORTUNITIES FUND IX (PARALLEL 2), L.P.;
OAKTREE HUNTINGTON INVESTMENT FUND
II, L.P.; OAKTREE OPPORTUNITIES FUND
X, L.P.; OAKTREE OPPORTUNITIES FUND X
(PARALLEL), L.P.; OAKTREE OPPORTUNITIES
FUND X (PARALLEL 2), L.P.; OAKTREE VALUE
OPPORTUNITIES FUND HOLDINGS, L.P.;
OCEANA MASTER FUND LTD.; OCHER ROSE,
L.L.C.; PENTWATER MERGER ARBITRAGE
MASTER FUND LTD.; PWCM MASTER FUND
LTD.; REDWOOD MASTER FUND, LTD.;
BANK OF NEW YORK MELLON; OFFICIAL
COMMITTEE OF UNSECURED CREDITORS;
ASSURED GUARANTY CORP.; ASSURED
GUARANTY MUNICIPAL CORP.; OFFICIAL
COMMITTEE OF RETIRED EMPLOYEES;
NATIONAL PUBLIC FINANCE GUARANTEE
CORP.; FINANCIAL GUARANTY INSURANCE
COMPANY; AMERINATIONAL COMMUNITY
SERVICES, LLC, AS SERVICER FOR THE GDB
DEBT RECOVERY AUTHORITY; CANTOR-KATZ
COLLATERAL MONITOR LLC, AS COLLATERAL
MONITOR FOR THE GDB DEBT RECOVERY
AUTHORITY; ATLANTIC MEDICAL CENTER,
INC.; CAMUY HEALTH SERVICES, INC.; CENTRO
DE SALUD FAMILIAR DR. JULIO PALMIERI
FERRI, INC.; CIALES PRIMARY HEALTH CARE
SERVICES, INC.; CORP. DE SERV. MEDICOS
 43a

Appendix B

PRIMARIOS Y PREVENCION DE HATILLO,

INC.; COSTA SALUD, INC.; CENTRO DE SALUD
DE LARES, INC.; CENTRO DE SERVICIOS
PRIMARIOS DE SALUD DE PATILLAS, INC.;
HOSPITAL GENERAL CASTANER, INC.; GNMA
& US GOVERNMENT TARGET MATURITY FUND
FOR PUERTO RICO RESIDENTS, INC., F/K/A
PUERTO RICO GNMA & U.S. GOVERNMENT
TARGET MATURITY FUND, INC.; MORTGAGE-
BACKED & US GOVERNMENT SECURITIES
FUND FOR PUERTO RICO RESIDENTS, INC.,
F/K/A PUERTO RICO MORTGAGE-BACKED &
U.S. GOVERNMENT SECURITIES FUND, INC.;
PUERTO RICO RESIDENTS BOND FUND I,
F/K/A PUERTO RICO INVESTORS BOND FUND
I; PUERTO RICO RESIDENTS TAX-FREE FUND,
INC., F/K/A PUERTO RICO INVESTORS TAX-
FREE FUND, INC.; PUERTO RICO RESIDENTS
TAX-FREE FUND II, INC., F/K/A PUERTO RICO
INVESTORS TAX-FREE FUND II, INC.; PUERTO
RICO RESIDENTS TAX-FREE FUND III, INC.,
F/K/A PUERTO RICO INVESTORS TAX-FREE
FUND III, INC.; PUERTO RICO RESIDENTS
TAX-FREE FUND IV, INC., F/K/A PUERTO RICO
INVESTORS TAX-FREE FUND IV, INC.; PUERTO
RICO RESIDENTS TAX-FREE FUND V, INC.,
F/K/A PUERTO RICO INVESTORS TAX-FREE
FUND V, INC.; PUERTO RICO RESIDENTS TAX-
FREE FUND VI, INC., F/K/A PUERTO RICO
INVESTORS TAX-FREE FUND VI, INC.; TAX-
FREE FIXED INCOME FUND FOR PUERTO RICO
RESIDENTS, INC., F/K/A PUERTO RICO FIXED
 44a

Appendix B

INCOME FUND, INC.; TAX-FREE FIXED INCOME

FUND II FOR PUERTO RICO RESIDENTS, INC.,
F/K/A PUERTO RICO FIXED INCOME FUND
II, INC.; TAX-FREE FIXED INCOME FUND III
FOR PUERTO RICO RESIDENTS, INC., F/K/A
PUERTO RICO FIXED INCOME FUND III, INC.;
TAX-FREE FIXED INCOME FUND IV FOR
PUERTO RICO RESIDENTS, INC., F/K/A PUERTO
RICO FIXED INCOME FUND IV, INC.; TAX-
FREE FIXED INCOME FUND V FOR PUERTO
RICO RESIDENTS, INC., F/K/A PUERTO RICO
FIXED INCOME FUND V, INC.; TAX-FREE
FIXED INCOME FUND VI FOR PUERTO RICO
RESIDENTS, INC., F/K/A PUERTO RICO FIXED
INCOME FUND VI, INC.; TAX FREE FUND FOR
PUERTO RICO RESIDENTS, INC., F/K/A TAX-
FREE PUERTO RICO FUND, INC.; TAX FREE
FUND II FOR PUERTO RICO RESIDENTS,
INC., F/K/A TAX-FREE PUERTO RICO FUND
II, INC.; TAX-FREE HIGH GRADE PORTFOLIO
BOND FUND FOR PUERTO RICO RESIDENTS,
INC., F/K/A PUERTO RICO AAA PORTFOLIO
BOND FUND, INC.; TAX-FREE HIGH GRADE
PORTFOLIO BOND FUND II FOR PUERTO RICO
RESIDENTS, INC., F/K/A PUERTO RICO AAA
PORTFOLIO BOND FUND II, INC.; TAX-FREE
HIGH GRADE PORTFOLIO TARGET MATURITY
FUND FOR PUERTO RICO RESIDENTS,
INC., F/K/A PUERTO RICO AAA PORTFOLIO
TARGET MATURITY FUND, INC.; TAX FREE
TARGET MATURITY FUND FOR PUERTO RICO
RESIDENTS, INC., F/K/A TAX-FREE PUERTO
 45a

Appendix B

RICO TARGET MATURITY FUND, INC.; UBS

IRA SELECT GROWTH & INCOME PUERTO
RICO FUND; SERVICIOS INTEGRALES EN LA
MONTANA (SIM),

Creditors-Appellees,

UNITED STATES,

Respondent-Appellee.

JUDGMENT

Entered: July 18, 2022

This cause came on to be heard on appeal from the

United States District Court for the District of Puerto
Rico and was argued by counsel.

Upon consideration whereof, it is now here ordered,

adjudged and decreed as follows: The district court’s
decision is affirmed.

By the Court:
Maria R. Hamilton, Clerk
 46a

APPENDIX C —Appendix C OF FACT AND

FINDINGS
CONCLUSIONS OF LAW OF THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT
OF PUERTO RICO, FILED JANUARY 18, 2022
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO

PROMESA

Title III
No. 17 BK 3283-LTS
(Jointly Administered)

IN RE: THE FINANCIAL OVERSIGHT AND

MANAGEMENT BOARD FOR PUERTO RICO, AS
REPRESENTATIVE OF THE COMMONWEALTH
OF PUERTO RICO, et al.,

Debtors.1

1.  The Debtors in these Title III Cases, along with each Debtor’s
respective Title III case number and the last four (4) digits of each
Debtor’s federal tax identification number, as applicable, are the (i)
Commonwealth of Puerto Rico (the “Commonwealth”) (Bankruptcy
Case No. 17-BK-3283-LTS) (Last Four Digits of Federal Tax ID:
3481); (ii) Puerto Rico Sales Tax Financing Corporation (“COFINA”)
(Bankruptcy Case No. 17-BK-3284-LTS) (Last Four Digits of Federal
Tax ID: 8474); (iii) Puerto Rico Highways and Transportation
Authority (“HTA”) (Bankruptcy Case No. 17-BK-3567-LTS) (Last
Four Digits of Federal Tax ID: 3808); (iv) Employees Retirement
System of the Government of the Commonwealth of Puerto Rico
(“ERS”) (Bankruptcy Case No. 17-BK-3566-LTS) (Last Four Digits
of Federal Tax ID: 9686); (v) Puerto Rico Electric Power Authority
(“PREPA”) (Bankruptcy Case No. 17-BK-4780-LTS) (Last Four
Digits of Federal Tax ID: 3747); and (vi) Puerto Rico Public Buildings
Authority (“PBA”) (Bankruptcy Case No. 19-BK-5523-LTS) (Last
 47a

Appendix C

January 18, 2022, Decided

January 18, 2022, Filed

FINDINGS OF FACT AND CONCLUSIONS OF

LAW IN CONNECTION WITH CONFIRMATION
OF THE MODIFIED EIGHTH AMENDED TITLE
III JOINT PLAN OF ADJUSTMENT OF THE
COMMONWEALTH OF PUERTO RICO, THE
EMPLOYEES RETIREMENT SYSTEM OF THE
GOVERNMENT OF THE COMMONWEALTH OF
PUERTO RICO, AND THE PUERTO RICO
PUBLIC BUILDINGS AUTHORITY

LAURA TAYLOR SWAIN,

United States District Judge

The motion of the Financial Oversight and Management

Board for Puerto Rico (the “Oversight Board”) for
confirmation of a proposed Plan of Adjustment for the
Commonwealth of Puerto Rico, the Employees Retirement
System of the Government of the Commonwealth of Puerto
Rico and the Puerto Rico Public Buildings Authority is
now before the Court pursuant to Title III of the Puerto
Rico Oversight, Management, and Economic Stability
Act (“PROMESA”). 2 The Court has jurisdiction of this

Four Digits of Federal Tax ID: 3801) (Title III case numbers are
listed as Bankruptcy Case numbers due to software limitations).

2.  PROMESA is codified at 48 U.S.C. § 2101 et seq. References

to “PROMESA” section numbers in the remainder of this FFCL
(defined below) are to the uncodified version of the legislation, unless
otherwise indicated.
 48a

Appendix C

matter pursuant to section 306(a) of PROMESA. This

Court hereby makes its findings of fact and conclusions
of law, pursuant to Rule 52 of the Federal Rules of Civil
Procedure, as made applicable herein by Federal Rules
of Bankruptcy Procedure 7052 and 9014 and section 310
of PROMESA, with respect to the confirmation motion.

Introduction

In 2017, the Commonwealth of Puerto Rico (the

“Commonwealth”), through the Oversight Board, initiated
unprecedented proceedings pursuant to PROMESA to
restructure the debts of the Commonwealth and certain of
its instrumentalities and to find a path forward for Puerto
Rico, its citizens, and other stakeholders. (See May 22,
2017, Hr’g Tr. 6:9-8:12.) During the pendency of the Title
III cases, Puerto Rico has endured the disastrous effects
of hurricanes, earthquakes, and the COVID-19 pandemic.
These events have not only made day to day life far more
challenging for the residents of Puerto Rico, but they have
exacerbated the financial difficulties of the Commonwealth
and made the already complex circumstances more
challenging for those involved in the resolution of these
Title III cases. Nonetheless, the Oversight Board,
representatives of many creditor constituencies, including
retirees, the government of Puerto Rico and other parties-
in-interest have persevered, with the help and guidance
of an extraordinary team of skilled judicial mediators
(the “Mediation Team”), in working toward a resolution
intended to allow the Commonwealth and two of its
instrumentalities to exit these PROMESA Title III cases.
 49a

Appendix C

Prior Restructurings under PROMESA

On November 7, 2018, this Court approved a qualifying

modification for the Government Development Bank for
Puerto Rico (“GDB”), which restructured approximately
$4.5 billion of claims against GDB (Docket Entry No. 270
in Case No. 18-1561.) On February 4, 2019, this Court
confirmed the Third Amended Title III Plan of Adjustment
of Puerto Rico Sales Tax Financing Corporation, dated
January 9, 2019 (Docket Entry Nos. 5047 and 5048 in Case
No. 17-3283, 3 as amended by Docket Entry Nos. 5053 and
5055 on February 5, 2019), for the Puerto Rico Sales Tax
Financing Corporation (“COFINA”) and approved the
settlement between the Commonwealth and COFINA
(Docket Entry No. 5045). The settlement divides rights
to a significant flow of tax revenues between the two
debtors that were involved in complex litigation regarding
the ownership of such tax revenues. The resolution of
the GDB and COFINA disputes marked important first
steps towards Puerto Rico’s financial recovery, economic
stability, and prosperity.

Proposed Plan of Adjustment for the Commonwealth

of Puerto Rico, the Employees Retirement System
and the Public Buildings Authority

The Debtors have now brought before the Court for

confirmation the Modified Eighth Amended Title III
Joint Plan of Adjustment of the Commonwealth of Puerto

3.  All docket references are to entries in Case No. 17-3283

unless otherwise indicated.
 50a

Appendix C

Rico, et al., dated January 14, 2022 (Docket Entry No.

19784) (as modified pursuant to any revisions made at
or subsequent to the Confirmation Hearing, including
the Plan Supplement, and as may be modified pursuant
to section 313 of PROMESA, the “Plan”). 4 The Plan5
required extraordinary work over the course of several
years to negotiate the terms of various plan support
agreements and resolve disputes arising throughout the
pendency of these Title III Cases. The Mediation Team
has served a critical role in facilitating navigation of
complicated negotiations between parties-in-interest that
have spanned several years and involved complex issues.
In response to requests of this Court, the Mediation Team
has filed certifications of the good faith participation of
parties in confidential negotiations at key points during
these cases. (See, e.g., Docket Entry Nos. 17314 and
18885.) The motion to confirm the Plan before this Court
constitutes a crucial step in the effort to achieve the
economic recovery of the Commonwealth of Puerto Rico
and its instrumentalities.

4.  Capitalized terms used but not defined herein shall have the
meanings given to them in the Plan.

5.  The use of the term “Plan” herein, unless otherwise indicated
by context, refers to the confirmable final version filed at Docket
Entry No. 19784, as described herein. The penultimate version of the
plan, which required final modifications to be confirmable, was filed
as the Modified Eighth Amended Title III Joint Plan of Adjustment
of the Commonwealth of Puerto Rico, et al., dated December 20, 2021
(Docket Entry No. 19568 in Case No. 17-3283) (the “Fifth Modified
Eighth Amended Plan”).
 51a

Appendix C

The Plan has broad but not universal support.

Objections by creditors, and the case put forward by the
Debtors, are discussed in detail in the findings of fact and
conclusion of law that follow (the “Findings of Fact and
Conclusions of Law” or “FFCL”). In addition to formal
filings by parties, the Court has received thousands of
letters and email communications from citizens and others
who live in Puerto Rico and are concerned about Puerto
Rico’s future and their own. Within the past few months in
particular, government workers and retirees have written
with passion and sadness about their anxieties concerning
their ability to support their families and live in a dignified
way in retirement. Many have also protested that the past
government borrowings and the disposition of borrowed
funds were improper and that ordinary citizens should
not have to bear the economic consequences of alleged
past wrongs; many such communications demanded
that the Court order a full audit of the past borrowings
and dispositions before considering any proposed plan
of adjustment. Many of the writers express frustration
with the economic measures developed by the Oversight
Board and also, sadly, express lack of confidence in elected
leaders’ willingness and ability to manage responsibly
the resources that will be available to the government
following the confirmation of a plan of adjustment. They
are understandably concerned about the provision of
services that residents consider essential. Pride in and
concern for the University of Puerto Rico were prominent
features of many of the communications.

In evaluating whether the proposed plan of adjustment

should be confirmed, the Court considered the legal and
 52a

Appendix C

evidentiary submissions of the parties in interest, and

the larger context of pain and hope in which Puerto Rico
moves forward. The Court’s authority is significant but is
exercised within boundaries set by the Constitution and
laws of the United States. In this connection, Congress
has conferred powers on the Oversight Board to develop
fiscal plans and budgets in collaboration with the elected
government, and has given the Oversight Board the sole
power to formulate and propose plans of adjustment.
The Court must determine whether the proposed plan
of adjustment meets the requirements of the laws
passed by Congress and, where objections based on the
Constitution of the United States have been raised, the
requirements of the Constitution. It is not for the Court to
determine whether particular policies, asset allocations,
or settlements of disputed issues are optimal; the Court
determines whether the proposed Plan meets the legal
requirements for confirmation of a plan of adjustment.
This process is largely forward-looking. The applicable
legal standards do not require an audit of the creation
and disposition of past borrowings.

For the reasons explained in the following Findings

of Fact and Conclusions of Law, the Court finds that,
with the incorporation of certain specified revisions,
the Plan proposed by the Oversight Board meets the
confirmation requirements of PROMESA and does not
violate the Constitution. The Court has also determined
that PROMESA itself does not violate the Constitution.
In moving forward following confirmation, the Court
urges the people of Puerto Rico to use their resources and
voices well, and urges those who govern and those who
 53a

Appendix C

oversee Puerto Rico to listen to those voices, to make wise

choices and explain them well, and to lead Puerto Rico to
a better, brighter, and more vibrant future of growth and
economic stability.6

The Motion and Submissions Considered

Be for e t he C ou r t i s t he Pl a n f i le d by t he
Commonwealth of Puerto Rico (the “Commonwealth”), the
Employees Retirement System of the Government of the
Commonwealth of Puerto Rico (“ERS”), and the Puerto
Rico Public Buildings Authority (“PBA”), and together
with the Commonwealth and ERS, the “Debtors”), by
and through the Oversight Board, as representative of
the Debtors pursuant to section 315(b) of PROMESA.7

6.  While the legal standards governing the confirmation

determination did not require the Court to consider an audit of the
creation and disposition of past borrowings, confirmation of the Plan
does not foreclose further investigation, whether through regulatory,
law enforcement, or civil litigation channels, into the origins of
Puerto Rico’s debt crisis and the application of the proceeds of the
pre-PROMESA borrowings.

7.  The Court previously entered, pursuant to, inter alia, section
1125 of the Bankruptcy Code and Bankruptcy Rule 3017(b), after
due notice and a hearing, an order, dated August 2, 2021 (Docket
Entry No. 17639) (the “Disclosure Statement Order”), approving the
Disclosure Statement, establishing procedures for the solicitation,
submission, and tabulation of votes and elections with respect to the
Plan, approving the forms of ballots, master ballots, and election
notices in connection therewith, and approving the form of notice
of the Confirmation Hearing. The Court also entered the Order
Establishing Procedures and Deadlines Concerning Objections
to Confirmation and Discovery in Connection Therewith (Docket
Entry No. 17640.)
 54a

Appendix C

The following documents have been filed by the Debtors

in connection with confirmation of the Plan:

(a) Plan Supplement and Plan Related Documents

of the Commonwealth of Puerto Rico, et al.
(Docket Entry No. 18470) (as the same may be
amended, supplemented, or modified, the “Plan
Supplement”);

(b) Certificates of Service of Solicitation Materials

(Docket Entry Nos. 19107-1 through 19107-9)
(Debtors Exs. 138-40) (the “Mailing Affidavits”);

(c) Affidavit of Publication and Radio Advertisements

(Docket Entry Nos. 19108-1 through 19108-4)
(Debtors Ex. 141) (the “Publication Affidavit”
and, together with the Mailing Affidavits, the
“Service Affidavits”);

(d) Omnibus Reply of the Commonwealth of Puerto

Rico, the Employees Retirement System of the
Government of the Commonwealth of Puerto
Rico, and the Puerto Rico Public Buildings
Authority to Objections to Seventh Amended
Title III Plan of Adjustment (Docket Entry No.
18874);

(e) Memorandum of Law in Support of Confirmation

of Seventh Amended Title III Joint Plan of
Adjustment of the Commonwealth of Puerto
Rico, et al. (Docket Entry No. 18869);
 55a

Appendix C

(f) Certificate of Service (Docket Entry No. 19182);

(g) Omnibus Reply of the Commonwealth of Puerto

Rico, the Employees Retirement System of the
Government of the Commonwealth of Puerto
Rico, and the Puerto Rico Public Buildings
Authority to Objections to Requested Rulings
Regarding Act 53-2021 Relating to the Modified
Eighth Amended Joint Plan of Adjustment
(Docket Entry No. 19249);

(h) Response of the Financial Oversight and

Management Board in Accordance with the
Order Regarding Certain Aspects of Motion
for Confirmation of Modified Eighth Amended
Title III Joint Plan of Adjustment of the
Commonwealth of Puerto Rico, et al. (Docket
Entry No. 19567)

(i) Declaration of Natalie Jaresko in Respect of

Confirmation of Seventh Amended Title III Joint
Plan of Adjustment for the Commonwealth of
Puerto Rico, et al. (Docket Entry Nos. 18729 and
19054-4) (the “Jaresko Decl.”);

(j) Declaration of David Skeel in Respect of

Confirmation of Plan of Adjustment for the
Commonwealth of Puerto Rico, et al. (Docket
Entry Nos. 18731 and 19054-9) (the “Skeel
Decl.”);
 56a

Appendix C

(k) Declaration of David M. Brownstein in Respect

of Confirmation of Seventh Amended Title III
Plan of Adjustment of Commonwealth of Puerto
Rico, et al. (Docket Entry Nos. 18726 and 19054-
1) (the “Brownstein Decl.”);

(l) Declaration of Steven Zelin of PJT Partners

LP on Behalf of the Financial Oversight and
Management Board for Puerto Rico in Respect
of Confirmation of Seventh Amended Title III
Joint Plan of Adjustment of the Commonwealth
of Puerto Rico, et al. (Docket Entry Nos. 18734
and 19054-10) (the “Zelin Decl.”);

(m) Declaration of Ojas N. Shah in Respect of

Confirmation of Seventh Amended Title III
Joint Plan of Adjustment of the Commonwealth
of Puerto Rico, et al. (Docket Entry Nos. 18730
and 19054-8) (the “Shah Decl.”);

(n) Declaration of Gaurav Malhotra of Ernst &

Young LLP in Respect of Confirmation of Seventh
Amended Title III Joint Plan of Adjustment for
the Commonwealth of Puerto Rico, et al. (Docket
Entry Nos. 18738 and 19054-6) (the “Malhotra
Decl.”);

(o) Declaration of Juan Santambrogio in Respect

of Confirmation of Seventh Amended Title III
Joint Plan of Adjustment of the Commonwealth
of Puerto Rico, et al. (Docket Entry Nos. 18736
and 19054-7) (the “Santambrogio Decl.”);
 57a

Appendix C

(p) Declaration of Adam Chepenik in Respect of

the Confirmation of Seventh Amended Title III
Joint Plan of Adjustment for the Commonwealth
of Puerto Rico, et al. (Docket Entry Nos. 18735
and 19054-2) (the “Chepenik Decl.”);

(q) Declaration of Sheva R. Levy in Respect of

Confirmation of Seventh Amended Title III
Joint Plan of Adjustment of the Commonwealth
of Puerto Rico, et al. (Docket Entry Nos. 18737
and 19054-5) (the “Levy Decl.”);

(r) Declaration of Jay Herriman in Respect of

Confirmation of Confirmation of Seventh
Amended Title III Plan of Adjustment of the
Commonwealth of Puerto Rico, et al. (Docket
Entry Nos. 18732 and 19054-3) (the “Herriman
Decl.”);

(s) Declaration of Christina Pullo of Prime Clerk

LLC Regarding the Solicitation of Votes and
Tabulation of Ballots Cast on the Seventh
Amended Title III Joint Plan of Adjustment of
the Commonwealth of Puerto Rico, et al. (Docket
Entry No. 19056) (the “Pullo Decl.”);

(t) Declaration of Andrew Wolfe in Respect of

Confirmation of Seventh Amended Title III
Joint Plan of Adjustment of the Commonwealth
of Puerto Rico, et al. (Docket Entry No. 18725)
(the “Wolfe Decl.”);
 58a

Appendix C

(u) Declaration of Marti P. Murray in Respect of

Confirmation of Seventh Amended Title III
Joint Plan of Adjustment of the Commonwealth
of Puerto Rico, et al. (Docket Entry No. 18724)
(the “Murray Decl.”);

(v) Supplemental Declaration of Gaurav Malhotra of

Ernst & Young LLP in Respect of Confirmation
of Eighth Amended Title III Joint Plan of
Adjustment for the Commonwealth of Puerto
Rico, et al. (Docket Entry No. 19057) (the
“Malhotra Sup. Decl.”);

(w) Supplemental Declaration of Natalie Jaresko

in Respect of Confirmation of Eighth Amended
Title III Joint Plan of Adjustment for the
Commonwealth of Puerto Rico, et al. (Docket
Entry No. 19058) (the “Jaresko Sup. Decl.”);

(x) Supplemental Declaration of Sheva R. Levy in

Respect of Confirmation of Eighth Amended
Title III Joint Plan of Adjustment of the
Commonwealth of Puerto Rico, et al. (Docket
Entry No. 19059) (the “Levy Sup. Decl.”);

(y) Supplemental Declaration of Juan Santambrogio

in Respect of Confirmation of Eighth Amended
Title III Joint Plan of Adjustment of the
Commonwealth of Puerto Rico, et al. (Docket
Entry No. 19060) (the “Santambrogio Sup.
Decl.”);
 59a

Appendix C

(z) Supplemental Declaration of Christina Pullo of

Prime Clerk LLC Regarding the Solicitation of
Votes and Tabulation of Ballots Cast on Seventh
Amended Title III Joint Plan of Adjustment of
the Commonwealth of Puerto Rico, et al. (Docket
Entry No. 19115) (the “Pullo Sup. Decl.”); and

(aa) Supplemental Declaration of Jay Herriman

in Respect of Confirmation of Modified Eighth
Amended Title III Joint Plan of Adjustment of
the Commonwealth of Puerto Rico, et al. (Docket
Entry No. 19329) (the “Herriman Sup. Decl.”).

Submissions in opposition to confirmation of the Plan

were filed by the following parties: (i) PFZ Properties,
Inc. (Docket Entry Nos. 9223 and 18418); (ii) Sucesión
Pastor Mandry Mercado (Docket Entry Nos. 12701, 16481,
17062, 17998, and 19605); (iii) Vicente Pérez Acevedo and
Corporación Marcaribe Investment (Docket Entry No.
16668); (iv) Antonio Martin Cervera (Docket Entry No.
16871); (v) Maria Teresita Martin (Docket Entry No.
16872); (vi) Wanda Ortiz Santiago (Docket Entry Nos.
16939 and 17175); (vii) Nancy I. Negron-Lopez (Docket
Entry No. 16955); (viii) Demetrio Amador Inc. (Docket
Entry Nos. 17005 and 18582); (ix) Suiza Dairy Corp.
(Docket Entry Nos. 17013, 17526, 18593, and 19601); (x)
Maruz Real Estate Corp. (Docket Entry No. 17016); (xi)
Group Wage Creditors (Docket Entry No. 17021); (xii)
Yashei Rosario (Docket Entry Nos. 17047 and 17116);
(xiii) Ana A. Núñez Velázquez (Docket Entry Nos. 17436,
17438, and 18529); (xiv) Edgardo Marquez Lizardi (Docket
Entry Nos. 18111 and 18249); (xv) Maria M. Ortiz Morales
 60a

Appendix C

(Docket Entry No. 18396); (xvi) Arthur Samodovitz

(Docket Entry No. 18433); (xvii) Miguel Luna de Jesus
(Docket Entry No. 18485); (xviii) Ismael L. Purcell Soler
and Alys Collazo Bougeois (Docket Entry No. 18504); (xix)
Mildred Batista De León (Docket Entry Nos. 18505 and
19010); (xx) Javier Alejandrino Osorio (Docket Entry Nos.
18506 and 19008); (xxi) Service Employees International
Union (the “SEIU”) and International Union, United
Automobile, Aerospace and Agricultural Implement
Workers of America (Docket Entry Nos. 18511 and 19349);
(xxii) Mapfre PRAICO Insurance Company (Docket Entry
Nos. 18512 and 18513); (xxiii) certain creditors who filed
actions in the United States District Court for the District
of Puerto Rico (Docket Entry No. 18535); (xxiv) Med
Centro, Inc. (Docket Entry No. 18538); (xxv) Asociación de
Jubilados de la Judicatura de Puerto Rico (Docket Entry
Nos. 18548 and 18549); (xxvi) Cooperativa de Ahorro y
Crédito Vegabajeña (Docket Entry No. 18551); (xxvii)
International Union, UAW (Docket Entry No. 18558);
(xxviii) Maruz Real Estate Corp. (Docket Entry No.
18563); (xxix) LORTU-TA Ltd, Inc., La Cuarterola, Inc.,
Juaza, Inc., and the Conjugal Partnership Composed of
Juan Zalduondo Viera and Magdalena Machicote Ramery
(Docket Entry No. 18564); (xxx) Sucn. De Frank Torres
Ortiz & Aurea Rodriguez (Docket Entry No. 18565); (xxxi)
Finca Matilde, Inc. (Docket Entry Nos. 18566 and 19608);
(xxxii) the University of Puerto Rico Retirement System
Trust (Docket Entry No. 18573); (xxxiii) Peter C. Hein
(Docket Entry No. 18575); (xxxiv) Miriam E. Lima Colón,
Betzaida Feliciano Concepción, and Angel L. Méndez
González (Docket Entry No. 18583); (xxxv) Asociatión
de Maestros Puerto Rico and Asociación de Maestros de
 61a

Appendix C

Puerto Rico-Local Sindical (Docket Entry No. 18585) (the

“AMPR Objection”); (xxxvi) the Underwriter Defendants
(Docket Entry No. 18587); (xxxvii) certain credit unions
(Docket Entry No. 18594); (xxxviii) Community Health
Foundation of P.R. Inc. (Docket Entry No. 18604); (xxxix)
Quest Diagnostics of Puerto Rico, Inc. (Docket Entry No.
18560); (xl) U.S. Bank Trust Association and U.S. Bank
National Association (Docket Entry Nos. 18631 and 18634);
and (xli) Nilsa Candelario (Docket Entry No. 18663); (xlii)
Jorge Rafael Eduardo Collazo Quinones (Docket Entry
No. 19311), (xliii) El Ojo de Agua Development, Inc.
(Docket Entry No. 19610); (xliv) Demetrio Amador Inc.
(Docket Entry No. 19611); (xlv) Maruz Real Estate Corp.
(Docket Entry No. 19612); and (xlvi) certain plaintiffs
in the case captioned Administración de los Sistemas
de Retiro de Empleados del Gobierno y la Judicatura
de Puerto Rico v. UBS Fin. Servs. Inc. of P.R., Civ. No.
KCA-2011-1067 (Docket Entry No. 19766) (the “Nazario
Serrano et al. Objection”). 8 In addition, the Debtors have
received letters in opposition to confirmation of the Plan,
which were not filed with the Court, from: (a) Luiz Roldan
Ruiz; (b) Antonia Medina Rodriquez; and (c) Aida Iris
Santiago Torres. The Court received numerous letters
regarding the confirmation motion and the Plan, which
were filed on the docket with Notices of Correspondence.

Reservations of rights or limited objections raising

discrete issues but generally supporting the Plan were
filed by the following parties: (i) the Ad Hoc Group of

8.  Replies to the Nazario Serrano et al. Objection were filed

by UBS Financial Services Incorporated of Puerto Rico (Docket
Entry No. 19782) and the Oversight Board (Docket Entry No. 19791).
 62a

Appendix C

FGIC Noteholders (Docket Entry No. 17001); (ii) AAFAF

(Docket Entry Nos. 17202 and 18592); 9 (iii) Vaquería
Tres Monjitas, Inc. (Docket Entry No. 18637); (iv) the
Constitutional Debt Group, GO Group, LCDC, and QTCB
Group (Docket Entry No. 18453); (v) Ambac (Docket Entry
No. 18479); (vi) the Internal Revenue Service (Docket
Entry No. 18567); (vii) certain ERS bondholders (Docket
Entry No. 18569); (viii) Bank of New York Mellon (Docket
Entry No. 18588); (ix) the Creditors’ Committee (Docket
Entry Nos. 18589 and 19609); and (x) the University of
Puerto Rico Retirement System Trust (Docket Entry
No. 19048).

Further, submissions in opposition to the proposed

confirmation order (Docket Entry No. 18447) were filed
by the following parties: (i) Peter C. Hein (Docket Entry
No. 18647); (ii) Suiza Dairy Corp. (Docket Entry Nos.
18651 and 19602); (iii) Finca Matilde, Inc. (Docket Entry
No. 18670); and (iv) AAFAF (Docket Entry Nos. 18742 and
19495).10 Oppositions to the revised proposed confirmation
orders (Docket Entry Nos. 19061, 19118, 19188, 19325,

9.  AAFAF’s additional limited objection to confirmation of

the Plan, Docket Entry No. 18742, was withdrawn prior to the
Confirmation Hearing. (Docket Entry No. 19109.)

10.  «DRA Parties» means AmeriNational Community Services,

LLC, as servicer for the GDB Debt Recovery Authority, and
Cantor-Katz Collateral Monitor LLC, which serves as the collateral
monitor for Wilmington Trust, N.A. The DRA Parties› objections to
confirmation of the Plan, Docket Entry Nos. 18590 and 18636, and
objection to the initial proposed confirmation order, Docket Entry
No. 18685, were withdrawn prior to the Confirmation Hearing.
(Docket Entry No. 19121.)
 63a

Appendix C

19368, and 19571) were filed by the following parties: (a)

International Union, United Automobile, Aerospace and
Agricultural Implement Workers of America and Service
Employees International Union (Docket Entry Nos. 19162,
19204 and 19349);11 (b) PFZ Properties, Inc. (Docket Entry
Nos. 19212 and 19597); (c) Finca Matilde, Inc. (Docket
Entry Nos. 19214 and 19608); (d) Peter C. Hein (Docket
Entry Nos. 19218, 19446, and 19599); (e) certain credit
unions (Docket Entry No. 19221); (f) Demetrio Amador,
Inc. (Docket Entry No. 19228); (g) Suiza Dairy Corp.
(Docket Entry Nos. 19279 and 19398); and (h) AAFAF
(Docket Entry No. 19319).

Reservations of rights with respect to the proposed

confirmation orders were filed by the following parties:
(i) Assured (Docket Entry Nos. 18645 and 19217); (ii) the
Creditors’ Committee (Docket Entry Nos. 18658 and
19225); (iii) Bank of New York Mellon (Docket Entry No.
18662); (iv) the Retiree Committee (Docket Entry Nos.
18679 and 19248) (v) Ambac (Docket Entry No. 18694);
and (vi) the Ad Hoc Group of Constitutional Debtholders,
the Ad Hoc Group of General Obligation Bondholders, the
LCDC, and the QTCB Noteholder Group (Docket Entry
No. 19281). A statement in response to the proposed
confirmation order was filed by the International Union,
UAW and Service Employees International Union (Docket
Entry No. 19388). The Court has also received and

11.  International Union, United Automobile, Aerospace and

Agricultural Implement Workers of America and Service Employees
International Union’s objections to the proposed confirmation order
were partially withdrawn after the Confirmation Hearing. (Docket
Entry No. 19349.)
 64a

Appendix C

reviewed carefully submissions in connection with each

version of the Oversight Boards’ submissions in connection
with its Proposed Findings of Facts and Conclusion of
Law (Docket Entry Nos. 18739, 19366, 19427, and 19570).

Statements in support of confirmation of the Plan were

filed by the following parties: (i) the Retiree Committee
(Docket Entry No. 18562); (ii) National (Docket Entry No.
18574); (iii) Assured (Docket Entry No. 18584); (iv) FGIC
(Docket Entry No. 18595); (v) Ambac (Docket Entry No.
18601); and (vi) the Puerto Rico Funds (Docket Entry
No. 18848).12

12.  The Puerto Rico Funds are: GNMA & US Government

Target Maturity Fund for Puerto Rico Residents, Inc. (f/k/a Puerto
Rico GNMA & U.S. Government Target Maturity Fund, Inc.),
Mortgage-Backed & US Government Securities Fund for Puerto
Rico Residents, Inc. (f/k/a Puerto Rico Mortgage-Backed & U.S.
Government Securities Fund, Inc.), Puerto Rico Residents Bond
Fund I (f/k/a Puerto Rico Investors Bond Fund I), Puerto Rico
Residents Tax-Free Fund, Inc. (f/k/a Puerto Rico Investors Tax-
Free Fund, Inc.), Puerto Rico Residents Tax-Free Fund II, Inc.
(f/k/a Puerto Rico Investors Tax-Free Fund II), Inc., Puerto Rico
Residents Tax-Free Fund III, Inc. (f/k/a Puerto Rico Investors
Tax-Free Fund III, Inc.), Puerto Rico Residents Tax-Free Fund IV,
Inc. (f/k/a Puerto Rico Investors Tax-Free Fund IV, Inc.), Puerto
Rico Residents Tax-Free Fund V, Inc. (f/k/a Puerto Rico Investors
Tax-Free Fund V, Inc.), Puerto Rico Residents Tax-Free Fund VI,
Inc. (f/k/a Puerto Rico Investors Tax-Free Fund VI, Inc.), Tax-Free
Fixed Income Fund for Puerto Rico Residents, Inc. (f/k/a Puerto
Rico Fixed Income Fund, Inc.), Tax-Free Fixed Income Fund II
for Puerto Rico Residents, Inc. (f/k/a Puerto Rico Fixed Income
Fund II, Inc.), Tax-Free Fixed Income Fund III for Puerto Rico
Residents, Inc. (Puerto Rico Fixed Income Fund III, Inc.), Tax-Free
Fixed Income Fund IV for Puerto Rico Residents, Inc. (f/k/a Puerto
 65a

Appendix C

Further, pursuant to the Urgent Motion of the

Financial Oversight and Management Board of Puerto
Rico for Order (I) Approving Form of Notice of Rulings
the Oversight Board Requests at Confirmation Hearing
Regarding Act 53-2021 (Docket Entry No. 19002), the
Oversight Board requested Court approval of certain
rulings related to Act 53-2021 (“Act 53”) in connection
with confirmation of the Plan. Oppositions to such
rulings were filed by the following parties: (i) Asociación
Puertorriqueña de la Judicatura, Inc. (Docket Entry No.
19161); (ii) Asociación de Jubilados de la Judicatura de
Puerto Rico and Hon. Hector Urgell Cuebas, Former
Judge of the Puerto Rico Court of Appeals (Docket Entry
No. 19175); (iii) Federación de Maestros de Puerto Rico,
Inc., Grupo Magisterial Educadores(as) por la Democracia,
Unidad, Cambio, Militancia y Organización Sindical, Inc.,
and Unión Nacional de Educadores y Trabajadores de la
Educación, Inc. (Docket Entry No. 19180); (iv) Asociación
Rico Fixed Income Fund IV, Inc.), Tax-Free Fixed Income Fund
V for Puerto Rico Residents, Inc. (f/k/a Puerto Rico Fixed Income
Fund V, Inc.), Tax-Free Fixed Income Fund VI for Puerto Rico
Residents, Inc. (f/k/a Puerto Rico Fixed Income Fund VI, Inc.), Tax
Free Fund for Puerto Rico Residents, Inc. (f/k/a Tax-Free Puerto
Rico Fund, Inc.), Tax Free Fund II for Puerto Rico Residents, Inc.
(f/k/a Tax-Free Puerto Rico Fund II, Inc.), Tax-Free High Grade
Portfolio Bond Fund for Puerto Rico Residents, Inc. (f/k/a Puerto
Rico AAA Portfolio Bond Fund, Inc.), Tax-Free High Grade Portfolio
Bond Fund II for Puerto Rico Residents, Inc. (f/k/a Puerto Rico
AAA Portfolio Bond Fund II, Inc.), Tax-Free High Grade Portfolio
Target Maturity Fund for Puerto Rico Residents, Inc. (f/k/a Puerto
Rico AAA Portfolio Target Maturity Fund, Inc.), Tax Free Target
Maturity Fund for Puerto Rico Residents, Inc. (f/k/a Tax-Free
Puerto Rico Target Maturity Fund, Inc.), and UBS IRA Select
Growth & Income Puerto Rico Fund.
 66a

Appendix C

de Maestros de Puerto Rico and Asociacón de Maestros

de Puerto Rico-Local Sindical (Docket Entry No. 19181);
and (v) Maria A. Clemente Rosa (Docket Entry No. 19254).
A joinder in support of the Oversight Board’s requested
rulings was filed by the LCDC (Docket Entry No. 19252).

Further, pursuant to the Order Regarding Certain

Aspects of Motion for Confirmation of Modified Eighth
Amended Title III Joint Plan of Adjustment of the
Commonwealth of Puerto Rico, et. al. (Docket Entry
No. 19517), the Oversight Board filed a Response of
the Financial Oversight and Management Board in
Accordance with Order Regarding Certain Aspects of
Motion for Confirmation of Modified Eighth Amended
Title III Joint Plan of Adjustment of the Commonwealth
of Puerto Rico, et. al. (Docket Entry No. 19567). Responses
were filed by the following parties: (i) International
Union, United Automobile, Aerospace and Agricultural
Implement Workers of America and Service Employees
International Union (Docket Entry No. 19586); (ii) PFZ
Properties, Inc. (Docket Entry No. 19597); (iii) Peter Hein
(Docket Entry Nos. 19599 and 19616), (iv) Cooperativa
de Ahorro y Crédito Vegabajeña (Docket Entry No.
19600); (v) Suiza Dairy Corp. (Docket Entry No. 19603);
(vi) Federación de Maestros de Puerto Rico, Inc., Grupo
Magisterial Educadores(as) por la Democracia, Unidad,
Cambio, Militancia y Organización Sindical, Inc., and
Unión Nacional de Educadores y Trabajadores de la
Educación, Inc. (Docket Entry No. 19606) (the “Teachers’
Associations Sup. Obj.”); (vii) AAFAF (Docket Entry No.
19607); (viii) Finca Matilde, Inc. (Docket Entry No. 19608);
(ix) El Ojo de Agua Development, Inc. (Docket Entry
 67a

Appendix C

No. 19610); (x) Demetrio Amador Inc. (Docket Entry No.

19611); and (xi) Maruz Real Estate Corp. (Docket Entry
No. 19612).

The Court heard argument and statements by members

of the public, and received evidence, in connection with
confirmation of the Plan at a hearing held on November
8, 9, 10, 12, 15, 17, 22, and 23, 2021 (the “Confirmation
Hearing”).13 The Court has carefully considered the Plan,
as well as the supporting and opposing submissions, and
the witness testimony and voluminous briefing and written
evidence submitted by the parties. The Court has also
reviewed and carefully considered hundreds of letters and
email messages submitted by members of the public and
listened carefully to the oral remarks made on the record
at the Confirmation Hearing by members of the public.

On January 10, 2022, the Court entered its Order

Regarding Plan Modifications Necessary to the Entry
of an Order Confirming Plan of Adjustment for the
Commonwealth of Puerto Rico, et al. (Docket Entry
No. 19721) (the “January Order”). In response, the
Oversight Board filed the Plan. In response to the Plan
and associated filings, PFZ Properties, Inc. filed the
Response to Informative Motion at Docket 19787 (Docket
Entry No. 19804).

13.  Following the Confirmation Hearing, the Court also

considered and reserved decision on approval of the Qualifying
Modification Pursuant to PROMESA Title VI for the Puerto Rico
Infrastructure Financing Authority (Docket Entry No. 1 Ex. A
in Case No. 21-1492) and Qualifying Modification Pursuant to
PROMESA Title VI for the Puerto Rico Convention Center District
Authority (Docket Entry No. 1 Ex. A in Case No. 21-1493.)
 68a

Appendix C

For the follow ing reasons, the Plan is hereby

confirmed, and any remaining objections are overruled
except to the extent expressly stated herein. For the
avoidance of doubt, to the extent that a particular objection
or issue is not specifically addressed in these Findings
of Fact and Conclusions of Law, it has been considered
thoroughly and is overruled. The overruled objections, and
the Oversight Board’s positions as to the proper scope of
preemption and the proper treatment of Eminent Domain/
Inverse Condemnation Claims, are preserved for appeal.

The Court turns now to its analysis and decision on

the motion for confirmation of the plan of adjustment that
the Oversight Board has proposed for the Commonwealth
of Puerto Rico, the Employees Retirement System and
the Public Buildings Authority, and the reasons for that
decision.

Findings of Fact and Conclusions of Law

1. Findings and Conclusions. What follows constitutes

the Court’s Findings of Fact and Conclusions of Law
pursuant to Rule 52 of the Federal Rules of Civil
Procedure, as made applicable herein by Federal Rules
of Bankruptcy Procedure 7052 and 9014 and section 310
of PROMESA. To the extent any of the findings of fact
contained herein constitute conclusions of law, they are
adopted as such. To the extent any of the conclusions of
law contained herein constitute findings of fact, they are
adopted as such. Any headings or sub-headings used
herein are for reference purposes only and shall not affect
in any way the meaning or interpretation of the Findings
 69a

Appendix C

of Fact and Conclusions of Law set forth herein or the

Plan.

2. Jurisdiction. This Court has exclusive jurisdiction

over the Title III Cases pursuant to PROMESA section
306(a). Venue is proper before this Court pursuant to
PROMESA section 307(a). Pursuant to section 306(b) of
PROMESA, upon commencement of the Title III Cases,
the Title III Court exercised, and continues to exercise,
exclusive jurisdiction over all property of the Debtors,
wherever located. To the extent necessary, pursuant
to PROMESA section 305, the Oversight Board has
granted consent to, and the Plan provides for, this Court’s
exercise of jurisdiction over the property and revenues of
the Debtors as necessary to approve and authorize the
implementation of the Findings of Fact and Conclusions
of Law and the Plan.

3. Judicial Notice. The Court takes judicial notice

of the dockets of the Title III Cases, the appellate court
dockets of any and all appeals taken from any order
entered or opinion issued by the Court in the Title
III Cases, and the following litigation and adversary
proceedings, each as defined in the Plan, including all
pleadings and other documents filed, all orders entered,
and all evidence and arguments made, proffered, or
adduced at hearings related thereto: (a) the Ambac
Action, (b) the Appointments Related Litigation, (c) the
Clawback Actions, (d) the ERS Litigation, (e) the ERS
Recovery Actions, (f) the ERS Takings Action, (g) the
FGIC Action, (h) the Gracia Gracia CW Action, (i) the
Gracia Gracia Federal Action, (j) the Lift Stay Motions,
 70a

Appendix C

(k) the Med Center Litigation, (l) the Med DC Action,

(m) the National Action, (n) the PBA Litigation, (o) the
PRIFA BANs Litigation, (p) the SCC Action, (q) the
Uniformity Litigation, (r) the Invalidity Actions, (s) the
Lien Challenge Actions, (t) the Debt Related Objections,
and (u) the Avoidance Actions listed in Exhibits A and B
to the Plan.

4. Burden of Proof. The Debtors have the burden of

proving satisfaction of the requirements of section 314 of
PROMESA and, to the extent applicable to consideration
of confirmation of the Plan, Rule 9019 of the Bankruptcy
Rules, by a preponderance of the evidence. As explained
below, the Plan, which has been amended to incorporate
the Debtors’ Full-Payment Proposal (defined below) for
Eminent Domain/Inverse Condemnation Claims to the
extent they are Allowed Claims for just compensation,
meets the applicable requirements of section 314 of
PROMESA and, to the extent applicable to consideration
of confirmation of the Plan, Bankruptcy Rule 9019.

General Background

I. The Oversight Board and Title III Cases

5. For more than a decade, Puerto Rico has faced an

unprecedented fiscal and economic crisis. Actions taken
in the past caused Puerto Rico to lose access to capital
markets and precipitated the collapse of Puerto Rico’s
public finance system. (See PROMESA § 405(m).) These
actions accelerated the contraction of Puerto Rico’s
economy and increased the out-migration of its residents.
 71a

Appendix C

(See Murray Decl. Ex. A ¶¶ 20-22.)14 The situation has

been further exacerbated by the devastation caused
to Puerto Rico by Hurricanes Irma and Maria in 2017,
the earthquakes that occurred in early 2020, and the
COVID-19 pandemic. (Jaresko Decl. ¶¶ 20, 22-23.)

6. On June 30, 2016, the United States enacted

PROMESA, and the Oversight Board was established
pursuant to section 101(b) of PROMESA. (Jaresko Decl.
¶ 7.) Pursuant to section 4 of PROMESA and Article VI
of the Constitution of the United States, the provisions
of PROMESA prevail over any inconsistent general

14.  Consistent with the investigative authority granted to

the Oversight Board by section 104 of PROMESA, the Oversight
Board commissioned a report on the origins of the Commonwealth’s
financial crisis. The report was prepared by Kobre & Kim LLP, and
it was published on the Oversight Board’s website on August 20,
2018. (See Docket Entry No. 3774.) Many residents of Puerto Rico,
political leaders, and investors have called for specific auditing of
the bond issues and the application of the proceeds of certain bond
issues and/or prosecution of individuals or entities that may have
misapplied bond proceeds. Such inquiries could be helpful to Puerto
Rico as it grapples with its past and moves toward the future. The
Court understands, however, that in the context of these Title III
restructuring proceedings the Oversight Board, in its capacity as the
Debtors’ representative, has focused on the identification of resources
that can be marshaled for application to outstanding debts, and on
reaching agreements to reduce outstanding debts without extensive
further litigation. Those are reasonable and prudent decisions, and
remedial measures that are not inconsistent with the Plan can be
pursued by appropriate authorities. As noted above (see supra n.5),
confirmation of the Plan does not preclude further investigations or
law enforcement activity with respect to conduct in connection with
the past issuance of debt and application of debt proceeds.
 72a

Appendix C

or specific provisions of territory law, State law, or

regulation. See PROMESA § 4.

7. On August 31, 2016, President Obama appointed

the Oversight Board’s original seven voting members.
(Jaresko Decl. ¶ 8.) The Oversight Board currently has
its full complement of seven members. (Id.)

8. The Oversight Board designated ERS and PBA

as “covered instrumentalities” pursuant to PROMESA
Section 101(d). (Jaresko Decl. ¶ 15.) The Commonwealth
is a “covered territory” pursuant to PROMESA Sections
5(8) and 101(b)(1).

9. On May 3, 2017, the Oversight Board issued a

restructuring certification pursuant to PROMESA
Sections 104(j) and 206, and filed a voluntary petition
for relief for the Commonwealth pursuant to PROMESA
Section 304(a), thereby commencing the Commonwealth
Title III Case. (See Docket Entry No. 1.)

10. On May 21, 2017, the Oversight Board issued

a restructuring certification pursuant to PROMESA
Sections 104(j) and 206, and filed a voluntary petition for
relief for ERS pursuant to PROMESA Section 304(a),
thereby commencing the ERS Title III Case. (Docket
Entry No. 1 in Case No. 17-3566.)

11. On June 15, 2017, the U.S. Trustee appointed the

Creditors’ Committee in the Commonwealth Title III
Case (Docket Entry No. 338) and, on August 25, 2017, the
U.S. Trustee amended that appointment to provide that
 73a

Appendix C

the Creditors’ Committee would also serve in the ERS

Title III Case (Docket Entry No. 1171). On June 15, 2017,
the U.S. Trustee appointed the Retiree Committee in the
Commonwealth Title III Case. (Docket Entry No. 340.)

12. On June 23, 2017, the Court entered an order

appointing the Mediation Team, led by Chief Bankruptcy
Judge Barbara Houser. (Docket Entry No. 430.)

13. On June 29, 2017, the Court entered an order

providing for the joint administration of the Commonwealth
Title III Case and the ERS Title III Case, for procedural
purposes only. (Docket Entry No. 156 in Case No. 17-3566.)

14. On September 27, 2019, the Oversight Board issued

a restructuring certification, pursuant to PROMESA
Sections 104(j) and 206, and filed a voluntary petition for
relief for PBA pursuant to PROMESA Section 304(a),
thereby commencing the PBA Title III Case. (Docket
Entry No. 1 in Case No. 19-5523.)

15. On October 9, 2019, the Court entered an order

providing for the joint administration of the PBA Title III
Case with the existing Title III Cases. (Docket Entry No.
13 in Case No. 19-5523.)

II. The Plan Support Agreements, Plan, and Disclosure

Statement

16. The Oversight Board, either directly or through

its advisors, engaged in extensive mediation sessions
under the guidance and direction of the Mediation Team,
 74a

Appendix C

and negotiated directly with various constituencies, in an

effort to build support for the restructuring of, among
other indebtedness, the Commonwealth, ERS, and PBA’s
debt. Those negotiations culminated in certain agreements
with various stakeholders in furtherance of the successful
implementation of the Plan. (Jaresko Decl. ¶ 29; Skeel
Decl. ¶ 17; Zelin Decl. ¶ 13; Debtors Exs. 16-19, 23.)

17. On May 31, 2019, the Oversight Board entered

into a plan support agreement (the “2019 PSA”) with
certain holders of approximately $3 billion of GO Bond
Claims and PBA Bond Claims regarding the framework
of a plan of adjustment to resolve (i) disputes regarding
the validity and related rights of the GO Bonds and PBA
Bonds, and (ii) disputes between the Commonwealth and
PBA regarding the characterization of certain purported
leases, the amount of any administrative rent that may be
owed by the Commonwealth for the use of PBA facilities
following the commencement of the Commonwealth Title
III Case, and the ownership of certain PBA facilities.
Following entry into the 2019 PSA, the Oversight Board,
under the guidance of the Mediation Team, continued to
negotiate with its creditors to generate further consensus
among the parties, including, but not limited to, other
holders and insurers of GO Bonds and PBA Bonds.
(Jaresko Decl. ¶ 30; Skeel Decl. ¶ 18; Zelin Decl. ¶¶ 14-15.)

18. On June 7, 2019, the Oversight Board (i) reached

an agreement with the Retiree Committee regarding,
among other things, the treatment of accrued ERS, JRS,
and TRS benefits pursuant to the Plan, and (ii) entered
into the AFSCME Plan Support Agreement regarding,
 75a

Appendix C

among other things, the return of contributions of all

public employees to ERS under the System 2000 plan,
and modifications to a collective bargaining agreement
and AFSCME’s consent to the treatment of ERS benefits
pursuant to the Plan. (Jaresko Decl. ¶ 31; Santambrogio
Decl. ¶ 12; Skeel Decl. ¶ 19; Debtors Ex. 21.) The AFSCME
Plan Support Agreement provides for AFSCME’s
support for modified terms of collective bargaining
agreements, along with its consent to the restructuring
of the Commonwealth’s pension obligations, pursuant to
the Plan. (Jaresko Decl. ¶ 31; Santambrogio Decl. ¶ 12;
Debtors Ex. 21.)

19. On September 27, 2019, the Debtors filed

the Original Plan (as defined below), containing the
material terms outlined in the 2019 PSA. The Oversight
Board thereafter continued to negotiate with various
stakeholders to generate further support for a plan of
adjustment. On February 9, 2020, the Oversight Board
and certain holders of GO Bonds and PBA Bonds holding
over $8 billion in Claims (and, inclusive of Claims held by
parties who executed joinders thereto, over $10 billion),
terminated the 2019 PSA, and disclosed they had reached
a global settlement in principle outlined in a plan support
agreement (the “2020 PSA”). (Jaresko Decl. ¶¶ 18, 33;
Skeel Decl. ¶ 21; Zelin Decl. ¶ 16.) On February 28, 2020,
in furtherance of the 2020 PSA, the Oversight Board filed
the First Amended Plan (as defined below), a disclosure
statement in connection w ith the First A mended
Plan (Docket Entry No. 11947) (the “2020 Disclosure
Statement”), and a motion seeking approval of the 2020
Disclosure Statement (Docket Entry No. 11950). (Jaresko
Decl. ¶ 34.)
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Appendix C

20. On March 10, 2020, the Court entered an order

scheduling a hearing to consider the adequacy of
information contained in the 2020 Disclosure Statement
and setting related deadlines. (Docket Entry No. 12187.)
Shortly thereafter, in response to the COVID-19 pandemic
and its effects on the people and economy of Puerto Rico,
the Oversight Board filed a motion (Docket Entry No.
12485) seeking to adjourn the hearing to consider approval
of the 2020 Disclosure Statement and related deadlines,
which the Court granted on March 27, 2020 (Docket Entry
No. 12549). (Skeel Decl. ¶ 23.)

21. Following the adjournment, the Oversight Board

re-engaged with the parties to the 2020 PSA and entered
into further mediation sessions with the assistance and
guidance of the Mediation Team. (Jaresko Decl. ¶ 36;
Skeel Decl. ¶ 24; Zelin Decl. ¶ 17.) However, the parties
were unable to reach a consensus and, on October 6,
2020, the PSA Creditors filed a motion (Docket Entry
No. 14478) seeking to impose deadlines for confirmation
of a plan of adjustment. On October 29, 2020, the Court
entered the Order on Joint Motion of PSA Creditors
Pursuant to Section 312 of PROMESA and Section 105
of the Bankruptcy Code to Impose Deadlines for Plan
of Adjustment (Docket Entry No. 14987) (the “Plan
Scheduling Order”) directing the Oversight Board to file,
on or before February 10, 2021, the proposed terms of a
plan of adjustment and a motion for approval of a proposed
timetable for filing an amended plan and proposed
disclosure statement, among other things. (Id.)
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Appendix C

22. The Oversight Board continued to engage in

discussions with the guidance of the Mediation Team and,
on February 9, 2021, reached an agreement in principle
with the parties to the 2020 PSA regarding the terms
of an amended plan of adjustment, subject to execution
of a plan support agreement. (Zelin Decl. ¶¶ 20, 22.)
Accordingly, the Oversight Board requested an extension
of the February 10, 2021 deadline set forth in the Plan
Scheduling Order. (Docket Entry No. 15821.) On February
16, 2021, the Court entered the Order Granting Urgent
Motion of the Financial Oversight and Management
Board for Puerto Rico Requesting Extension of Deadlines
for Submission of Plan of Adjustment or Term Sheet with
Respect Thereto (Docket Entry No. 15849), extending the
February 10, 2021 deadline to March 8, 2021.

23. On February 23, 2021, the Oversight Board

announced the termination of the 2020 PSA and the
execution of the Initial PSA, dated as of February 22,
2021, among the Oversight Board, as representative of the
Debtors, and the Initial GO/PBA PSA Creditors. (Jaresko
Decl. ¶ 36; Skeel Decl. ¶ 24; Zelin Decl. ¶ 22; Debtors Ex.
16.) On March 8, 2021, in furtherance of the Initial PSA,
the Oversight Board filed the Second Amended Plan (as
defined below) and a disclosure statement in connection
with the Second Amended Plan.

24. Following entry into the Initial PSA, the Oversight

Board continued to work to develop additional consensual
resolutions and engaged with objecting parties under the
guidance of the Mediation Team. (Jaresko Decl. ¶ 38; Zelin
Decl. ¶ 26.) On March 9, 2021, the Oversight Board entered
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Appendix C

into the ERS Stipulation (amended on April 2, 2021) which,

among other things, (i) provides a global resolution of
disputes regarding the validity and related rights of ERS
Bonds and the extent of the alleged liens supporting the
obligations thereunder, (ii) resolves the administrative
expense claims filed by certain ERS Bondholders, (iii)
provides a resolution of disputes regarding certain
legal challenges to the Commonwealth’s post-petition
enactment of a “pay as you go” system for payment of
pension benefits to retirees, (iv) provides for the payment
of $373 million in cash to the holders of ERS Bonds, as
well as the proceeds from the sale of certain ERS assets
to the Commonwealth, and (v) provides for the disposition
of the ERS Private Equity Portfolio. (Jaresko Decl. ¶¶ 38-
39; Skeel Decl. ¶¶ 26-27; Zelin Decl. ¶ 27; Debtors Ex. 19.)

25. On May 5, 2021, the Oversight Board entered into

the HTA/CCDA Plan Support Agreement with certain
holders and insurers of bonds issued by HTA and CCDA
which, among other things, (i) provides for a global
resolution of disputes regarding the bondholders’ rights
and alleged property interests in certain allocable “clawed
back” revenues of the Commonwealth, (ii) provides for the
issuance of new bonds and CVIs, along with the payment of
certain amounts in cash, resolving the bondholders’ claims
against the Commonwealth, (iii) resolves the outstanding
disputes between the Commonwealth and the other
parties to the HTA/CCDA Plan Support Agreement, (iv)
provides for the bondholders and insurers party thereto to
support the Plan, and (v) provides an agreement regarding
the structure of a potential plan of adjustment for HTA.
(Jaresko Decl. ¶ 40; Skeel Decl. ¶ 28; Zelin Decl. ¶ 34;
Debtors Ex. 17.)
 79a

Appendix C

26. On May 11, 2021, in furtherance of the HTA/

CCDA Plan Support Agreement, the Debtors filed the
Third Amended Plan (as defined below) and a disclosure
statement in connection with the Third Amended Plan
(Docket Entry No. 16741). On May 13, 2021, the Debtors
filed a motion seeking approval of such disclosure
statement (Docket Entry No. 16756). On June 29, 2021,
the Debtors filed the Fourth Amended Plan (as defined
below), reflecting additional terms negotiated with certain
creditors, and a disclosure statement in connection with
the Fourth Amended Plan (Docket Entry No. 17192.)

27. On July 12, 2021, the Oversight Board (i) entered

into the GO/PBA Plan Support Agreement, which amended
and restated the Initial PSA (Jaresko Decl. ¶ 122; Debtors
Ex. 16) and (ii) reached an agreement in principle with
the Creditors’ Committee, which proposed recoveries
for Classes of unsecured claimholders and resolved the
Creditors’ Committee’s objections to the Plan, subject to
the terms of the Committee Agreement. (Jaresko Decl.
¶ 41; Zelin Decl. ¶ 38; Debtors Ex. 23.) The GO/PBA Plan
Support Agreement, together with the restructuring
of COFINA’s debt, contemplates the reduction of the
Commonwealth’s debt (including principal and interest
from restructured COFINA bonds) by approximately 62%,
from $90.4 billion to $34.1 billion. (Jaresko Decl. ¶ 37; Zelin
Decl. ¶ 38.) The GO/PBA Plan Support Agreement also
(i) provides for a proposed global resolution of disputes
regarding the validity and related rights of GO Bonds
that may have been issued in violation of the Puerto Rico
Constitutional debt limit, (ii) provides for the issuance of
new bonds and CVIs, along with the payment of certain
 80a

Appendix C

amounts in cash, resolving the bondholders’ claims against

the Commonwealth, (iii) resolves the outstanding disputes
between the Commonwealth and PBA, and (iv) provides
for the resolution of disputes regarding the PRIFA BANs
pursuant to a stipulation dated February 22, 2021 (the
“PRIFA BANs Stipulation”) (Debtors Ex. 22). (Jaresko
Decl. ¶ 37.) Also on July 12, 2021, in furtherance of the
GO/PBA Plan Support Agreement, the Debtors filed the
Fifth Amended Plan (as defined below) and a disclosure
statement in connection with the Fifth Amended Plan
(Docket Entry No. 17308.)

28. On July 27, 2021, the Oversight Board entered

into the PRIFA Plan Support Agreement, which, among
other things, (i) provides for a global resolution of disputes
regarding the bondholders’ rights and alleged property
interests in certain allocable “clawed back” revenues
of the Commonwealth, (ii) provides for the issuance of
new CVIs, along with the payment of certain amounts
in cash, resolving the bondholders’ claims against the
Commonwealth, (iii) resolves the outstanding disputes
between the Commonwealth and the other parties to
the PRIFA PSA, (iv) provides for the bondholders and
insurers party thereto to support the Plan, and (v)
presents the foundation for a restructuring of the PRIFA
Bonds pursuant to Title VI of PROMESA. (Jaresko Decl.
¶ 42; Skeel Decl. ¶ 30; Zelin Decl. ¶ 41; Debtors Ex. 18.)
Also on July 27, 2021, in furtherance of the PRIFA Plan
Support Agreement, the Debtors filed the Sixth Amended
Plan (as defined below) and a disclosure statement in
connection with the Sixth Amended Plan. (Docket Entry
No. 17516.)
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Appendix C

29. On July 30, 2021, the Debtors filed the Seventh

Amended Plan and an updated disclosure statement in
connection with the Seventh Amended Plan (Docket Entry
No. 17628) (the “Disclosure Statement”). (Debtors Ex. 2.)

30. On August 2, 2021, the Court entered the

Disclosure Statement Order which, among other things (a)
approved the Disclosure Statement as containing adequate
information within the meaning of section 1125 of the
Bankruptcy Code, (b) established (1) October 19, 2021 at
5:00 p.m. (Atlantic Standard Time) as the Confirmation
Objection Deadline, (2) October 4, 2021 at 5:00 p.m.
(Atlantic Standard Time) as the deadline by which (i)
ballots to accept or reject the Plan were required to be
received by the Solicitation Agent (the “Voting Deadline”)
and (ii) elections regarding the form of distributions were
required to be effectuated through the Automated Tender
Offer Program (“ATOP”) (the “Election Deadline”), and
(c) scheduled a hearing on November 8-10, 12, 15-18, and
22-23, 2021, to consider confirmation of the Plan. (Docket
Entry No. 17639.) On September 27, 2021, the Court
entered an order (Docket Entry No. 18258) extending the
Voting Deadline to October 18, 2021, at 5:00 p.m. (Atlantic
Standard Time) and, on October 1, 2021, the Court
entered an order (Docket Entry No. 18360) extending
the Election Deadline to October 18, 2021, at 5:00 p.m.
(Atlantic Standard Time).

31. Consistent with the Disclosure Statement Order,

the Debtors caused the Solicitation Agent to distribute
Solicitation Packages to all holders of Claims entitled to
vote. (Mailing Affidavits; Pullo Decl. ¶ 4.) The Solicitation
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Appendix C

Packages contained, among other things: (a) the

Confirmation Hearing Notice setting forth the time, date,
and place of the Confirmation Hearing, (b) the Disclosure
Statement Order (without the exhibits thereto) and the
Disclosure Statement (together with all exhibits thereto,
including the Plan), (c) the appropriate form of Ballot or
Notice, if any, with instructions for voting and/or making
any applicable election and, as applicable, a pre-addressed,
pre-paid return envelope, (d) with respect to Class 51, the
Retiree Committee Letter and Information Guide, and
(e) with respect to Classes 54, 58, and 66, the Creditors’
Committee Letter. (Id. ¶ 4.) The Debtors also caused the
Solicitation Agent to publish the Confirmation Hearing
Notice and place radio advertisements providing, among
other things, information regarding the solicitation of
votes to accept or reject the Plan and deadlines associated
therewith. (Publication Affidavit; Pullo Decl. ¶ 7.)

32. The Court now turns to a review of the legal

and factual issues raised in connection with the motion
to confirm the Plan, beginning with an objection to the
constitutionality of PROMESA itself.
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Appendix C

PROMESA’s Consistency with the

Constitution of the United States15

33. Challenges to PROMESA itself, primarily by

bondholder Peter Hein, assert, but fail as a matter of law
to show, that PROMESA is unconstitutional.

34. The Bankruptcy Clause: Objections by pro se

claimants Peter Hein (Docket Entry No. 18575) (the
“Hein Objection”) and Arthur Samodovitz (Docket
Entry No. 18433) (the “Samodovitz Objection”) assert

15.  The Court has received and reviewed the Notice of

Appearance and Request for Service of Papers (Docket Entry No.
19647), as well as the Notice of Participation by the United States
of America (Docket Entry No. 19710), filed by the United States
Department of Justice, Civil Division, notifying the Court that
the United States intends to “participate in the above-captioned
proceeding for the purpose of defending the constitutionality of
PROMESA as it applies to the proposed approval of the Plan of
Adjustment.” (Docket Entry No. 19710 at 2.) The Court has also
received and reviewed the Response of the United States of America
to Order Regarding Plan Modification Necessary to the Entry of
an Order Confirming Plan of Adjustment for the Commonwealth of
Puerto Rico, the Employees Retirement System of the Government
of the Commonwealth of Puerto Rico, and the Puerto Rico Public
Buildings Authority (Docket Entry No. 19774). The Court proceeds
to enter its Findings of Fact and Conclusions of Law because Rule
5.1(c) of the Federal Rules of Civil Procedure provides that “[b]efore
the time to intervene expires, the court may reject the constitutional
challenge, but may not enter a final judgment holding the statute
unconstitutional.” Fed. R. Civ. P. 5.1(c). That is to say, “[t]he court
may reject a constitutional challenge at any time[.]” Fed. R. Civ. P.
5.1 advisory committee’s note. The Court herein rejects constitutional
challenges to PROMESA.
 84a

Appendix C

that PROMESA violates the Bankruptcy Clause of the

Constitution of the United States because it is not uniform
with Chapter 9, which requires, as a predicate to filing
a petition, a showing of insolvency. (Samodovitz Obj. at
11-12; Hein Obj. at 33-34 (discussing 11 U.S.C. §  109(c)
(3)). See also Nov. 22, 2021, Hr’g Tr. 140:5-21 (“Chapter
9 . . . applies throughout the country, except for Puerto
Rico, [and] Chapter 9 requires proof of insolvency. . . . But
in this PROMESA proceeding, proof of insolvency is not
being imposed as a requirement for a discharge.”).)

35. PROMESA does not violate the uniformity

requirement of the Bankruptcy Clause of the Constitution
of the United States, which empowers Congress to
“establish . . . uniform Laws on the subject of Bankruptcies
throughout the United States.” U.S. Const. art. I, §  8,
cl. 4 (the “Bankruptcy Clause”). U.S. Const., Art. IV,
§ 3, cl. 2. The reason for this broad grant of authority to
Congress is that our Constitution “envisions a federalist
structure, with the National Government exercising
limited federal power and other, local governments—
usually state governments—exercising more expansive
power.” Fin. Oversight & Mgmt. Bd. for P.R. v. Aurelius
Inv., LLC, 140 S. Ct. 1649, 1658, 207 L. Ed. 2d 18 (2020)
(hereinafter, “Aurelius”). In legislating with respect
to territories, however, Congress has authority to
act like a state legislature, with sovereign authority
unconstrained by certain of the restrictions that limit
Congress’s authority to enact laws for the United States
“as a political body of states in union.” Cincinnati Soap
Co. v. United States, 301 U.S. 308, 323, 57 S. Ct. 764, 81
L. Ed. 1122, 1937-1 C.B. 317 (1937) (“In dealing with the
 85a

Appendix C

territories, possessions and dependencies of the United

States, this nation has all the powers of other sovereign
nations, and Congress in legislating is not subject to the
same restrictions which are imposed in respect of laws
for the United States considered as a political body of
states in union.”); Palmore v. United States, 411 U.S.
389, 397, 93 S. Ct. 1670, 36 L. Ed. 2d 342 (1973) (“Not
only may statutes of Congress of otherwise nationwide
application be applied to the District of Columbia, but
Congress may also exercise all the police and regulatory
powers which a state legislature or municipal government
would have in legislating for state or local purposes.”).
Congress’s authority to govern territories is “general
and plenary, arising from and incidental to the right to
acquire the territory itself, and from the power given by
the constitution to make all needful rules and regulations
respecting the territory or other property belonging to the
United States.” Late Corp. of the Church of Jesus Christ
of Latter-Day Saints v. United States, 136 U.S. 1, 42, 10 S.
Ct. 792, 34 L. Ed. 478 (1890); see Palmore, 411 U.S. at 398
(noting that Congress’s authority to legislate with respect
to the District of Columbia “permits it to legislate for the
District in a manner with respect to subjects that would
exceed its powers, or at least would be very unusual, in
the context of national legislation enacted under other
powers delegated to it”).16

16.  Nor would a contrary holding necessarily prove fatal to

PROMESA or to the Plan. Congress expressly provided in the
legislation’s severability clause (section 3(b) of PROMESA) that
the solution to any uniformity problem would not be to strike down
PROMESA, but rather to extend it to any similarly situated territory,
“provided that the legislature of that territory adopts a resolution
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Appendix C

36. Congress unambiguously invoked its Article IV

authority when it enacted PROMESA. See Aurelius,
140 S. Ct. 1649, 1664-65 (“Congress expressly invoked
a constitutional provision allowing it to make local debt-
related law (Article IV).”). The uniformity requirement
is, by the Bankruptcy Clause’s plain text, a limitation
on a specific enumerated power within Article I, not a
generally applicable limitation that restricts the exercise
of legislative power where it would otherwise be proper
under Article IV. Accordingly, the Bankruptcy Clause-
related objections of Mr. Samodovitz and Mr. Hein are
overruled.

37. Substantive Due Process and the Ex Post

Facto Clause: Mr. Hein argues that the retroactive
application of PROMESA to pre-enactment debts violates
substantive due process and that the Ex Post Facto Clause
prohibits the retroactive application of a statute (such as
PROMESA) to impair his prepetition bonds (Hein Obj. at
17). The Supreme Court opinion on which Mr. Hein relies,
Eastern Enterprises v. Apfel, 524 U.S. 498, 537-38, 118 S.
Ct. 2131, 141 L. Ed. 2d 451 (1998), is inapposite because it
does not support the theories Mr. Hein purports to derive
from it. In deciding that the Coal Industry Retiree Health
Benefit Act of 1992 imposed severe retroactive liability on
a limited class of parties that could not have anticipated
the liability (and that the liability was substantially
disproportionate to the parties’ past experience), thereby

signed by the territory’s governor requesting the establishment

and organization of a Financial Oversight and Management Board
pursuant to section 101.” 48 U.S.C.A. § 2102(b) (Westlaw through
P.L. 117-80).
 87a

Appendix C

violating the Takings Clause of the Constitution of the

United States, 524 U.S. at 528-29, the Supreme Court
expressed reservations about applying the doctrine of
substantive due process to economic legislation and, in
light of its determination that a taking had occurred,
did not base its decision on the doctrine of substantive
due process, 524 U.S. at 537-38. It likewise declined to
extend the Ex Post Facto Clause, which is “directed at the
retroactivity of penal legislation,” to legislation affecting
property and for which the jurisprudence of the Takings
Clause is more appropriate, 524 U.S. 533-34. Accordingly,
Mr. Hein fails to demonstrate that substantive due
process analysis is appropriate, that the Ex Post Facto
Clause of the Constitution is applicable to PROMESA, or
that PROMESA violates such constitutional principles.
See U.S. Const. art. I, § 9, cl. 3. The Court now turns to
PROMESA’s plan confirmation requirements.

Compliance with PROMESA Sections

104(j) and 313

38. The Oversight Board must certify the submission

or modification of a plan of adjustment on behalf of a debtor
in a case under Title III of PROMESA before submitting
or modifying such plan of adjustment. See PROMESA
§  104(j)(1)-(2). The Oversight Board may certify a plan
of adjustment only if it determines, in its sole discretion,
that the Plan is consistent with the applicable certified
fiscal plan. See id. § 104(j)(3). The Oversight Board, after
the issuance of a certification pursuant to PROMESA
Section 104(j), may modify the plan at any time before
confirmation, but may not modify the plan so that the plan
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Appendix C

as modified fails to meet the requirements of PROMESA

Title III. See id. § 313. After the Oversight Board files a
modification, “the plan as modified becomes the plan.” Id.

39. The Oversight Board has complied with its

obligations pursuant to PROMESA Sections 104(j) and
313. On April 23, 2021, the Oversight Board certified the
Commonwealth’s current fiscal plan, which also covers
ERS and PBA (the “Fiscal Plan”). (Jaresko Decl. ¶ 28;
Debtors Ex. 10.)

40. On September 26, 2019, the Oversight Board

certified the submission of the Title III Joint Plan of
Adjustment of the Commonwealth of Puerto Rico, et
al. (Docket Entry No. 18806-5) (the “Certification of the
Submission of the Original Plan”). (Debtors Ex. 122.) The
Oversight Board subsequently filed the Title III Joint
Plan of Adjustment of the Commonwealth of Puerto Rico,
et al. (Docket Entry No. 8765) (the “Original Plan”).

41. On February 28, 2020, the Oversight Board

certified the modification of the Original Plan (Docket
Entry No. 18807-1) (the “Certification of the Submission
of the Amended Plan”). (Debtors Ex. 123.) The Oversight
Board subsequently filed the Amended Title III Joint Plan
of Adjustment of the Commonwealth of Puerto Rico, et
al. (Docket Entry No. 11946) (the “First Amended Plan”).

42. On March 8, 2021, the Oversight Board certified

the modification of the First Amended Plan (Docket Entry
No. 18807-2) (the “Certification of the Submission of the
Second Amended Plan”). (Debtors Ex. 124.) The Oversight
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Appendix C

Board subsequently filed the Second Amended Title

III Joint Plan of Adjustment of the Commonwealth of
Puerto Rico, et al. (Docket Entry No. 15976) (the “Second
Amended Plan”).

43. On May 11, 2021, the Oversight Board certified

the modification of the Second Amended Plan (Docket
Entry No. 18807-3) (the “Certification of the Submission
of the Third Amended Plan”). (Debtors Ex. 125.) The
Oversight Board subsequently filed the Third Amended
Title III Joint Plan of Adjustment of the Commonwealth
of Puerto Rico, et al. (Docket Entry No. 16740) (the “Third
Amended Plan”).

44. On June 29, 2021, the Oversight Board certified the

modification of the Third Amended Plan (Docket Entry
No. 18807-4) (the “Certification of the Submission of the
Fourth Amended Plan”). (Debtors Ex. 126.) The Oversight
Board subsequently filed the Fourth Amended Title
III Joint Plan of Adjustment of the Commonwealth of
Puerto Rico, et al. (Docket Entry No. 17194) (the “Fourth
Amended Plan”).

45. On July 12, 2021, the Oversight Board certified the

modification of the Fourth Amended Plan (Docket Entry
No. 19569 Ex. A) (the “Certification of the Submission
of the Fifth Amended Plan). (Debtors Ex. 127.) The
Oversight Board subsequently filed the Fifth Amended
Title III Joint Plan of Adjustment of the Commonwealth
of Puerto Rico, et al. (Docket Entry No. 17306) (the “Fifth
Amended Plan”).
 90a

Appendix C

46. On July 26, 2021, the Oversight Board certified the

modification of the Fifth Amended Plan (Docket Entry
No 19569 Ex. B) (the “Certification of the Submission
of the Sixth Amended Plan”). (Debtors Ex. 128.) The
Oversight Board subsequently filed the Sixth Amended
Title III Joint Plan of Adjustment of the Commonwealth
of Puerto Rico, et al. (Docket Entry No. 17516) (the “Sixth
Amended Plan”).

47. On July 30, 2021, the Oversight Board certified

the modification of the Sixth Amended Plan (Docket
Entry No. 18807-7) (the “Certification of the Submission
of the Seventh Amended Plan”). (Debtors Ex. 129.) The
Oversight Board subsequently filed the Seventh Amended
Title III Joint Plan of Adjustment of the Commonwealth
of Puerto Rico, et al. (Docket Entry No. 17627) (the
“Seventh Amended Plan”). (Debtors Ex. 1.)

48. On November 3, 2021, the Oversight Board

certified the modification of the Seventh Amended Plan
(Docket Entry No. 19106-4) (the “Certification of the
Submission of the Eighth Amended Plan”). (Debtors Ex.
137.) The Oversight Board subsequently filed the Eighth
Amended Title III Joint Plan of Adjustment of the
Commonwealth of Puerto Rico, et al. (Docket Entry No.
19053) (the “Eighth Amended Plan”). (Debtors Ex. 136.)

49. On November 7, 2021, the Oversight Board

certified the modification of the Eighth Amended Plan
(Docket Entry No. 19119-2) (the “Certification of the
Submission of the First Modified Eighth Amended Plan”).
(Debtors Ex. 144.) The Oversight Board subsequently
 91a

Appendix C

filed the Modified Eighth Amended Title III Joint Plan

of Adjustment of the Commonwealth of Puerto Rico, et
al. (Docket Entry No. 19114) (the “First Modified Eighth
Amended Plan”). (Debtors Ex. 143.)

50. On November 12, 2021, the Oversight Board

certified the modification of the First Modified Eighth
A mended Plan (Docket Entr y No. 19 327-1) (the
“Certification of the Submission of the Second Modified
Eighth Amended Plan”). (Debtors Ex. 147.) The Oversight
Board subsequently filed the Modified Eighth Amended
Title III Joint Plan of Adjustment of the Commonwealth
of Puerto Rico, et al. (Docket Entry No. 19184) (the
“Second Modified Eighth Amended Plan”).

51. On November 21, 2021, the Oversight Board

certified the modification of the Second Modified
Eighth Amended Plan (Docket Entry No. 19327-2) (the
“Certification of the Submission of the Third Modified
Eighth Amended Plan”). (Debtors Ex. 148.) The Oversight
Board subsequently filed the Modified Eighth Amended
Title III Joint Plan of Adjustment of the Commonwealth
of Puerto Rico, et al. (Docket Entry No. 19323) (the “Third
Modified Eighth Amended Plan”). (Debtors Ex. 149.)

52. On November 24, 2021, the Oversight Board

certified the modification of the Third Modified Eighth
A mended Plan (Docket Entr y No. 19569 Ex. C)
(the “Certification of the Submission of the Fourth
Modified Eighth Amended Plan”). The Oversight Board
subsequently filed, on November 28, 2021, the Modified
Eighth Amended Title III Joint Plan of Adjustment of
 92a

Appendix C

the Commonwealth of Puerto Rico, et al. (Docket Entry

No. 19367) (the “Fourth Modified Eighth Amended Plan”).

53. On December 20, 2021, the Oversight Board

certified the modification of the Fourth Modified
Eighth Amended Plan (Docket Entry No. 19569 Ex.
D) (the “Certification of the Submission of the Fifth
Modified Eighth Amended Plan”). The Oversight Board
subsequently filed, on December 21, 2021, the Modified
Eighth Amended Title III Joint Plan of Adjustment of
the Commonwealth of Puerto Rico, et al., (Docket Entry
No. 19568) (the “Fifth Modified Eighth Amended Plan”).

54. On January 14, 2022, the Oversight Board certified

the sixth modification of the Modified Eighth Amended
Plan and the submission of the Plan upon a determination,
in the Oversight Board’s sole discretion, that the Plan
was consistent with the Fiscal Plan. (Docket Entry No.
19786 Ex. A) (the “Certification of the Submission of
the Plan”). Accordingly, the Oversight Board submitted
the modification and the Plan described in the following
paragraph in compliance with section 104(j) of PROMESA.

55. On January 14, 2022, the Oversight Board filed the

Modified Eighth Amended Title III Plan of Adjustment of
the Commonwealth of Puerto Rico, et al. (Docket Entry
No. 19784) (as already defined herein, the “Plan”). The
Oversight Board submitted the Plan in accordance with
section 313 of PROMESA. For the reasons explained
herein, the Court confirms the Plan and holds that it meets
the requirements of PROMESA and that the Oversight
Board has complied with all provisions of PROMESA
applicable to confirmation of the Plan.
 93a

Appendix C

Compliance with PROMESA Section 314(b)

A. PROMESA § 314(b)(1): The Plan Fully Complies

with the Provisions of the Bankruptcy Code Made
Applicable by PROMESA § 301.

56. As required by Bankruptcy Rule 3016(a), the Plan

is dated and identifies the Debtors as the proponents.
(Plan at 1.) In addition, as detailed below, the Plan satisfies
the requirements of sections 1122, 1123(a)(1), 1123(a)(2),
1123(a)(3), 1123(a)(4), 1123(a)(5), 1123(b), and 1123(d) of
the Bankruptcy Code.

i. Bankruptcy Code Section 1122(a)

57. With the exception of Administrative Expense

Claims and Professional Claims, which need not
be classified, Alticle IV of the Plan designates the
classification of Claims. The Plan’s classification of Claims
complies with section 1122(a) of the Bankruptcy Code
because each Class contains only claims that are either all
unsecured Claims or are all seemed Claims seemed by the
same collateral, or are otherwise substantially similar to
the other claims in the class. (Jaresko Decl. ¶ 47.) The Plan
designates the following sixty-nine (69) Classes of Claims:

Claim Class Debtor(s)

Vintage PBA Bond Claims Class 1 PBA
Vintage PBA Bond Claims Class 2 PBA
(Assmed)
Vintage PBA Bond Claims Class 3 PBA
(National)
 94a

Appendix C

Claim Class Debtor(s)

Vintage PBA Bond Claims Class 4 PBA
(Ambac)
Vintage PBA Bond Claims Class 5 PBA
(FGIC)
Vintage PBA Bond Claims Class 6 PBA
(Syncora)
Retail Vintage PBA Bond Class 7 PBA
Claims
2011 PBA Bond Claims Class 8 PBA
Retail 2011 PBA Bond Class 9 PBA
Claims
2012 PBA Bond Claims Class 10 PBA
Retail 2012 PBA Bond Class 11 PBA
Claims
PBA/DRA Seemed Claim Class 12 PBA
PBA General Unsecmed Class 13 PBA
Claims
PBA/DRA Unsecmed Claim Class 14 PBA
Vintage CW Bond Claims Class 15 Commonwealth
Retail Vintage CW Bond Class 16 Commonwealth
Claims
Vintage CW Bond Claims Class 17 Commonwealth
(Assmed)
Vintage CW Bond Claims Class 18 Commonwealth
(National)
Vintage CW Bond Claims Class 19 Commonwealth
(Ambac)
 95a

Appendix C

Claim Class Debtor(s)

Vintage CW Bond Claims Class 20 Commonwealth
(FGIC)
Vintage CW Bond Claims Class 21 Commonwealth
(Syncora)
Vintage CW Bond Claims Class 22 Commonwealth
(Taxable Election)
Vintage CW Guarantee Class 23 Commonwealth
Bond Claims
Vintage CW Guarantee Class 24 Commonwealth
Bond Claims (Assmed)
Vintage CW Guarantee Class 25 Commonwealth
Bond Claims (National)
Vintage CW Guarantee Class 26 Commonwealth
Bond Claims (Ambac)
Vintage CW Guarantee Class 27 Commonwealth
Bond Claims (FGIC)
Vintage CW Guarantee Class 28 Commonwealth
Bond Claims (Syncora)
Vintage CW Guarantee Bond Class 29 Commonwealth
Claims (Taxable Election)
2011 CW Bond Claims Class 30 Commonwealth
Retail 2011 CW Bond Claims Class 31 Commonwealth
2011 CW Bond Claims Class 32 Commonwealth
(Assured)
2011 CW Bond Claims Class 33 Commonwealth
(Taxable Election)
 96a

Appendix C

Claim Class Debtor(s)

2011 CW Guarantee Bond Class 34 Commonwealth
Claims
2011 CW Guarantee Bond Class 35 Commonwealth
Claims (Taxable Election)
2011 CW Series D/E/PIB Class 36 Commonwealth
Bond Claims
2011 CW Series D/E/PIB Class 37 Commonwealth
Bond Claims (Assured)
Retail 2011 CW Series D/E/ Class 38 Commonwealth
PIB Bond Claims
2011 CW Series D/E/PIB Class 39 Commonwealth
Bond Claims (Taxable
Election)
2012 CW Bond Claims Class 40 Commonwealth
Retail 2012 CW Bond Claims Class 41 Commonwealth
2012 CW Bond Claims Class 42 Commonwealth
(Assured)
2012 CW Bond Claims Class 43 Commonwealth
(Taxable Election)
2012 CW Guarantee Bond Class 44 Commonwealth
Claims
2012 CW Guarantee Bond Class 45 Commonwealth
Claims (Taxable Election)
2014 CW Bond Claims Class 46 Commonwealth
Retail 2014 CW Bond Claims Class 47 Commonwealth
 97a

Appendix C

Claim Class Debtor(s)

2014 CW Bond Claims Class 48 Commonwealth
(Taxable Election)
2014 CW Guarantee Bond Class 49 Commonwealth
Claims
2014 CW Guarantee Bond Class 50 Commonwealth
Claims (Taxable Election)
Retired ERS Pruiicipant Class Commonwealth
Below-Threshold Claims 51A
Retired JRS Participant Class Commonwealth
Below-Threshold Claims 51B
Retired TRS Participant Class Commonwealth
Below-Threshold Claims 51C
Retired ERS Participant Class Commonwealth
Above-Threshold Claims 51D
Retired JRS Participant Class Commonwealth
Above-Threshold Claims 51E
Retired TRS Participant Class Commonwealth
Above-Threshold Claims 51F
Active ERS Participant Class Commonwealth
Claims 51G
Active JRS Participant Class Commonwealth
Claims 51H
Active TRS Participant Class 51I Commonwealth
Claims
System 2000 Participant Class Commonwealth
Claims 51J
 98a

Appendix C

Claim Class Debtor(s)

VTP Payroll Participant Class Commonwealth
Below-Threshold Claims 51K
VTP Payroll Participant Class Commonwealth
Above-Threshold Claims 51L
AFSCME Claims Class 52 Commonwealth
Daily Producer Claims Class 53 Commonwealth
Eminent Domain/Inverse Class 54 Commonwealth
Condemnation Claims
Energy Incentive Claims Class 55 Commonwealth
Med Center Claims Class 56 Commonwealth
Tax Credit Claims Class 57 Commonwealth
CW General Unsecured Class 58 Commonwealth
Claims
GDB/PET Claim Class Commonwealth
58A
CW/HTA Claims Class 59 Commonwealth
CW/Convention Center Class 60 Commonwealth
Claims
CW/PRIFA Rum Tax Claims Class 61 Commonwealth
CW/MBA Claims Class 62 Commonwealth
CW Appropriations Claims Class 63 Commonwealth
Section 510(b) Subordinated Class 64 Commonwealth,
Claims ERS, and PBA
ERS Bond Claims Class 65 ERS
 99a

Appendix C

Claim Class Debtor(s)

ERS General Unsecured Class 66 ERS
Claims
Gracia-Gracia Claims Class 67 Commonwealth
Convenience Claims Class 68 Commonwealth
and ERS
Federal Claims Class 69 Commonwealth

(Jaresko Decl. ¶ 47.)

58. The classification of Claims set forthh in the Plan

is reasonable and was not done to control the outcome of
voting to accept or reject the Plan, as the classification is
based upon differences in the legal nature and/or priority
of such Claims in accordance with applicable law. To the
extent unsecured Claims are separately classified from
the Commonwealth’s general unsecured claims (Class
58),1717 it is not to genymander an accepting Class, as
proven by there being several impaired accepting Classes
for each Debtor. Rather, separate classification is used
for govemmental or business reasons usually requiring
different treatment of separate Classes’ Claims. (Jaresko
Decl. ¶ 48.)

17.  Class 58A consists of the GDB/PET Claim, which will

receive payments from the Commonwealth equal to, and on the
same timeframe as, the pro rata payments to be made to holders of
Allowed CW General Unsecured Claims (Class 58) pursuant to the
Plan. (Plan § 62.4.)
 100a

Appendix C

59. All holders of Claims in Classes 1-11 hold PBA

Bonds and allege the same guarantee against the
Commonwealth, but are separately classified based on
three factors: the year in which the bonds were issued;
whether the bonds are insured and, if so, the insurer; and
whether the bondholder is a retail investor. Classification
depending on year of issuance is based on differences in
the risk profile associated with each issuance potentially
having violated the debt service limit set forth in Article
VI, section 2 of the Commonwealth Constitution, with the
treatment of Classes varying based on how much risk of
disallowance of the Claims existed for each Class. Holders
of insured bonds issued the same year are separately
classified because the insurance agreements provide
bondholders different rights. Claims of Retail Investors
are separately classified because such Claims are smaller
in dollar amount and the holders’ rights differ from those
of holders of GO Bonds and PBA Bonds who are parties
to the GO/PBA Plan Support Agreement, and holders
of bonds insured by the Monolines. Thus, the holders
of Claims in Classes 1-11 are classified by whether the
PBA Bonds they hold: (a) were issued prior to 2011 and
are (i) uninsured (Class 1), (ii) uninsured and held by a
Retail Investor (Class 7), (iii) insured by Assured (Class
2), National (Class 3), Ambac (Class 4), FGIC (Class 5),
or Syncora (Class 6); (b) were issued in 2011 and are (i)
uninsured (Class 8), or (ii) uninsured and held by a Retail
Investor (Class 9); or (c) were issued in 2012 and are (i)
uninsured (Class 10), or (ii) uninsured and held by a Retail
Investor (Class 11). (Jaresko Decl. ¶ 48.)
 101a

Appendix C

60. Bond Claims against the Commonwealth in Classes

15-50 are classified separately based on the date of bond
issuance, whether the bonds are insured and, if so, the
insurer, and whether the bondholder is a retail investor as
follows: (a) whether the bonds were issued prior to March
2011 (Classes 15-29), March or later in 2011 (Classes 30-
39), in 2012 (Classes 40-45), or 2014 (Classes 46-50), and
(b) whether the bonds are (i) uninsured (Classes 15, 23,
30, 34, 36, 40, 44, 46, and 49) and held by Retail Investors
(Classes 16, 31, 38, 41, and 47), or (ii) insured by Assured
(Classes 17, 24, 32, and 42), National (Classes 18 and 25),
Ambac (Classes 19 and 26), FGIC (Classes 20 and 27), or
Syncora (Classes 21 and 28). (Jaresko Decl. ¶ 49.)

61. Based on the elections offered pursuant to the Plan,

certain Vintage CW Bond Claims, Vintage CW Guarantee
Bond Claims, 2011 CW Bond Claims, 2011 CW Guarantee
Bond Claims, 2011 CW Series D/E/PIB Bond Claims,
2012 CW Bond Claims, 2014 CW Bond Claims, and 2014
CW Guarantee Bond Claims, to the extent elections were
made, were shifted to other Classes (Classes 22, 29, 33, 35
39, 43, 48, and 50, respectively) to denote the election made
by holders of such Claims to receive taxable distributions
on account of their bonds, and the alternative form of
distribution elected. (Jaresko Decl. ¶ 49.) Only Puerto Rico
Investors could elect to receive taxable bonds because,
unlike mainland U.S. investors, Puerto Rico Investors
are generally not subject to U.S. federal income taxation.
(Brownstein Decl. ¶ 16.) When Puerto Rico Investors
elect taxable treatment, it increases the likelihood that a
greater amount of tax-exempt bonds will be available for
mainland U.S. bondholders. (Id.) The taxable election for
 102a

Appendix C

on-island bondholders benefits mainland U.S. bondholders

because, as a result of on-island bondholders taking the
taxable election, mainland investors receive a higher
amount of tax-exempt bonds affording a greater after-tax
gain.18 (See Nov. 12, 2021, Hr’g Tr. 112:5-15.)

62. Active and retired employees holding pension

Claims comprise Classes 51A-51L. The services that
are and have been performed by these current and
retired employees are integral to the basic provision of
governmental services to the Commonwealth’s residents
and the Government could not function without them.
Moreover, the best interests of the Commonwealth
and all of its stakeholders are served by ensuring that
pensioners receive monthly benefits to maintain the
ability to support themselves without requiring additional
future support from the Commonwealth. These pension
Claims are further classified separately based on
whether the pensioners (a) are retired (Classes 51A-F,
K, and L) or active (Classes 51G-J), (b) are participants

18.  On cross-examination, the Debtors’ w itness, David

M. Brownstein, Managing Director in the Municipal Finance
Department at Citigroup Global Markets Inc., testified that an
individual mainland bondholder in a 35 percent tax bracket would
benefit by a 14 percent after-tax gain: “Clearly, if you’re a taxpayer
who pays state and local taxes, you’re higher than that, but in a 35
percent tax bracket, you, as an U.S. holder, mainland holder of these
bonds, for the 49 million in bonds that the local on-island holders
took taxable instead of you, you have a 14 percent after-tax gain.
That is what was provided to you by giving the on-island investors
the right to elect taxable bonds, which meant that your portfolio
would have a higher amount of tax[-]exempt bonds.” (Nov. 12, 2021,
Hr’g Tr. 112:8-15.)
 103a

Appendix C

in ERS (Classes 51A, 51D, and 51G), JRS (Classes 51B,

51E, and 51H), TRS (Classes 51C, 51F, and 51I), System
2000 (51J), or participated in a voluntary termination
program (Classes 51K and 51L), because each program
had different funding sources as of the Commonwealth
Petition Date, with different levels of underfunding, and
(c) receive total monthly pension benefits above (Classes
51D-F and 51L) or below (Classes 51A-C and 51K) $1,500.19
(Jaresko Decl. ¶¶ 50-51.)

63. The separate classification of Claims for retirement

benefits from the claims of other creditors is justified.
Unlike the Claims of commercial creditors, who contracted
to be paid a fixed sum at a fixed time, retirees agreed to
defer their compensation with the expectation that the
deferred compensation, i.e., their pension, would be paid in
periodic payments over the balance of their life (and that of
any surviving spouse), based on formulas established when
they worked for the Commonwealth or other governmental
entities. Accordingly, the Plan proposes to make payments
to retirees over the life of the retiree and any eligible
spouse through the PayGo system and specified statutory
rules established before the Commonwealth’s Title III
case began, as modified pursuant to the Plan, including
through the “freeze” of TRS and JRS and elimination of
cost of living adjustments (“COLAs”).

19.  As set forth below, in light of the passage of Act 53 and

modifications to the proposed plan after the classes were established
and votes were solicited, the Plan was modified to remove the Monthly
Benefit Modification feature of the Seventh Amended Plan, and
the $1,500 threshold no longer affects the treatment of pensioners’
claims.
 104a

Appendix C

64. Claims held by AFSCME, related to certain

collective bargaining agreements between AFSCME
affiliates and the Commonwealth that will occur pursuant
to the Plan, are classified in Class 52, separately from
general unsecured claims. The separate classification
is necessary because the treatment of these claims is
the result of the adoption of a new collective bargaining
agreement. This treatment is inapplicable to other
Classes of unsecured Claims and it is beneficial to the
Commonwealth and all its stakeholders to provide such
treatment as opposed to the potential litigation and
treatment of any rejection damages Claims relating
to these collective bargaining agreements. AFSCME
and its local affiliates collectively constitute one of
Puerto Rico’s primary public employee unions and an
important bargaining unit whose members provide the
Commonwealth’s public services. (Jaresko Decl. ¶ 52.)
Separate classification of these Claims is reasonable,
justified, and supported by a governmental purpose.
The Plan provides that all other collective bargaining
agreements are neither being rejected nor assumed.

65. The Claims held by Suiza Dairy, Inc. and Vaqueria

Tres Monjitas, Inc.—the Commonwealth’s primary
producers and sources of dairy for the population—are
classified separately in Class 53, which rejected the
Plan. The Plan may nonetheless be confirmed pursuant
to Bankruptcy Code section 1129(b)(2)(B) because no
Claims junior to the Claims in Class 53 receive or retain
any property and there is no contention the Plan unfairly
discriminates against Class 53. Moreover, if there were
such a contention it would be overruled because the
Allowed Claims in Class 53 receive more than CW General
 105a

Appendix C

Unsecured Claims in Class 58. The separate classification

of these unsecured claims is justified by the particular
importance of the milk industry in Puerto Rico. It is very
costly and difficult for Puerto Rico to consistently import
dairy, which has a short shelf life—a fact underscoring
the importance of the domestic dairy industry to the
Commonwealth and its residents. Dairy production is
one of the key issues of food security on the Island. The
dairy industry also is one of the Commonwealth’s largest
agricultural industries and employs a significant number
of Puerto Rico’s residents. It is reasonable and justified
to classify such dairy producers’ Claims separately and
provide such Class with a fifty percent (50%) recovery, 20
ensuring that such integral Claimants do not suffer further
financial hardship and impair an industry that is vital to
the health of the Commonwealth’s citizens. (Jaresko Decl.
¶ 53.) Further, the dairy producers’ claims arose from
the prepetition Dairy Producer Settlement (see Jaresko
Decl. ¶ 53; Plan §§ 1.190, 1.191; Debtors Ex. 26 (the “Dairy
Producer Settlement”)), and the Commonwealth obligation
to pay certain fees to protect consumers (see Debtors Ex.
26 ¶ 14). Accordingly, the separate classification of claims
held by large dairy producers is reasonable, justified, and
supported by a governmental purpose.

66. Eminent Domain/Inverse Condemnation Claims

(as that term is defined in section 1.212 of the Plan) are
separately classified in Class 54 of the Plan. The holders of
such Claims assert that they hold prepetition constitutional

20.  The objection of Suiza Dairy is discussed and resolved infra,

at paragraphs 175-77.
 106a

Appendix C

Claims based on seizures or the inverse condemnation of

real property pursuant to the Commonwealth’s eminent
domain power. The Debtors allege that the Eminent
Domain Claims are partially secured by funds deposited
by the Commonwealth with the Clerk of the Court of First
Instance in connection with condemnation proceedings
underlying such Claims in accordance with Puerto Rico
law, 32 L.P.R.A. §  2907. In accordance with applicable
Puerto Rico law, upon commencement of a condemnation
proceeding, title to a subject property is transferred to
the Commonwealth and funds on deposit become available
to the former title holder. 21 32 L.P.R.A. § 2907. The Fifth
Modified Eighth Amended Plan filed with the Court
on December 21, 2021 (Docket Entry No. 19568) treats
the Eminent Domain/Inverse Condemnation Claims as
secured Claims to the extent the Claims are allowable
and there is cash on deposit for them. It further provides
that the Eminent Domain/Inverse Condemnation Claims
will be treated as Class 58 CW General Unsecured Claims
entitled to the same treatment as other holders of CW
General Unsecured Claims to the extent each allowable
Claim exceeds the cash on deposit for it (Jaresko Decl.
¶ 54.) That proposed Plan further provides, however,
that if the Court determines that such Claims must
be paid in full to the extent they are Allowed Claims

21.  If the Commonwealth does not initiate a condemnation

proceeding following applicable eminent domain procedures, or if the
taking is the result of the diminution of the property’s use or value
resulting from government conduct, the former owner of property
may initiate a claim for inverse condemnation for the taking of
property for public use without just compensation. See, e.g., Filler
v. United States, 116 Fed. Cl. 123, 127 n.2 (Fed. Cl. 2014).
 107a

Appendix C

for just compensation, they will be so paid. (See Plan

§§  58.1, 77.1(e) (the “Full-Payment Proposal”).) The
claimants, opposing the proposed treatment of their
claims as partially secured and partially unsecured (or,
in the case of Inverse Condemnation claimants, entirely
unsecured), dispute the classification of any portion of
their claims as general unsecured claims and argue that,
even to the extent their claims are unsecured, they are
nonetheless entitled to payment in full of their allowable
unsecured Claims because the Claims are based on the
Fifth Amendment of the U.S. Constitution. The issue
presented by the Fifth Modified Eighth Amended Plan
and the pertinent objections is whether the Eminent
Domain/Inverse Condemnation claimants are entitled to
have the unsecured portions of their Claims (i.e., those
portions that the Debtors do not already propose to pay
in full) designated as nondischargeable or otherwise
required to be paid in full. The Eminent Domain/Inverse
Condemnation Claims are prepetition Claims arising
from the Commonwealth’s alleged taking of title to the
claimants’ real properties, or deprivation of the claimants
of use of such properties, prior to commencement of the
Commonwealth Title III case. It is undisputed that the
Fifth Modified Eighth Amended Plan does not currently
except the Eminent Domain/Inverse Condemnation
Claims from discharge. The Debtors and claimants
disagree as to whether the Court can and should except
them from discharge. Because the Fifth Amendment of the
U.S. Constitution provides that “private property [shall
not] be taken for public use, without just compensation,”
the claimants assert that Congress lacks power to
legislate the discharge of the Eminent Domain/Inverse
 108a

Appendix C

Condemnation Claims for less than payment in full of

just compensation. Conversely, the Debtors contend that
article I, section 8, clause 4 of the U.S. Constitution,
which grants Congress the power to pass uniform laws
on the subject of bankruptcies, empowers Congress to
provide for the discharge of such claims for less than
payment in full as Debtors have done in the Fifth Modified
Eighth Amended Plan. As set forth more fully below,
the Court concludes that the Eminent Domain/Inverse
Condemnation Claims identified in Class 54 are not
subject to impairment and discharge. Accordingly, the
Class 54 claimants’ assertions that their Claims should
be paid in full or deemed nondischargeable are sustained
and such Allowed Claims must be paid in accordance
with Debtors’ Full-Payment Proposal in connection with
Eminent Domain/Inverse Condemnation Claims (as set
forth in Plan §§ 58.1, 77.1(e)). The Court’s January Order
conditioned entry of this FFCL on the Debtors’ revision of
the Plan to incorporate the treatment of Allowed Eminent
Domain/Inverse Condemnation Claims as set forth in the
Full-Payment Proposal.

67. Claims in Class 55 arise from, or relate to, the

Energy Incentive Act, which provides tax incentives for
citizens who undertake certain clean-energy projects to
reduce their household’s energy use. Pursuant to the Plan,
such Claims are not paid in cash or other monies in the
Debtors’ Title III Cases, but rather, are satisfied through
reductions in tax revenue. (Jaresko Decl. ¶ 55.) It is in the
Commonwealth’s best interests to promote the reasonable
governmental purpose of supporting residents who are
taking steps to address climate change and who took
 109a

Appendix C

those steps in reliance upon the availability of such tax

deductions under the Energy Incentive Act. Accordingly,
separate classification of such Claims is reasonable and
justified.

68. Class 56 consists of all Claims of certain federally

qualified health centers arising from or relating to the
Medicaid Act. Separate classification of such Claims
is reasonable and justified because such Claims are
held by entities that provide critical medical treatment
to Commonwealth residents, particularly in a global
pandemic, and are payable through Medicare/Medicaid
funds from the federal government that are earmarked
for the payment of such claims and not available to other
general unsecured claimholders. Separate classification
of such Class and enhanced treatment on account of its
Claims through the receipt of a fifty percent (50%) recovery
is reasonable and justified to support such critical services
and ensure that medical providers on the Island are not
underfunded. (Jaresko Decl. ¶ 56.) 42 U.S.C. § 1396a(bb).
Class 56 also exempts the litigation styled Rio Grande
Cmty. Health Ctr. Inc., et al. v. Commonwealth of Puerto
Rico, et al., Case No. 03-1640 (GAG), currently pending in
the United States District Court for the District of Puerto
Rico, from dismissal under section 60.2 of the Plan, and
provides separate treatment for the manner in which that
litigation shall be pursued and resolved by the parties
thereto. (Plan § 60.2.)

69. Class 57 consists of Claims (other than Energy

Incentive Claims) relating to refunds or credits for
the payment of personal income taxes, arising under
 110a

Appendix C

the Puerto Rico Internal Revenue Code of 2011, or an

economic incentive law, in each case resulting in income
tax credits, deductions, or carryforwards. Such Tax
Credit Claims were designed and implemented by the
Government of the Commonwealth to incentivize certain
behavior and to benefit the Commonwealth and support
the economy as a whole. Pursuant to the Plan, such Claims
are not paid in cash or other monies in the Debtors’ Title
III Cases, but rather, are satisfied through reductions
in tax revenue. (Jaresko Decl. ¶ 57.) Accordingly, it is
reasonable and in the best interests of the Commonwealth
and its economy to continue to honor such tax incentives
upon which residents and local businesses have relied, and
to separately classify such Claims.

70. Class 63 consists of Claims arising from or related

to indebtedness only payable from appropriations of the
Commonwealth Legislature. Such claimants, significantly,
have fewer rights than holders of CW General Unsecured
Claims, as they have no ability to compel payment of
their Claims and hold only contingent rights to payment
to the extent appropriated by the Government of the
Commonwealth. (Jaresko Decl. ¶ 58.) It is therefore
reasonable and appropriate to separately classify such
claims.

71. Class 64 consists of Claims determined pursuant

to a Final Order to be subject to section 510(b) of the
Bankruptcy Code. (Jaresko Decl. ¶ 59.) Section 510(b) of
the Bankruptcy Code subordinates such Claims to other
general unsecured claims, and provides that such Claims
are only eligible to receive a recovery pursuant to the
 111a

Appendix C

Plan once all other unsecured creditors have been paid

in full. Because these Claims have a lower priority than
general unsecured claims, they are sufficiently dissimilar
to general unsecured claims to warrant separate
classification and treatment.

72. As each Class contains Claims substantially

similar to each other, the Plan satisfies the requirements
of section 1122(a) of the Bankruptcy Code. 22

22.  Mapfre PRAICO Insurance Company (“Mapfre PRAICO”)

contends that the Plan violates section 1122(a) because it places
Mapfre PRAICO’s claims against the Commonwealth and against
PBA into Class 58 and Class 13, respectively, notwithstanding
Mapfre PRAICO’s assertion that those claims are secured. The
Confirmation Order, however, provides that, to the extent Mapfre
PRAICO’s claims are determined to be secured claims, they will
be unimpaired and not subject to treatment as general unsecured
claims. See Confirmation Order ¶  86 (“Notwithstanding anything
contained in the Plan to the contrary, to the extent that the Claim of a
surety against any of the Debtors is determined to be a secured claim
and allowed in whole or in part, by Final Order, or by operation of
section 502(a) of the Bankruptcy Code following the expiration of the
period to object to any such Claim in accordance with the provisions
of Section 82.1 of the Plan, such Claim shall be paid in full, in Cash;
provided, however, that, in the event some or all of any such Claim
is determined to be an unsecured claim and allowed in whole or in
part, by Final Order, such Claim shall be treated in accordance with
the provisions of Section 17.1, 62.1 or 70.1 of the Plan, as the case may
be.”).) Accordingly, as modified by the Confirmation Order, to the
extent that Mapfre PRAICO’s claims are determined to be secured
claims, such claims will not be treated as general unsecured claims.
Mapfre PRAICO has not objected to the treatment that would be
provided by paragraph 87 of the Confirmation Order. Moreover, the
classification did not affect voting because any separate, unimpaired
class of secured claims would have been deemed to accept the Plan,
 112a

Appendix C

73. The Plan separately classifies Claims not similarly

situated to other Claims based upon differences in the
legal nature and/or priority of such Claims or because
they are asserted against a different Debtor than other
Claims with the same priority, including secured and
unsecured Claims against PBA (Classes 12-14), CW/HTA
Claims (Class 59), CW/Convention Center Claims (Class
60), CW/PRIFA Rum Tax Claims (Class 61), CW/MBA
Claims (Class 62), ERS Bond Claims and ERS General
Unsecured Claims (Classes 65 and 66), Gracia Gracia
Claims (Class 67), and Federal Claims (Class 69).

ii. Bankruptcy Code Section 1122(b)

74. Class 68 consists of Convenience Claims,

comprising Claims equal to or less than $20,000, or Claims
which the holder elects to reduce to $20,000 pursuant to
the Plan. (Plan §  1.162.) Any holder of multiple Claims
in an aggregate amount of $40,000 or more may elect
to reduce all such Claims to an aggregate amount of
$40,000 and be treated within Class 68. (Plan §-1.163, art.
LXXII.) The separate classification of Convenience Claims
is reasonable and necessary to ease the administrative
burden on the Debtors. (See Jaresko Decl. ¶ 60.)

75. The Plan satisfies the requirements of section

1122(b) of the Bankruptcy Code.

see 11 U.S.C. § 1126(f), and Class 13 and Class 58 did not vote to
accept the Plan.
 113a

Appendix C

iii. Bankruptcy Code Section 1123(a)(1)

76. Section 4.1 of the Plan designates sixty-nine (69)

separate Classes of Claims for the Debtors, other than
Claims of the type described in section 507(a)(2) of the
Bankruptcy Code.

77. The Plan satisfies the requirements of section

1123(a)(1) of the Bankruptcy Code.

iv. Bankruptcy Code Section 1123(a)(2)

78. Section 84.1 of the Plan specifies that Claims

in Classes 1 through 50, 51B, 51E, 51G through 51I,
52 through 53, 56, 58 through 66 and 69 are impaired.
Section 84.2 of the Plan specifies that Claims in Classes
51A, 51C, 51D, 51F, 51J through 51L, 54, 55, 57, 67, and
68 are unimpaired.

79. Since the Plan has been modified to exclude Class

54 from the list of impaired Classes and add it to the list
of unimpaired Classes, the Plan satisfies the requirements
of section 1123(a)(2) of the Bankruptcy Code.

v. Bankruptcy Code Section 1123(a)(3)

80. Articles V through LIV, sections 55.2, 55.5, 55.7

through 55.9, articles LVI through LVII, LX, LXII
through LXX and LXXIII of the Plan identify the
treatment of each Class of Claims impaired by the Plan.
Sections 62.2 and 62.3 have been revised to remove any
reference to Eminent Domain Claims from the category of
 114a

Appendix C

CW General Unsecured Claims and treatment thereunder.

81. The Plan satisfies the requirements of section

1123(a)(3) of the Bankruptcy Code.

vi. Bankruptcy Code Section 1123(a)(4)

82. Articles V through LXXIII of the Plan provide

that the treatment of each Claim in each particular Class
is the same as the treatment of each other Claim in such
Class, except to the extent that a holder of an Allowed
Claim has agreed to less favorable treatment of its Claim.
(Jaresko Decl. ¶ 65.)

83. Mr. Hein objects to the payment of certain costs

and fees to some, but not all bondholders, arguing that
such payments render the treatment of the bondholders’
respective claims different, violating section 1123(a)(4) of
the Bankruptcy Code (Hein Obj. at 17). Consummation
Costs, Restriction Fees, or Retail Support Fees are
being paid to certain parties pursuant to the Plan and in
accordance with the plan support agreements negotiated
by the Oversight Board. (See Zelin Decl. ¶¶ 80, 84, 85;
Debtors Exs. 16, 17.) Hein’s objection is unfounded because
these costs are not awarded on account of the creditors’
Claims but, rather, as consideration for the creditors’
actions in facilitating the settlements embodied in the
Plan. (See Nov. 10, 2021, Hr’g Tr. 63:24-64:5, 72:23-73:6;
Zelin Decl. ¶ 78; Jaresko Decl. ¶ 66.) Commitments to pay
Consummation Costs and Restriction Fees were essential
to incentivize parties to engage in continued negotiations
over an extended period of time, and to incentivize parties
 115a

Appendix C

to the plan support agreements to support confirmation

of the Plan. (Zelin Decl. ¶ 91.) Without such fees,
building consensus and encouraging parties to engage in
negotiations and ultimately document their agreements
would have been significantly more difficult, and Plan
confirmation would have been less likely or substantially
prolonged. (Id. ¶¶ 91-92.) The Oversight Board has
determined that it is fair and reasonable for the PSA
Creditors to be paid Consummation Costs as consideration
for their efforts in assisting in the formulation of the
Plan that has garnered significant creditor support, and
to compensate the PSA Creditors for fees and expenses
incurred in connection with the negotiation and execution
of the GO/PBA PSA and HTA/CCDA PSA. (Jaresko Decl.
¶ 216; Zelin Decl. ¶¶ 80, 84, 88, 91-93; Debtors Exs. 16,
17.) During the lengthy and complex negotiation process
led by the Mediation Team, PSA Creditors agreed to
various conditions and covenants set forth in plan support
agreements, including, among other things, a pledge to
support the Plan, the imposition of restrictions on the
transfer of their bonds, and a waiver of their right to seek
reimbursement of expenses through other means. (Zelin
Decl. ¶ 93, Debtors Exs. 16, 17.) The Consummation Costs
are not paid on account of creditors› Claims. (See Jaresko
Decl. ¶ 66.) Rather, the Consummation Costs are paid to
reimburse expenses incurred in negotiating plan support
agreements that enabled the Plan to move forward. (See
Nov. 10, 2021, Hr’g Tr. 63:24-64:5; Zelin Decl. ¶¶ 80, 84, 88,
92.) Thus, the Oversight Board has determined, and this
Court finds that, the 1.5% Consummation Cost expense
is reasonable. (Jaresko Decl. ¶ 216; Zelin Decl. ¶¶ 91-93;
Nov. 10, 2021, Hr’g Tr. 91:17-25.)
 116a

Appendix C

84. Additionally, in exchange for agreeing to support

the Plan and tender or “lock up,” as applicable, the parties’
bonds in accordance with each of the GO/PBA PSA and
HTA/CCDA PSA, it is fair and reasonable to make PSA
Restriction Fees available to holders of bonds issued by
such entities. (Zelin Decl. ¶¶ 80, 84, 85, 89, 91-93; Jaresko
Decl. ¶¶ 127, 178.) Similarly, in exchange for executing
the ERS Stipulation and agreeing to all of its terms and
conditions, including agreeing to support the Plan and
“lock up” their ERS Bonds in connection with the ERS
Stipulation, it is fair and reasonable to make an ERS
Restriction Fee available to each ERS bondholder party
to the ERS Stipulation. (Jaresko Decl. ¶ 216; Zelin Decl.
¶¶ 83, 91-93; Debtors Ex. 19.)

85. As a product of the negotiations culminating in the

GO/PBA PSA, a similar Retail Support Fee (i.e., a form
of “restriction fee”) will be available to Retail Investors
who did not tender and exchange their bonds to join the
GO/PBA PSA. (Zelin Decl. ¶¶ 81, 82; Debtors Ex. 16.)
The Oversight Board determined that providing Retail
Investors an opportunity to receive similar payments is
fair and reasonable, and balances the interests of various
creditor constituencies. (Jaresko Decl. ¶¶ 128, 216.)
Moreover, the Oversight Board has agreed to provide
bondholders with an additional opportunity to certify
that they are Retail Investors and receive their Pro Rata
Share of the GO/PBA Restriction Fee Percentage. (See
Nov. 22, 2021, Hr’g Tr. 44:1-45:4.) The Retail Support Fee
payments are reasonable and appropriate, and will not be
paid on account of Claims.
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Appendix C

86. The provisions for payment of Consummation

Costs, Restriction Fees, and Retail Support Fees are
critical components of the plan support agreements that
made development of the Plan possible. (See Jaresko Decl.
¶ 66.) The payment of Consummation Costs, Restriction
Fees, and Retail Support Fees to certain parties does
not violate section 1123(a)(4) of the Bankruptcy Code,
which mandates that “a plan shall . . . provide the same
treatment for each claim or interest of a particular class
.  .  .  .” 11 U.S.C.A. §  1123(a)(4) (Westlaw through P.L.
117-80). While it is true that all claims must be treated
equally, the same is not true for all claimants. See 7
Collier on Bankruptcy ¶ 1123.01 (16th ed. 2021) (“The
equality addressed by section 1123(a)(4) extends only to
the treatment of members of the same class of claims and
interests, and not to the plan’s overall treatment of the
creditors holding such claims or interests . . . . Creditors
should not confuse ‘equal treatment of claims with equal
treatment of claimants.’”); see also Ad Hoc Comm. of
Non-Consenting Creditors v. Peabody Energy Corp. (In
re Peabody Energy Corp.), 582 B.R. 771, 781 (E.D. Mo.
2017) (same); In re Adelphia Commc’ns Corp., 368 B.R.
140, 249-50 (Bankr. S.D.N.Y. 2007) (“[C]ourts have held
that the statute does not require identical treatment for all
class members in all respects under a plan, and that the
requirements of section 1123(a)(4) apply only to a plan’s
treatment on account of particular claims or interests in
a specific class—not the treatment that members of the
class may separately receive under a plan on account of the
class members’ other rights or contributions.”) (emphasis
in original). Accordingly, the payment of these fees is
consistent with section 1123(a)(4) of the Bankruptcy Code
 118a

Appendix C

and the Hein Objection and the Samodovitz Objection on

this ground are overruled. 23

vii. Bankruptcy Code Section 1123(a)(5)

87. Various provisions of the Plan provide adequate

and proper means for its implementation:

• Article III provides for the payment of Administrative

Expense Claims required to be paid on the Effective
Date;

• Section 74.1 provides for the issuance and distribution

of the New GO Bonds;

• Section 74. 2 prov ides for the issuance and

distribution of the CVIs;

• Section 74.5 ensures the feasibility of the Plan

by providing for the adoption and maintenance

23.  Mr. Hein and Mr. Samodovitz further contend that

Retail Investor bondholders should also be entitled to the 1.5%
Consummation Cost in addition to a Retail Support Fee. While Mr.
Hein and Mr. Samodovitz assert that they should be accorded a larger
payment under the plan support agreements, they do not argue that
their Claims have been treated differently (or impaired) as a result
of the payment of a Consummation Cost to certain PSA creditors,
and the Court finds that there is no such prohibited differential
treatment by reason of the payment of Consummation Costs. Rather,
as explained above, Consummation Costs are not awarded on account
of the individual creditors’ Claims. (Zelin Decl. ¶ 78; Jaresko Decl.
¶ 66.) As noted above, section 1123(a)(4) of the Bankruptcy Code does
not require identical treatment of all claimants.
 119a

Appendix C

of a debt management policy “designed to ensure

that certain past Debt issuance practices of the
Commonwealth are not repeated”;

• Section 76.1 provides, subject to Sections 76.5, 76.7,

and 76.10 of the Plan, that “all Executory Contracts
and Unexpired Leases that exist between the
Debtors and any Entity, and which have not expired
by their own terms on or prior to the Effective
Date, shall be rejected by the Debtors as of the
Effective Date, except for any Executory Contract
or Unexpired Lease (a) that has been assumed and
assigned or rejected pursuant to an order of the
Title III Court entered prior to the Effective Date,
(b) that is specifically designated as a contract or
lease to be assumed on the schedules to the Plan
Supplement, (c) that has been registered with
the Office of the Comptroller of Puerto Rico, (d)
that has been exempt from registration with the
Office of the Comptroller of Puerto Rico pursuant
to 2 L.P.R.A. §  97 and regulations promulgated
pursuant thereto, (e) that has been approved by
the Oversight Board or authorized by the Title III
Court, unless specifically designated a contract to
be rejected in the Plan Supplement, (f) with the
United States, or any of its agencies, departments
or agents or pursuant to any federal program,
(g) that is an incentive agreement between the
Government of the Commonwealth of Puerto Rico
and rum producers with respect to rum excise
tax “Cover Over” revenues, or (h) by or between
any Commonwealth of Puerto Rico agencies,
 120a

Appendix C

departments, municipalities, public corporations, or

instrumentalities (other than leases to which PBA
is a party) . . . .”;

• Article LXXVII provides for distributions to be

made to holders of all Allowed Claims under the
Plan;

• Article LXXVIII provides for the Avoidance

Actions Trust Assets to vest in the Avoidance
Actions Trust, to be administered by the Avoidance
Actions Trustee, and provides for the semi-annual
distribution of liquidated Avoidance Actions Trust
Assets to the beneficiaries thereof;

• Section 81.2 vests in the Disbursing Agent, among

other things, the power and authority to make
distributions contemplated by the Plan;

• Article LXXXII provides for the Debtors to

reconcile, and to the extent ultimately allowed, pay,
any and all Disputed Claims;

• Article LXXXIII provides for the funding and

administration of the Pension Reserve Trust under
the Plan;

• Article LXXXVIII provides that, “[o]n the Effective

Date, all matters provided for under the Plan that
would otherwise require approval of the directors
of the Debtors or Reorganized Debtors, including,
without limitation, to the extent applicable, the
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Appendix C

authorization to issue or cause to be issued the

New GO Bonds, the CVIs, the authorization to
enter into the Definitive Documents, the adoption
of Reorganized Debtors By-Laws, and the election
or appointment, as the case may be, of directors and
officers of Reorganized Debtors pursuant to the
Plan, as applicable, shall be authorized and approved
in all respects, in each case, in accordance with the
New GO Bonds Legislation, the CVI Legislation,
and the new corporate governance documents, as
applicable, and without further action by any Entity
under any other applicable law, regulation, order,
or rule”;

• Section 92.1 provides for the re-vesting of assets:

“Except as provided in the Confirmation Order, on
the Effective Date, title to all Assets and properties
of the Debtors encompassed by the Plan shall vest
in Reorganized Debtors, free and clear of all Liens
(except the Liens granted pursuant to the Plan and
Confirmation Order)”;

• Articles II and LXIX provide for the sale of all ERS

assets to the Commonwealth in exchange for $373
million in cash and the option to purchase the ERS
Private Equity Portfolio; and

• Articles VI through XV provide for approximately

$1.1 billion to be paid by the Commonwealth to
holders of PBA Bond Claims in satisfaction of their
claims.
 122a

Appendix C

(See Jaresko Decl. ¶ 67; Shah Decl. ¶ 59; see generally

Plan.)

88. The Plan Supplement contains, among other things,

the forms of (a) the New GO Bond Trust Agreement, (b)
the CVI Trust Agreement, (c) the Avoidance Actions
Trust Agreement, (d) the ERS Trust Agreement, (e) the
Schedule of Executory Contracts and Unexpired Leases
to be Assumed, (f) the Supplemental Ambac Election
Notice, (g) the Assured Custodial Trust Documents, (h)
the FGIC Custodial Trust Agreement, (i) Act 53-2021, and
(j) the Pension Reserve Trust Guidelines (each as defined
in the Plan Supplement). (See generally Plan Sup.) The
Plan, together with the documents and arrangements set
forth in the Plan Supplement, provides adequate means
for its implementation.

89. The Confirmation Order further provides

adequate means for the Plan’s implementation including,
but not limited to, paragraph 62 thereof which provides:
“Before the tenth (10th) anniversary of the Effective Date,
the Government of the Commonwealth of Puerto Rico,
including, without limitation, by any Entity or Person
acting for or on behalf thereof, shall not (a) implement
existing legislation or enact new legislation to create or
increase any defined benefit pension payment or obligation
to current or future retirees from or related to any
defined benefit plans over the benefits provided by the
Plan, regardless of funding source, or (b) undo (in whole
or part) the Plan’s eliminations of defined benefit plan
accruals and cost of living adjustments for government
employees; provided, however, that the Governor and
 123a

Appendix C

Legislature, subsequent to termination of the Oversight

Board, may apply to the Title III Court for relief from
this provision upon showing (i) the need therefor, (ii) the
affordability of the requested changes, (iii) the reasons
why the requested changes will not create a risk of the
financial distress caused by the Commonwealth’s prior
defined benefit plans, under which the Commonwealth
and other governmental employers accrued nearly $55
billion of unfunded pension obligations, (iv) the means of
funding the requested changes and reasons why there
is little risk of such funding not being carried out, (v)
the reasons why the requested changes will not create a
material risk of defaults on any of the then outstanding
obligations pursuant to the Plan, and (vi) the reasons
why the defined contribution plans are insufficient and
defined benefit plans are both prudent and required; and,
provided, however, that, prior to the termination of the
Oversight Board, the Oversight Board shall not reduce any
defined benefit pension payment or obligation to current
or future retirees from the benefits provided by the Plan.”
(Confirmation Ord. ¶  62.) This provision is appropriate
and necessary for the implementation and feasibility of
the Plan. 24

24.  Section 1142(b) of the Bankruptcy Code provides that

the “court may direct the debtor and any other necessary party
to execute or deliver or to join in the execution or delivery of any
instrument required to effect a transfer of property dealt with
by a confirmed plan, and to perform any other act, including the
satisfaction of any lien, that is necessary for the consummation of
the plan.” 11 U.S.C. § 1142(b); see In re Riverside Nursing Home,
137 B.R. 134, 138 (Bankr. S.D.N.Y. 1992) (“Subsection (b) of § 1142
expressly authorizes the court to direct a recalcitrant debtor or other
 124a

Appendix C

party to perform acts necessary to consummate the plan. . . . [A] court

may direct a confirmed debtor to retain professional management,
order payments to creditors from specific accounts and direct that
funds be held so as to implement the plan.”); In re Coral Air, Inc.,
40 B.R. 979, 21 V.I. 7, 12 (D.V.I. 1984) (noting that section 1142(b)
permits a court “to enter appropriate orders to enforce the intent
and specific provisions of the plan”). The Debtors have proffered
evidence that the Commonwealth’s pension obligations have been
and, absent modification, would continue to be a significant source
of debt for Puerto Rico (Jaresko Decl. ¶ 15), and that provisions that
conflict with the treatment of retirees put forth in the Plan may
undermine the goals of PROMESA and the feasibility of the Plan.
(See Jaresko Decl. ¶ 235; see also Jaresko Sup. Decl. ¶ 13 (discussing
similar need to ensure consistency between treatment of retirees
in Plan with respect to the Freeze and COLAs to protect Plan’s
feasibility).) The record adequately demonstrates that the “freeze” of
certain defined benefit obligations is essential to the Plan’s feasibility,
and the prohibition of the re-creation or enhancement of existing
defined benefit plans is therefore a necessary and appropriate means
to ensure the viability of the Plan and implement the discharge of
the Commonwealth’s prepetition pension obligations. (See Malhotra
Sup. Decl. ¶¶ 16-21.)
Although early versions of the Plan and proposed confirmation
order did not include the provision restricting the re-creation or
enhancement of existing defined benefit plans (the “DB Increase
Restriction”), parties in interest have been given adequate
notice of the relief sought with respect to pension programs,
including Plan provisions affecting future rights under existing
pension plans (in particular, the defined benefit “freeze” and the
restriction on cost of living adjustments), and of this request for
a restriction on the government’s power to restore defined benefit
arrangements. The DB Increase Restriction is a restriction on the
exercise of governmental powers, not an impairment of existing
vested rights held by any person. Accordingly, the notice provided
is sufficient under the circumstances. The inclusion of the provision
 125a

Appendix C

90. The Court’s conclusion under Bankruptcy Code

section 1123(a)(5), made applicable by PROMESA section
301(a), that there are adequate means to implement the
Plan rests on, among other things, Act 53 (Debtors Ex.
134), which authorizes the new debt to be issued pursuant
to the Plan with the support of the full faith and credit of
the Commonwealth, as long as the Plan does not include
Monthly Benefit Modifications to pension payments. (See
generally id.) The freezes in the accruals of pension
benefits and the elimination of cost of living adjustments
do not affect the authorization of the new debt. The
plain and unambiguous terms of the statute provide that
the debt authorization in Act 53 is conditioned only on
the Plan’s removal of the Monthly Benefit Modification
provision that was included in the proposed Seventh
Amended Plan, and Act 53 does not require satisfaction
of any other conditions to the authorization of new debt,
such as removal of Plan provisions concerning (a) the
elimination of cost of living adjustments and/or (b) the
freeze or termination of accrual of defined benefits
under TRS or JRS from and after the Effective Date. 25

in the proposed confirmation order thus will not violate the due
process rights of retirement plan participants who did not receive
individualized notice of the Debtors’ intention to request that the
provision be included in the Plan and the Confirmation Order.
25.  Courts “interpret a Puerto Rico statute according to its plain
meaning.” Santiago-Ramos v. Centennial P.R. Wireless Corp., 217
F.3d 46, 59 (1st Cir. 2000). “We first determine whether the statutory
language is unambiguous. In the absence of ambiguity, we generally
do not look beyond the plain meaning of the statutory language.”
Herman v. Hector I. Nieves Transp., Inc., 244 F.3d 32, 34 (1st Cir.
2001) (citations omitted). Here, article 104 of Act 53 declares that it
 126a

Appendix C

The Plan cancels and eliminates the Monthly Benefit

Modification previously included in the proposed Seventh
Amended Plan, thereby satisfying the condition in Act 53
for authorization of the new debt to be issued pursuant

is the public policy of Puerto Rico “to protect the accrued pensions
of its public servants.” Article 104 provides that, “[t]herefore, with
regard to the accrued pensions of government employees, it is
hereby provided as follows: The Legislative Assembly authorizes
the issuance of the General Obligation Bonds and CVIs subject to
the FOMB filing an amended Plan for confirmation by the Title III
Court that eliminates the Monthly Benefit Modification.” Article
605 of Act 53 further provides that “[t]he effectiveness of [Act 53] is
conditioned to the FOMB filing an amended Plan for confirmation by
the Title III Court that eliminates the Monthly Benefit Modification
as defined in the Plan.” These operative provisions establish that the
conditions put in place by Act 53 concern the protection of accrued
pension rights and, in particular, the elimination of the Monthly
Benefit Modification from the Plan. No language in Act 53 indicates
a legislative intent to preclude the defined benefit accrual “freeze” or
the elimination of COLAs, each of which operates prospectively and
does not affect accrued pension rights. Notwithstanding arguments
to the contrary that were raised in certain objections, Article 104’s
references to protecting “accrued pensions of . . . public servants” and
“the pensions of all of our retirees” confirm that Act 53’s conditions
are met by a Plan that affects only the accrual of future pension
benefits rather than those already earned. Article 605’s references
to “reductions to . . . pensions” and “[z]ero cuts to pensions” arise
in the context of a provision that expressly provides “clarity” to
prior provisions and does not establish additional conditions. Like
the reference to “avoid[ing] any cut of pensions” in Article 603,
those phrases are merely restatements of the policy of protecting
accrued pension rights announced in Article 104 of Act 53, and they
are consistent with the sufficiency of a plan that eliminates a cut to
accrued current monthly pension payments and precludes further
defined benefit accruals and cost of living increases to those monthly
benefits.
 127a

Appendix C

to the Plan. (See, e.g., Plan §  55.7(a).) Accordingly, Act

53 provides adequate means for implementation of the
Plan. In this connection, the Court also concludes that
PROMESA’s preemption provisions and Title III’s debt
adjustment and plan confirmation provisions are sufficient
to enable the Commonwealth to implement the defined
benefit and COLA freeze provisions of the Plan without
further legislative action. The Court’s Confirmation Order,
which provides detailed terms for the implementation
of the defined benefit and COLA freeze aspects of the
Plan, approves the freezes, which are economic measures
consistent with the fiscal plan and within the scope of the
Oversight Board’s powers under PROMESA. The Plan
and Confirmation Order are enforceable against the
Commonwealth, its officials and other interested parties,
and any Commonwealth law provisions contrary to their
terms are preempted.

91. The Plan satisfies the requirements of section

1123(a)(5) of the Bankruptcy Code. 26

26.  The Asociación de Maestros Puerto Rico and the Asociación

de Maestros de Puerto Rico-Local Sindical (together, “AMPR”)
contend that the accrual of post-Effective Date benefits and cost of
living adjustments cannot be preempted by the Plan or rejected by the
Debtors. AMPR does not, however, dispute that the Supreme Court
of Puerto Rico has characterized such obligations as contractual in
nature. (See, e.g., AMPR Obj. ¶¶ 2, 21 (citing Asociación de Maestros
de P.R. v. Sistema de Retiro para Maestros de P.R., 2014 TSPR
58, 190 DPR 854, 2014 Juris P.R. 67 (P.R. 2014)).) Such rights are
therefore ultimately subject to impairment and discharge like other
general unsecured obligations.
 128a

Appendix C

viii. Bankruptcy Code Section 1123(b)(1)

92. Article LXXXIV of the Plan identifies which

Classes of Claims are impaired and which Classes of
Claims are left unimpaired. Article LXXXIV has been
modified to reflect that Class 54 is unimpaired rather
than impaired.

93. The Plan is consistent with section 1123(b)(1) of

the Bankruptcy Code.

ix. Bankruptcy Code Section 1123(b)(2)

94. Subject to section 76.10 of the Plan, section 76.1

of the Plan provides that, as of the Effective Date, all
Executory Contracts and Unexpired Leases to which any
Debtor is a party are rejected, “except for any Executory
Contract or Unexpired Lease (a) that has been assumed
and assigned or rejected pursuant to an order of the
Title III Court entered prior to the Effective Date, (b)
that is specifically designated as a contract or lease to
be assumed on the schedules to the Plan Supplement,
(c) that has been registered with the Office of the
Comptroller of Puerto Rico, (d) that has been exempt
from registration with the Office of the Comptroller of
Puerto Rico pursuant to 2 L.P.R.A. § 97 and regulations
promulgated pursuant thereto, (e) that has been approved
by the Oversight Board or authorized by the Title III
Court unless specifically designated a contract to be
rejected in the Plan Supplement, (f) with the United
States, or any of its agencies, departments or agents or
pursuant to any federal program, (g) that is an incentive
 129a

Appendix C

agreement between the Commonwealth of Puerto Rico

and rum producers with respect to rum excise tax “Cover
Over” revenues, or (h) by or between any Commonwealth
of Puerto Rico agencies, departments, municipalities,
public corporations, or instrumentalities (other than
leases to which PBA is a party); provided, however, that
the Debtors reserve the right to amend, on or prior to the
Effective Date, such schedules to delete any Executory
Contract and Unexpired Lease therefrom or add any
Executory Contract and Unexpired Lease thereto, in
which event such Executory Contract(s) and Unexpired
Lease(s) shall be deemed to be, as the case may be, either
rejected, assumed, or assumed and assigned as of the
Effective Date.” (Plan § 76.1; see also Plan Sup. Ex. E.)

95. The Plan is consistent with section 1123(b)(2) of

the Bankruptcy Code.

x. Bankruptcy Code Section 1123(b)(3)(A)

96. The Plan incorporates, among other things, the

settlements and compromises set forth in the AFSCME
Plan Support Agreement (Debtors Ex. 21), the GO/PBA
Plan Support Agreement (Debtors Ex. 16), the HTA/
CCDA Plan Support Agreement (Debtors Ex. 17), the
PRIFA Plan Support Agreement (Debtors Ex. 18), the
Retiree Committee Plan Support Agreement (Debtors
Ex. 20), the Committee Agreement (Debtors Ex. 23),
the ERS Stipulation (Debtors Ex. 19), the PRIFA BANs
Stipulation (Debtors Ex. 22), and the Stipulation in
Connection with DRA Related Disputes (Docket Entry
No. 19100 Ex. A) (Debtors Ex. 146). Further, the Plan sets
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forth the terms and conditions for a global compromise

and integrated settlement of, among other issues, asserted
and unasserted disputes concerning the rights of holders
of CW Bond Claims, CW Guarantee Bond Claims, ERS
Bond Claims, PBA Bond Claims, CW/Convention Center
Claims, CW/ HTA Claims, CW/ MBA Claims, CW/
PRIFA Rum Tax Claims, and PRIFA BANs, including
the disputes: (a) set forth in the Debt Related Objections
challenging, among other things, the validity, priority,
secured status and related rights of the 2011 CW Bond
Claims, the 2011 CW Series D/E/PIB Bond Claims, the
2012 CW Bond Claims, the 2014 CW Bond Claims, the
2014 CW Guarantee Bond Claims, the 2011 PBA Bond
Claims, the 2012 PBA Bond Claims, and the PRIFA BANs,
(b) set forth in the Invalidity Actions, (c) set forth in the
Lien Challenge Actions, (d) raised by certain holders
of CW Bond Claims, CW Guarantee Bond Claims, and
GDB HTA Loans asserting rights to receive revenues
historically conditionally appropriated to CCDA, HTA,
MBA, and PRIFA, as applicable, and “clawed back” by
the Commonwealth pursuant to the provisions of the
Commonwealth Constitution, (e) relating to the validity,
priority, secured status and related rights attendant to the
GDB HTA Loans, (f) set forth in the ERS Litigation, the
ERS Recovery Actions, and the ERS Takings Action, (g)
between the Commonwealth and PBA, including, without
limitation, the resolution of (i) the claims and Causes of
Action currently being litigated in the PBA Litigation (ii)
the amount, if any, of the PBA Administrative Expense
Claim, and (iii) the ownership of the PBA Property,
between the Commonwealth and PBA and the claims
that PBA may assert against the Commonwealth under
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leases, agreements and applicable law, (h) set forth in

the Lift Stay Motions and the Clawback Actions relating
to the CW/Convention Center Claims, the CW/HTA
Claims, and the CW/PRIFA Rum Tax Claims, and (i)
set forth in the PRIFA BANs Litigation. (Jaresko Decl.
¶¶ 71, 114-87.) The Plan also incorporates the terms of a
global settlement and compromise of all pending disputes
involving the DRA Parties. (See Docket Entry No. 19100,
¶¶ 9-12.) As explained in the paragraphs that follow, such
settlements and compromises are in the best interests
of the Debtors and their creditors, and within the range
of reasonableness. (Murray Decl. Ex. A ¶¶ 119-36; Zelin
Decl. ¶¶ 13, 24, 29, 36, 43; Jaresko Decl. ¶¶ 201-16; Skeel
Decl. ¶¶ 32-46.)

97. Each of the plan support agreements was

reached following months of negotiations directed by
the Mediation Team and/or other informal discussions
that included party representatives, legal and financial
advisors, and involved vigorous debate and discussion on
both sides. (Zelin Decl. ¶¶ 18-20, 21-22, 26-28, 32-33, 38,
40-41; Jaresko Decl. ¶¶ 202-16.) Those negotiations were
conducted at arms’ length and in good faith. (Id.; Skeel
Decl. ¶ 33; Jaresko Decl. ¶ 202.) The litigation resolved
by the plan support agreements involves extraordinarily
complex, high-stake disputes and, because these are
the first Title III cases litigated under PROMESA,
novel legal issues. Collectively, billions of dollars were at
stake. (Jaresko Decl. ¶ 203.) The consequence of the GO
Bondholders prevailing on their priority argument, or
the HTA, PRIFA, or CCDA bondholders prevailing on
their property interest contentions, would have inflicted
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grave harm on the Commonwealth and its residents

because the Commonwealth, in either situation, would
have lost control of billions of dollars of revenues needed
to sustain the Commonwealth. This would have prevented
the Oversight Board from developing fiscal plans and
budgets necessary to carry out its statutory mission. A
small risk of a negative and grave outcome was imprudent
to undertake once settlement was possible on the terms
in the Plan. (Skeel Decl. ¶ 34; Jaresko Decl. ¶¶ 203-13.)
The settlements embodied in the Plan also avoid the
uncertainty, delay, and significant expense that would
result from continued litigation. (Skeel Decl. ¶ 44; Jaresko
Decl. ¶ 214.)

98. The Plan is the result of extensive arms’ length

negotiations among the Government Parties and
significant creditor constituencies, including the PSA
Creditors, each of which was represented by sophisticated
counsel, and the compromises and settlements among the
Government Parties and various PSA Creditors form
the very foundation of the Plan. In the absence of such
compromises and settlements, the Debtors’ emergence
from Title III would likely be significantly delayed by
further litigation and burdened by additional expense,
which could impair the Debtors’ ability to successfully
adjust their debts, thereby prejudicing recovery for all
creditors and raising further uncertainties regarding the
Debtors’ financial condition. (See Jaresko Decl. ¶¶ 81-82,
201-04, 214-215; Skeel Decl. ¶¶ 43-46.)

99. Each of the compromises and settlements

incorporated into the Plan (a) is made in good faith,
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furthers the policies and purposes of PROMESA, and is

fair, equitable, and reasonable; (b) is in the best interests of
the Debtors, their creditors, and all other affected Persons
with respect to the Claims, Causes of Action, and other
matters resolved by such compromises and settlements; (c)
is within the range of reasonable results if the issues were
litigated; (d) falls above the lowest point in the range of
reasonableness; and (e) meets the standards for approval
under sections 105(a) and 1123(b) of the Bankruptcy
Code, Bankruptcy Rule 9019(a), and other applicable law.
Further, the Plan will fairly and consensually resolve
numerous pending adversary proceedings and appeals,
each of which raises difficult and complex issues. The
Plan thus incorporates a complex series of compromises
and settlements that resolve the most significant potential
obstacles to confirmation of a plan of adjustment. (See
Skeel Decl. ¶¶ 33-34; Jaresko Decl. ¶¶ 201-05.) The
settlements resolve billions of dollars of claims against
the Debtors. (Skeel Decl. ¶ 46.) Each of the settlements
is consistent with what would be expected as a result
of negotiations in a complex debt restructuring and is
reasonable. In addition, the ability to achieve consensus
from at least 15 major parties is evidence the settlements
are reasonable. (Murray Decl. Ex. A ¶¶ 115-37; Zelin
Decl. ¶¶ 24, 29, 36, 43.) For these reasons, the negotiated
settlements provide an appropriate and reasonable basis
for the adjustment of all affected Claims, including those
of dissenting Creditors in the accepting Classes, as well
as claims and interests belonging to the Debtors.

100. Accordingly, the Plan is consistent with section

1123(b)(3)(A) of the Bankruptcy Code.
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xi. Bankruptcy Code Section 1123(b)(3)(B)

101. Article LXXVIII of the Plan provides for, among

other things, the transfer of the Avoidance Actions to the
Avoidance Actions Trust. Section 79.1 of the Plan provides:
“Except as settled and released herein, from and after the
Effective Date, the Avoidance Actions Trustee shall have
the exclusive right and power to (a) litigate any and all of
the Avoidance Actions and (b) compromise and settle such
Avoidance Actions, upon approval of the Title III Court.”
(Plan § 79.1.)

102. Further, Section 82.1(a) of the Plan states:

“[e]xcept with respect to Allowed Claims, and subject
to the terms and conditions of the ADR Procedures and
the ADR Order, Reorganized Debtors, by and through
the Oversight Board, and in consultation with AAFAF,
shall object to, and shall assume any pending objection
filed by the Debtors to, the allowance of Claims filed
with the Title III Court with respect to which it disputes
liability, priority or amount, including, without limitation,
objections to Claims that have been assigned and the
assertion of the doctrine of equitable subordination with
respect thereto. All objections, affirmative defenses and
counterclaims shall be litigated to Final Order; provided,
however, that Reorganized Debtors, by and through the
Oversight Board, and in consultation with AAFAF, shall
have the authority to file, settle, compromise, or withdraw
any objections to Claims, without approval of the Title
III Court.” For the avoidance of doubt, the foregoing is
subject to the rights of the two (2) Creditors’ Committee
appointees to the Avoidance Action Trust Board pursuant
to section 82.1(b) of the Plan. (Plan § 82.1(a).)
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103. The Plan is consistent with section 1123(b)(3)(B)

of the Bankruptcy Code.

xii. Bankruptcy Code Section 1123(b)(4)

104. Article LXIX of the Plan provides for the sale

of all ERS assets to the Commonwealth in exchange for
$373 million in cash and the option to purchase the ERS
Private Equity Portfolio, subject to certain conditions.
(Jaresko Decl. ¶ 76.) Specifically, section 69.2 of the Plan
provides that the Commonwealth, up to and including
April 10, 2023, “shall have the option to purchase the
ERS Private Equity Portfolio for the ERS Portfolio
Price . . . . In the event that the Commonwealth declines
to exercise the option or fails to provide notice of its
exercise of the Commonwealth Election by April 10,
2023, any holder(s) of Allowed ERS Bond Claims shall
have the option to exercise the Bondholder Election and
purchase all of the interests in the ERS Trust for the ERS
Portfolio Price plus such amount as may be necessary to
reimburse the Commonwealth for any funded shortfall
amounts in connection with the ERS Private Equity
Portfolio during the period from April 2, 2021 up to and
including the purchase thereof pursuant to the Bondholder
Election that have not been previously reimbursed to the
Commonwealth, by providing written notice thereof to the
Commonwealth on or prior to April 15, 2023.” However,
“[i]n the event that neither the Commonwealth Election
nor the Bondholder Election shall have been exercised,
on April 25, 2023, (i) the Commonwealth shall purchase
the ERS Private Equity Portfolio for the ERS Portfolio
Price . . . .” Pursuant to section 69.1 of the Plan, in either
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scenario, the proceeds of the purchase of the ERS Private

Equity Portfolio, along with the $373 million in cash, shall
be distributed to holders of Allowed ERS Bond Claims.
(Plan § 69.1.)

105. The Plan is consistent with section 1123(b)(4) of

the Bankruptcy Code.

xiii. Bankruptcy Code Section 1123(b)(5)

106. Articles V through LIV, sections 55.2, 55.5,

55.7 through 55.9, articles LVI through LVII, LX, LXII
through LXX, and LXXIII of the Plan modify the rights
of holders of Claims in the impaired Classes. Sections
55.1, 55.3, 55.4, 55.6, 55.10 through 55.12, articles LVIII
through LIX, LXI, LXXI, and LXXII of the Plan leave
the rights of holders of unimpaired Claims unaffected.
Sections 62.2 and 62.3 have been revised to remove any
reference to Eminent Domain Claims from the category of
CW General Unsecured Claims and treatment thereunder.

107. The Plan is consistent with section 1123(b)(5) of

the Bankruptcy Code.

xiv. Bankruptcy Code Section 1123(b)(6)

108. Article XCII of the Plan provides for, among other

things, (a) certain releases, injunctions, and exculpations
described below in paragraphs 233-242 and (b) an
exemption from registration pursuant to Bankruptcy
Code section 1145 for the issuance and distribution of
New GO Bonds and CVIs. (Jaresko Decl. ¶ 78; Zelin Decl.
¶¶ 94, 96, 97, 99, 107-10.)
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109. The Plan is consistent with section 1123(b)(6) of

the Bankruptcy Code.

xv. Bankruptcy Code Section 1123(d)

110. Section 76.4 of the Plan provides for the payment

of cure amounts required to be paid to the counterparties
of Executory Contracts and Unexpired Leases assumed,
or assumed and assigned, pursuant to the Plan. All cure
amounts will be determined in accordance with the
underlying agreements and applicable nonbankruptcy
law, and pursuant to the procedures established by
the Plan. (Jaresko Decl. ¶ 79.) On November 23, 2021,
the Oversight Board filed and caused to be served the
Notice of Executory Contracts and Unexpired Leases to
be Assumed Pursuant to Title III Plan of Adjustment
(Docket Entry No. 19353), (i) setting forth the cure
amounts for each assumed Executory Contract and
Unexpired Lease based on a review of the Debtors’ books
and records, and (ii) establishing a deadline for parties
to object to the proposed cure amounts for an Executory
Contract or Unexpired Lease to which they are a party
or to the assumption of such Executory Contract or
Unexpired Lease. Within ten (10) Business Days of entry
of a Final Order setting forth the cure amount as to each
Executory Contract or Unexpired Lease to be assumed
or assumed and assigned, the Debtors or the Reorganized
Debtors, as the case may be, shall pay or otherwise satisfy
such cure amount.

111. The Plan is consistent with section 1123(d) of the

Bankruptcy Code.
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Appendix C

xvi. Bankruptcy Code Section 1129(a)(2)

112. The Debtors have (i) complied with provisions

of the Bankruptcy Code and PROMESA applicable to
confirmation of the Plan, except as otherwise provided
or permitted by orders of this Court, and (ii) complied
with the applicable provisions of the Bankruptcy Code,
PROMESA, the Bankruptcy Rules, the Local Rules,
and the Disclosure Statement Order in transmitting the
Disclosure Statement, the Plan, the Ballots, the Election
Notices, and related documents, and in soliciting and
tabulating votes on the Plan.

113. The Oversight Board, with the assistance of its

professionals, and in coordination with AAFAF, expended
significant time and effort preparing the Disclosure
Statement (Debtors Ex. 2), and sought and received input
and comment thereon from other parties in interest. This
Court approved the Disclosure Statement as containing
adequate information and meeting the requirements of
sections 1125 and 1126 of the Bankruptcy Code. (Jaresko
Decl. ¶ 80.) The Debtors have properly solicited and
tabulated votes on the Plan. (Jaresko Decl ¶ 80; see
generally Pullo Decl.; see generally Pullo Sup. Decl.)

114. The Oversight Board, as proponent of the Plan, is

the duly-appointed representative of the Debtors in their
Title III Cases as provided pursuant to PROMESA and
has acted in accordance with applicable law in proposing
the Plan.
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Appendix C

115. The Debtors have complied with section 1129(a)

(2) of the Bankruptcy Code.

xvii. Bankruptcy Code Section 1129(a)(3)

116. The Plan was proposed in good faith with the

legitimate purpose to provide a means for the Debtors to
achieve fiscal responsibility and access to capital markets,
consistent with the purposes of PROMESA. (Jaresko Decl.
¶ 81.) In determining that the Plan has been proposed
in good faith, the Court has examined the totality of the
circumstances surrounding the filing of the Title III Cases,
the Plan itself, the lengthy process leading to the Plan’s
formulation (including the compromises, settlements, and
releases incorporated therein), and the process associated
with the Plan’s prosecution. The Debtors’ good faith is
evident from the facts and records of the Title III Cases,
the Disclosure Statement and the hearing thereon, and the
record of the Confirmation Hearing and other proceedings
held in the Title III Cases, including related adversary
proceedings. The Plan (including the settlements and
compromises contained therein) is the result of extensive
arm’s length negotiations among the parties, including
through mediation led by former Chief Bankruptcy Judge
Barbara Houser.

117. The Oversight Board has worked to develop

c on s en su s w it h c r e d it or s a nd t o e va lu at e t he
Commonwealth’s and its instrumentalities’ current and
future financial circumstances. These circumstances
have been subject to constant change as the Oversight
Board, the Commonwealth, creditors, and the people of
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Appendix C

Puerto Rico have fought to address the Island’s needs

and develop a path to fiscal responsibility in the midst of
multiple major hurricanes, earthquakes, and other natural
disasters, as well as the impact of the global COVID-19
pandemic. (Jaresko Decl. ¶ 82.) The Plan and Disclosure
Statement represent the culmination of those efforts and
the substantial input of each key stakeholder.

118. The Plan (including all other agreements,

documents, and instruments necessary to effectuate the
Plan) achieves a rational adjustment of the Debtors’ debts,
and properly distributes value to creditors, including
through the implementation of (a) parties’ elections
with respect to distributions and/or (b) the settlements
pursuant to the Plan. The Plan was proposed with the
legitimate and honest purpose of implementing the
settlements and compromises of numerous risky and
costly disputes, while avoiding protracted litigation that
could delay distributions to creditors. (Jaresko Decl. ¶ 83.)

119. The Plan complies with section 1129(a)(3) of the

Bankruptcy Code.

xviii. Bankruptcy Code Section 1129(a)(6)

120. The Plan does not provide for any rate changes
by the Debtors and, accordingly, section 1129(a)(6) of the
Bankruptcy Code does not apply.

xix. Bankruptcy Code Section 1129(a)(8)

121. Pursuant to the Disclosure Statement Order,

the Title III Court approved the Disclosure Statement
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Appendix C

(Debtors Ex. 2) and found, among other things, that the

Disclosure Statement contained “adequate information”
within the meaning of section 1125 of the Bankruptcy
Code and directed the Debtors to solicit acceptances and
rejections of the Plan, as well as certain elections with
respect thereto. (Disclosure Statement Ord. ¶¶ B, 7-19.)
Prior to the transmission of the Disclosure Statement,
the Debtors did not solicit acceptances of the Plan from
any holders of Claims. 27

122. The Solicitation Packages were served in

compliance with the Bankruptcy Code, Bankruptcy Rules,
Local Rules, and the Disclosure Statement Order. (See
generally Mailing Affidavits.)

123. The (a) service of the Solicitation Packages, (b)

publication of the Confirmation Hearing Notice, and (c)
airing of radio advertisements regarding the approval of
the Disclosure Statement, Confirmation Hearing dates,
Confirmation Objection Deadline, Voting Deadline, and
Election Deadline: (i) were adequate and sufficient under
the circumstances of the Title III Cases; (ii) provided
adequate and sufficient notice of such deadlines, the
method of voting or making an election of distribution
pursuant to the Plan; and the date, time, and location of
the Confirmation Hearing; (iii) provided holders of Claims
with a reasonable period of time to make an informed
decision to accept or reject the Plan and to make any
election provided thereunder; (iv) were in compliance
with PROMESA, the Bankruptcy Code, the Bankruptcy

27.  See infra ¶¶ 136-60, 147-49.

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Appendix C

Rules, the Local Rules, the Disclosure Statement Order,

and any other applicable orders and rulings of the Court;
and (v) provided due process to all parties in interest in the
Title III Cases. (See Service Affidavits; see also generally
Pullo Decl.)

124. No other or further notice with respect to the

Plan or the Confirmation Hearing is required. Based
upon the foregoing, the Debtors and their successors,
predecessors, control persons, representatives, officers,
directors, employees, agents, attorneys, financial advisors,
investment bankers, accountants, and other retained
professionals, and any and all affiliates, managers,
employees, attorneys, and advisors of the foregoing (i)
have acted in “good faith” within the meaning of section
1125(e) of the Bankruptcy Code and in compliance with
the applicable provisions of PROMESA, the Bankruptcy
Code, the Bankruptcy Rules, the Local Rules, and
any applicable nonbankruptcy law, rule, or regulation
governing the adequacy of disclosure in connection with all
their activities relating to the solicitation of acceptances of
the Plan or elections thereunder and their participation in
the activities described in section 1125 of the Bankruptcy
Code and (ii) shall be deemed to have participated in good
faith and in compliance with the applicable provisions of
PROMESA and the Bankruptcy Code in the offer and
issuance of securities pursuant to the Plan and, therefore,
are not, and on account of such offer, issuance, and
solicitation will not be, liable at any time for the violation
of any applicable law, rule, or regulation governing the
solicitation of acceptances or rejections of the Plan or
elections thereunder or the offer and issuance of securities
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Appendix C

pursuant to the Plan, and are entitled to the protections

afforded by section 1125(e) of the Bankruptcy Code and, to
the extent such parties are listed therein, the exculpation
provisions set forth in section 92.7 of the Plan.

125. Votes to accept or reject the Plan were solicited and

tabulated fairly, in good faith, and in a manner consistent
with the Disclosure Statement Order, PROMESA, the
Bankruptcy Code, the Bankruptcy Rules, and the Local
Bankruptcy Rules. (See Pullo Decl. ¶ 8.)

126. Certain Classes either voted to reject, or were

deemed to reject, the Plan (the “Rejecting Classes”).
(See Pullo Decl. Ex. A; Pullo Sup. Decl. Ex. A.) 2 8
Notwithstanding such rejection and deemed rejection,
the Plan (which has been revised in compliance with the
Court’s order rejecting the unsecured claim treatment
of Eminent Domain/Inverse Condemnation Claims and
directing the Debtors to incorporate their Full-Payment
Proposal for the payment of Allowed Eminent Domain/
Inverse Condemnation Claims (see Docket Entry No.
19517 at 6-15, 17-18)) satisfies sections 1129(b)(2)(A) and
1129(b)(2)(B) of the Bankruptcy Code with respect to the
Rejecting Classes.

28.  Classes 51D, 51F, and 51L voted to reject the Plan, but
subsequently were rendered unimpaired and deemed to have
accepted the Plan by the modifications made in the Eighth Amended
Plan. Accordingly, such classes are not Rejecting Classes. See Pullo
Sup. Decl. Ex. A. Moreover, because holders of Allowed Claims under
Class 54 are entitled to payment in full under the Full-Payment
Proposal, Allowed Eminent Domain/Inverse Condemnation Claims
are unimpaired.
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Appendix C

xx. Bankruptcy Code Section 1129(a)(10)

127. At least one Class of each of the Commonwealth

creditors’ impaired Claims, PBA creditors’ impaired
Claims, and ERS creditors’ impaired Claims has accepted
the Plan. (See Pullo Decl. Ex. A.) Accordingly, the Plan
complies with section 1129(a)(10) of the Bankruptcy Code.

xxi. Bankruptcy Code Section 1129(b)(1)

128. The Plan’s treatment of Claims in the Rejecting

Classes is proper because, as is described further below,
the Plan does not discriminate unfairly and is fair and
equitable with respect to such Claims. (Jaresko Decl.
¶  87.) Unfair discrimination applies only to rejecting
classes of creditors, not individual creditors within a class.
See Bankruptcy Code §§ 1129(b)(1), 1123(a)(4). “Thus, a
disapproving creditor within a class that approves a plan
cannot claim unfair discrimination.” In re Nuverra Envtl.
Sols., Inc., 834 F. App’x 729, 734-35 (3d Cir. 2021). As a
preliminary matter, the Court notes that no Rejecting
Class has objected to confirmation of the Plan on the basis
that the Plan discriminates unfairly.

129. The treatment afforded to retirees classified

in Classes 51A through 51F, 51K, and 51L, and active
employees classified in Classes 51G through 51J pursuant
to the Plan is fair and equitable and does not discriminate
unfairly against other creditors in the Title III cases.
Any cut to pensions of retired government employees
would have a negative impact on Puerto Rico’s economy
because retirees comprise a significant component of
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Appendix C

local demand in Puerto Rico. (Amended Declaration of

Simon Johnson (Docket Entry No. 19014-1) (the “Johnson
Decl.”) ¶  6; Retiree Committee Ex. A §  2.17.) Cutting
pensions actually could destabilize Puerto Rico’s economic
prospects, lead to greater out-migration, and make it
harder for Puerto Rico to obtain credit in the future, and
the savings from pension cuts do not justify the damage
those cuts would cause to the economy. (Johnson Decl. ¶ 6;
Retiree Committee Ex. A §§ 2.6; 2.13; 2.22.) Roughly half
of the retirees have pensions that place them below the
federal poverty level of $11,880 per year for a single person
household. (Retiree Committee Ex. A §  4.5.) Further,
retirees have also already experienced substantial
reductions in pensions, and, except for judges, government
retirees have not received cost of living increases since
2008. (Retiree Committee Ex. A §§  4.11; 4.12.) Many
retirees, such as retired police, teachers, and judges, do
not receive federal social security payments. (Retiree
Committee Ex. A §§ 4.3; 4.16.) The gross income of the
approximately 167,000 government retirees represents
6.4% of the total household expenditures on the Island
and 5.8% of Puerto Rico’s gross national income. (Retiree
Committee Ex. A §§ 4.1, 4.4.)

130. The macroeconomic impact of reducing the

pensions of retirees on the overall Puerto Rican economy
is significant. (Retiree Committee Ex. A §  5.) Because
each dollar that is not spent by a retiree has a ripple
effect throughout the economy, the loss of $1.00 of retiree
income impacts overall spending at a higher rate, known
as the fiscal multiplier. (Retiree Committee Ex. A § 5.2.)
Applying the Oversight Board’s fiscal multiplier, reducing
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Appendix C

the monthly benefits would result in the loss of 1,600 jobs

on the island and a 0.2% reduction in GNP in the near
term. (Retiree Committee Ex. A §  2.9.) A higher fiscal
multiplier would indicate a greater negative impact on the
economy of a loss of 6,300 jobs on the island and a reduction
in GNP of 0.6%. (Retiree Committee Ex. A §§ 2.9, 5.) Given
Puerto Rico’s high level of out-migration, including the
increase in out-migration of retirees since 2016, pension
cuts may force many more retirees to move to the states
to be with family members if they can no longer support
themselves living in Puerto Rico. Increased out-migration
will have a further negative impact on the economy as
pension dollars are then spent outside of Puerto Rico.
(Retiree Committee Ex. A §§ 5.21-5.28.)

131. The Plan, which eliminates any reductions in

accrued pensions and certain other retiree benefits for
retired and active employees and provides for the creation
of the Pension Reserve Trust, is better than further
pension and benefit cuts for Puerto Rico’s economy and for
other creditors and justifies the treatment that Claimants
for retirement benefits are receiving pursuant to the
Plan. See, e.g., In re Creekstone Apartments Assocs., L.P.,
168 B.R. 639, 644 (Bankr. M.D. Tenn. 1994) (disparate
treatment between classes is not unfair if it “protect[s] a
relationship with specific creditors that the debtor need[s]
to reorganize successfully.”). The treatment of Classes
51A through 51L does not unfairly discriminate in favor
of holders of Claims for retirement benefits and is fair
and equitable.
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Appendix C

132. The Plan does not unfairly discriminate against

holders of Claims in Class 58 (CW General Unsecured
Claims), Class 66 (ERS General Unsecured Claims),
or Class 13 (PBA General Unsecured Claims). For the
reasons set forth above in paragraphs 62-70, certain
Classes of unsecured Claims have been separately
classified to ensure that the Commonwealth is best able
to provide critical government services to its residents,
and that certain claimants are able to continue providing
such services in an efficient, reliable, and sustainable
manner. For these reasons, it is important that certain
Classes of unsecured Claims receive superior treatment to
Claims in Classes 58, 66, and 13. Further, for the reasons
set forth above in paragraph 66, separate classification
and treatment of Claims in Class 54 (Eminent Domain/
Inverse Condemnation Claims) is necessary because such
claimants assert Fifth Amendment rights, and the Plan
does not discriminate unfairly with respect to that Class.
Separate classification and treatment of such Claims is
reasonable and justified by a governmental purpose, and
does not constitute unfair discrimination.

133. Accordingly, the Plan complies with section

1129(b)(1) of the Bankruptcy Code.

xxii. Bankruptcy Code Section 1129(b)(2)

134. The Plan’s treatment of Claims in the Rejecting

Classes is proper because the Plan provides all holders
of Claims in the Rejecting Classes with what they can
reasonably expect to receive under the circumstances of
the Title III Cases. Because there are no equity holders in
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Appendix C

chapter 9 cases, the requirement under Bankruptcy Code

section 1129(b)(2)(B) (incorporated by PROMESA section
301(a)) that a plan be “fair and equitable” requires that,
where a debtor seeks nonconsensual confirmation of a plan
over one or more rejecting classes, no claim junior to any
of the claims in the rejecting classes of the relevant debtor
may receive any property. Under the Plan, the Class
holding Claims junior to the unsecured Rejecting Classes
(Section 510(b) Subordinated Claims) receives no property.
The commencement of the Title III Cases was precipitated
by the Debtors’ untenable debt burden, a severe cash
shortage, and the economic decline and out-migration
eroding the Debtors’ revenues. The creditor recoveries
in the Plan were calculated or negotiated to reasonably
compensate holders of Claims while enabling the Debtors
to avoid a recurrence of these financial difficulties and to
institute necessary reforms to ensure the Debtors’ fiscal
responsibility and access to capital markets. (See Jaresko
Decl. ¶ 81; Murray Decl. Ex. A ¶¶ 20, 139.)

135. Class 54 is the only Rejecting Class of Claims

characterized as secured in the Plan, and section 1129(b)
(2)(A) is satisfied with respect to such Class. Consistent
with these Findings of Fact and Conclusions of Law,
holders of Claims in Class 54 will receive payment in full to
the extent they are Allowed Claims. (Jaresko Decl. ¶ 88.)

136. Accordingly, the Plan complies with section

1129(b)(2) of the Bankruptcy Code with respect to Claims
in the Rejecting Classes.
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B. PROMESA § 314(b)(2): The Plan Fully Complies

with the Applicable Provisions of Title III of
PROMESA.

137. Except as otherwise provided for or permitted

by orders of the Title III Court, the Oversight Board has
complied with Section 1125(b) of the Bankruptcy Code and
Section 314(b)(2) of PROMESA, including the solicitation
and tabulation of votes consistent with the Disclosure
Statement Order. (See generally Jaresko Decl. and Pullo
Decl.)

138. The Disclosure Statement Order established

the procedures for the solicitation of votes on the Plan.
The Solicitation Agent complied with the procedures
established in the Disclosure Statement Order. (Mailing
Affidavits; Pullo Decl. ¶ 4.) Specifically, the Solicitation
Agent determined which creditors were entitled to vote
on the Plan by following the instructions in the Disclosure
Statement Order, by Class, and by applying the Voting
Record Dates set forth in the Disclosure Statement Order.
The Solicitation Agent then coordinated the distribution of
solicitation materials to holders of Claims entitled to vote.
(Pullo Decl. ¶¶ 5-6.) The Solicitation Agent coordinated
publication of the confirmation hearing notices as set
forth in the Disclosure Statement Order. (Id. ¶ 7; see also
Publication Affidavit.) The solicitation materials were
properly distributed to the appropriate parties, including
brokers and nominees. (See Mailing Affidavits.)

139. The Solicitation Agent received, reviewed,

determined the validity of, and tabulated the Ballots
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Appendix C

submitted. (Pullo Decl. ¶ 8.) The Solicitation Agent also

worked with the Depository Trust Company (“DTC”)
to count votes from the Bond Classes tendered through
DTC’s ATOP. (Id. ¶ 9.)

Plan Support Agreements

140. Section 1125(b) of the Bankruptcy Code requires

that “[a]n acceptance or rejection of a plan may not be
solicited after the commencement of the case under this
title from a holder of a claim or interest with respect to
such claim or interest, unless, at the time of or before
such solicitation, there is transmitted to such holder the
plan or a summary of the plan, and a written disclosure
statement approved, after notice and a hearing, by the
court as containing adequate information.” 11 U.S.C.
§  1125(b). Congress intended debtors and creditors be
afforded flexibility to resolve disputes, and where possible,
reach a consensual resolution of issues in contemplation
of the development of a plan of adjustment. See In re
Indianapolis Downs, LLC., 486 B.R. 286, 295 (Bankr. D.
Del. 2013) (“[A] narrow construction of ‘solicitation’ affords
[] parties the opportunity to memorialize their agreements
in a way that allows a [...] case to move forward.”)

141. Here, the Plan was made possible by the Debtors’

extensive negotiations with numerous claimholder
constituencies and the Plan Support Agreements that
resulted from the negotiations. (Jaresko Decl. ¶ 14.) These
agreements include the GO/PBA Plan Support Agreement,
ERS Stipulation, HTA/CCDA Plan Support Agreement,
PRIFA Plan Support Agreement, and agreement with
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the UCC. (Zelin Decl. ¶ 13.) The process of negotiation

and solicitation of assent to the plan support agreements
prior to the approval and distribution of the disclosure
statement did not constitute improper solicitation of votes
with respect to the Plan. “An agreement to accept the
Debtor’s plan, made post-petition but before approval of
the disclosure statement, remained executory until [the
creditor] actually filed its accepting ballot . . . Neither the
recitation in the disclosure statement, nor the parties’
execution of the written memorandum, constituted an
acceptance of the plan as such.” In re Heritage Org.,
L.L.C., 376 B.R. 783, 793 (Bankr. N.D. Tex. 2007).

Debtors’ “Notice to Holders of Uninsured Bonds”

dated July 27, 2021

142. On or about July 27, 2021, the Debtors published

a Notice to Holders of Uninsured Bonds29 that provided
an exchange opportunity to all beneficial owners of
Uninsured Bonds to become party to the amended plan
support agreement. Acceptance of the opportunity would
render the bondholder a party to the GO/PBA PSA, entitle
the bondholder to a Restriction Fee pursuant to the PSA,
and constitute consent to the change of the CUSIP number
assigned to the existing bondholding. (See Docket Entry
No. 18761-8) (the “Exchange Offer”) (Hein Ex. FFF at 2.)30

29.  The term “Uninsured Bonds” is designated the meaning

provided in the Exchange Offer.

30.  An “Amended Notice to Holders of Uninsured Bonds” was

published on or about July 30, 2021 (Docket Entry No. 18761-9) (the
“Amended Exchange Offer”). (Hein Ex. GGG.)
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Appendix C

The Exchange Offer was open to “all beneficial owners

of Uninsured Bonds, including retail beneficial holders.”
(Id. at 4.) Importantly, the bondholders’ right to the PSA
Restriction Fee Claim “travels” with the Uninsured Bond.
(Id.) Thus, “in order to separately identify the Uninsured
Bonds that fall into this category, the PSA provides for
the assignment of alternative identifying CUSIPs to track
beneficial interests in Uninsured Bonds that become
subject to the PSA [...].” (Id.; see also GO/PBA Plan
Support Agreement § 2.2.) (Debtors Ex. 16.)

143. Mr. Hein and Mr. Samodovitz argue that the

Exchange Offer was an improper solicitation designed
to procure votes in favor of the Plan. (Hein Obj. at 23).
In response, the Debtors explain that the Exchange
Offer provided a procedural mechanism for all uninsured
bondholders to “deal with the tender and exchange [of
bonds]” through the creation of alternative CUSIPS.
(Nov. 15, 2021, Hr’g. Tr. 140:1-2.) Mr. Hein further argues
that the August 13, 2021 participation deadline (the
“Participation Deadline”) for retail bondholders to join
to the PSA was unreasonable because the participation
deadline only permitted 17 days to consider the offer
(and review the accompanying material) before electing
to participate. (Hein Obj. at 23.) However, the Exchange
Offer did not require retail bondholders to take immediate
action before the Participation Deadline to become
entitled to a support fee. All beneficial owners who
tendered their Uninsured Bonds by the Participation
Deadline were entitled to receive a PSA Restriction Fee.
(Hein Ex. FFF at 3.) The Exchange Offer also disclosed
that, after August 13, 2021, retail bondholders who did
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Appendix C

not tender their bonds by the Participation Deadline

remain entitled to a Retail Support Fee (in the same
amount as the PSA Restriction Fee), so long as their Class
of retail bondholders approves the Plan and the retail
bondholder certifies their retail investor status. (Id. at 5.)
The ballots were not distributed by the Solicitation Agent
until August 30, 2021, after the Participation Deadline
had passed. (Debtors Ex. 138.) The Court finds that the
Exchange Offer was not a solicitation of votes and that
the Participation Deadline was reasonable. The Debtors
have proffered a good faith basis for the development of
a procedural mechanism to track all retail bondholders’
entitlement to the PSA Restriction Fee and Retail Support
Fee. Thus, the objections are overruled.

Entitlement to the Retail Support Fee

144. The Plan provides “in the event that a Class of

Retail Investors [...] votes to accept the Plan, the members
of such Class shall be entitled to receive their Pro Rata
Share of such Class’s allocable share of the aggregate
Retail Support Fee [...].” (Plan § 3.6.) The Retail Support
Fee will thus be available to each member of a class of
Retail Investors that votes, as a class, to accept the Plan.
(Jaresko Decl. ¶ 128.) Additionally, the Debtors represent
that a retail bondholder who voted and certified his status
as a retail investor would be entitled to receive the Retail
Support Fee, so long as the class voted to accept the Plan,
whether or not the bondholder voted in favor of the Plan.
(Nov. 15, 2021, Hr’g Tr. 139:9-15, 166:16-20.)
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Appendix C

145. The Retail Support Fee was designed to deliver

the same amount of fee consideration, as a percentage of
claim amount held, to Retail Investors as to recipients
of the GO/PBA Restriction Fee. (Zelin Decl. ¶ 81.) Thus,
the Retail Support Fee was designed to achieve economic
parity for Retail Investors vis-à-vis the recipients of
the GO/PBA Restriction Fee without requiring Retail
Investors to sign the GO/PBA PSA and agree to its terms
and conditions, including the obligation to support the Plan
and the “lock up” provisions. (Id.)

146. Retail bondholders were provided the option to

either (i) participate in the Exchange Offer with all other
bondholders, thereby receiving the same PSA fee as other
Restriction Fee parties, or (ii) as originally contemplated,
receive the Retail Support Fee if the creditor identifies
as a retail investor and the retail class votes to accept the
Plan. (Id. ¶ 82.)

147. The Debtors have represented that “all retail

investor classes voted to accept the Plan [...], and all
members of the retail classes shall receive the restriction
fee.” (Nov. 15, 2021, Hr’g. Tr. 142: 20-21; 23-24.) The
tabulation summary shows that the retail classes voted
to accept the Plan. (See Pullo Decl. Ex. A; see also Pullo
Sup. Decl. Ex. A.)

Voting on the Plan of Adjustment

148. Pursuant to the Disclosure Statement Order, the

Debtors, or their Solicitation Agent, distributed materials
needed for voting on the Plan or making elections on
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Appendix C

distributions thereunder (the “Solicitation Package”) to

bondholders in various voting classes. (See Disclosure
Statement Ord. ¶¶ 9, 14, 32.) The Court approved the
procedures for voting to accept or reject the Plan,
including the use of DTC’s ATOP process for bondholder
votes, in the Disclosure Statement Order. (See id. at ¶¶ 9,
14, 32.) The Solicitation Agent distributed the Solicitation
Package to appropriate parties, including brokers and
nominees. (See Mailing Affidavits.) (See also Debtors
Ex. 138.)

149. Mr. Hein and Mr. Samodovitz argue that the

complexity of the voting process may have impaired retail
bondholders’ ability to cast timely ballots and/or certify
themselves as retail investors for purposes of establishing
entitlement to a Retail Support Fee if a class voted to
accept the Plan. (Nov. 15, 2021, Hr’g Tr. 149:1-14; id. at
159: 19-25.) To vote to accept or reject the Plan, GO/PBA
PSA Creditors were required to instruct their nominee
or broker to tender their bonds utilizing ATOP before the
voting deadline under the Disclosure Statement Order.
(Disclosure Statement Ord. ¶ 32, Sched. 2.) Mr. Hein and
Mr. Samodovitz have not proffered credible evidence that
retail bondholders, as a whole, were unable to vote on the
Plan. Rather, the voting summary includes a tabulation
of all votes cast in support of and opposition to the Plan
and indicates that retail bondholders from each retail
class successfully voted. (See Pullo Decl. Ex. A; see also
Pullo Sup. Decl. Ex. A.) To the extent the objections
are challenges to the Disclosure Statement Order and
the voting process outlined therein, the objections are
overruled.
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Appendix C

150. The Plan complies with PROMESA Section 314(b)

(2).

C. PROMESA § 314(b)(3): The Debtors Are Not

Prohibited by Law from Taking any Action
Necessary to Carry Out the Plan.

151. The Plan contains no provisions which would

require the Debtors to violate the law, including
Commonwealth law that is not preempted.

152. Act 53, enacted on October 26, 2021, authorizes

the issuance of CVIs and New GO Bonds, consistent
with the terms set forth in the Plan and the plan support
agreements. (Jaresko Decl. ¶ 92; Debtors Ex. 134.) Act 53’s
effectiveness is conditioned only on the elimination of the
Monthly Benefit Modification (as defined in the Seventh
Amended Plan) from the Plan. The Monthly Benefit
Modification is not included in the Plan, and accordingly
Act 53 is effective and the Commonwealth’s issuance of
the CVIs and New GO Bonds is consistent with applicable
Commonwealth law. Furthermore, by reason of the Plan’s
provisions freezing defined benefit accruals and future
costs of living adjustments, upon the Plan’s Effective
Date, PROMESA preempts Acts 91-2004 (establishing
TRS) and 12-1954 (establishing JRS), each as amended,
providing for the future accrual of defined benefits and
future cost of living adjustments, to the extent set forth
in Exhibit A hereto. Absent preemption, the amount of
Commonwealth revenues that would need to be spent on
TRS and JRS pension benefits in fiscal year 2022 is $984
million. (Malhotra Decl. ¶ 65.) Absent preemption, these
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Appendix C

inconsistent statutes would undermine the restructuring

contemplated by the Plan. (Jaresko Decl. ¶ 235.)

153. Enabling legislation is not required to establish

the freeze of defined benefits or the elimination of COLAs.
Obligations arising from Commonwealth statutes,
including statutes providing employees the right to accrue
pension or other retirement benefits, give rise to claims
which can be impaired and discharged pursuant to the
Plan. See 11 U.S.C. § 101(5)(A) (defining claim as “right
to payment, whether or not such right is . . . contingent,
matured, [or] unmatured”); Rederford v. U.S. Airways,
Inc., 589 F.3d 30, 35-36 (1st Cir. 2009) (“The definition of
claim . . . defines what is discharged by the proceeding.
In enacting this language, Congress gave the term ‘claim’
the ‘broadest available definition.’”) (quoting Johnson
v. Home State Bank, 501 U.S. 78, 83, 111 S. Ct. 2150,
115 L. Ed. 2d 66 (1991)); In re Fin. Oversight & Mgmt.
Bd. for P.R., Case No. 17 BK-3283-LTS, 2021 U.S. Dist.
LEXIS 209434, 2021 WL 5024287, at *8-9 (D.P.R. Oct.
29, 2021). The discharge of prepetition obligations does
not need to be approved pursuant to, or consistent with,
Commonwealth law. See, e.g., Order Confirming Debtor’s
Sixth Amended Plan of Adjustment of Debts Pursuant to
Chapter 9 of the Bankruptcy Code, In re City of Prichard,
No. 09-15000, at 7 (Bankr. S.D. Ala. July 8, 2014) (“The
Court . . . finds and concludes that the City’s actions under
the Plan are not prohibited by law, and the treatment of
the Classes who formerly had an interest in the City’s
pension plan is lawful under the Bankruptcy Code.”); In
re Sanitary & Improvement Dist. No. 7, 98 B.R. 970, 974
(Bankr. D. Neb. 1989) (“If a municipality were required to
 158a

Appendix C

pay prepetition bondholders the full amount of their claim

with interest as contained on the face of the bonds and
the [municipality] had no ability to impair the bondholder
claims over objection, the whole purpose and structure of
chapter 9 would be of little value. . . . To create a federal
statute [chapter 9 of the Bankruptcy Code] based upon the
theory that federal intervention was necessary to permit
adjustment of a municipality’s debts and then to prohibit
the municipality from adjusting such debts is not, in the
point of view of this Court, a logical or necessary result.”).

154. The Debtors have sufficiently demonstrated that

express recognition of the preemptive effect of section 4
of PROMESA is crucial to accomplishing the Plan’s goals
and ensuring its feasibility. However, as set forth in the
Court’s Order Regarding Certain Aspects of Motion for
Confirmation of Modified Eighth Amended Title III Joint
Plan of Adjustment of the Commonwealth of Puerto Rico,
et al. (Docket Entry No. 19517) (the “Clarification Order”),
the broad language of the preemption provisions of the
Plan as previously proposed by the Debtors were overly
broad and vague. Accordingly, the Court memorializes
its conclusions concerning preemption here and, in light
of the Debtors’ modification of the preemption provisions,
will enter an order confirming the Plan.

155. Provisions of Commonwealth laws that are

inconsistent with PROMESA are preempted for the
reasons, and to the extent, set forth in Exhibit A
hereto. 31 Such preempted provisions include, without

31.  The Federación de Maestros de Puerto Rico, Inc., Grupo

Magisterial Educadores(as) por la Democracia, Unidad, Cambio,
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Appendix C

limitation: (i) pursuant to section 4 of PROMESA, all

laws, rules, and regulations, to the extent they give rise
to obligations of the Debtors discharged by the Plan and
the Confirmation Order pursuant to PROMESA, and
such discharge shall prevail over any general or specific
provisions of territory laws, rules, and regulations and
(ii) laws enacted prior to June 30, 2016, to the extent
they provide for transfers or other appropriations after
the enactment of PROMESA, including transfers from
the Commonwealth or one of its instrumentalities to
any agency or instrumentality, whether to enable such
agency or instrumentality to pay or satisfy indebtedness
or for any other purpose, are preempted to the extent
inconsistent with the Plan’s discharge of the Debtors’
obligations. Through modifications to the proposed Plan
and related documents, the Oversight Board previously
requested judicial acknowledgement that Act 80-2020, Act
81-2020, and Act 82-2020 are preempted by PROMESA.

Militancia y Organización Sindical, Inc., and Unión Nacional de

Educadores y Trabajadores de la Educación, Inc., (collectively, the
“Teachers’ Associations”) contend that the scope of preemption
set forth in the Plan is overly broad because certain sections
and subsections of Act 106-2017 and Act 160-2013 govern all
Commonwealth public retirement systems, not just TRS and
JRS, and include provisions essential to the functioning of the
government’s retirement systems. (See Teachers’ Associations
Sup. Obj. ¶¶  5-72.) Exhibit A, however, does not contemplate the
preemption of the entirety of every statutory section or subsection
set forth in the “Specific Provisions Preempted” column; rather,
any such section or subsection is preempted only to the extent its
operative provisions are both described in the “Specific Provisions
Preempted” column and a basis for the preemption thereof is listed
in the “Basis for Preemption” column.
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Appendix C

That request has been mooted by the Court’s approval of

the Stipulation and Order Resolving Oversight Board
Complaint Dated December 20, 2021 Concerning Acts
80-2020, 81-2020, and 82-2020 and Joint Resolution 33-
2021 (Docket Entry No. 6 in Adv. Proc. No. 21-00119),
pursuant to which the Puerto Rico Fiscal Agency and
Financial Advisory Authority, the Office of Management
and Budget, and the Honorable Pedro Pierluisi Urrutia,
the Governor of the Commonwealth of Puerto Rico,
resolved litigation concerning the validity of Acts 80-2020,
81-2020, and 82-2020 and Joint Resolution 33-2021 and
agreed that they are significantly inconsistent with the
relevant certified fiscal plan. 32

32.  Asociación Puertorriqueña de la Judicatura, Inc. and

Asociación de Jubilados de la Judicatura de Puerto Rico object
to the impairment of any obligations to the Judicial Retirement
System and contend that any such impairment would be inconsistent
with rights under the Puerto Rico Constitution and principles of
separation of powers and judicial independence that are embedded
in that document. However, PROMESA permits the impairment
and discharge of prepetition debts where, as here, the requirements
for confirmation of a plan of adjustment are satisfied. See 11 U.S.C.
§ 944(b). To the extent that Commonwealth law is inconsistent with
such impairment and discharge, it is preempted by PROMESA.
See Commonwealth of Mass. Div. of Employment and Training v.
Bos. Reg’l Med. Ctr., Inc. (In re Bos. Reg’l Med. Ctr., Inc.), 291 F.3d
111, 126 (1st Cir. 2002) (“[T]o the extent that we were to read the
Employment and Training Law to require that the Division receive
administrative expense priority for a claim that the Bankruptcy Code
would assign general unsecured status, the state law would then be
inconsistent with federal law and so preempted. The application of
the doctrine of preemption is often complex, but in such a case would
be clear-cut.” (citations omitted)); In re Sanitary & Imp. Dist., No.
7, 98 B.R. at 974.
 161a

Appendix C

156. Many of the preempted statutes would require

the Commonwealth to use its revenues to repay its general
obligation and guaranteed debt in full. The amount of debt
service necessary for fiscal year 2022 would be $1.7 billion.
(Malhotra Decl. ¶ 63.) These statutes are inconsistent
with PROMESA to the extent they are inconsistent with
the discharge of outstanding claims and the treatment
provided for such claims by the Plan under Title III of
PROMESA and would undermine the restructuring
contemplated by the Plan and Puerto Rico’s return to fiscal
responsibility and access to capital markets. (Jaresko
Decl. ¶¶ 230-33.) Further, certain preempted statutes
require the appropriation of Commonwealth revenues
and would require more than $3 billion in Commonwealth
revenues to be transferred in fiscal year 2022. (Malhotra
Decl. ¶ 64.) In addition, certain preempted statutes
require the Commonwealth to provide pension and other
benefits or payments to retirees who participated in the
ERS, TRS, or JRS retirement systems at statutorily
specified rates; the amount of Commonwealth revenues
that would need to be spent on TRS and JRS benefits or
payments in fiscal year 2022 pursuant to these statutes
would be $984 million. (Malhotra Decl. ¶ 65.) Such statutes
are inconsistent with PROMESA to the extent they are
inconsistent with the discharge of claims and treatment
provided for pension benefits and payments by the Plan
under Title III of PROMESA and would undermine the
restructuring contemplated by the Plan and the Plan’s
contemplated repayment of claims from such revenues.
(Jaresko Decl. ¶ 234.) For the avoidance of doubt, the
non-inclusion of a payment obligation arising from a
valid law in a certified fiscal plan or budget is not a basis
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Appendix C

for disallowance and discharge of such obligation to the

extent the claim arising therefrom otherwise satisfies the
requirements for allowance of a claim under the relevant
provisions of the Bankruptcy Code. 33

33.  Mr. Hein objects to the scope of the preemption provisions of

the Plan and this analysis and contends that the statutes authorizing
the bonds that he holds, which commit the full faith and credit of the
Commonwealth to repayment of the bonds, cannot be preempted.
His argument is contrary to the provisions of PROMESA, which
permit the impairment and discharge of prepetition debts such
as Mr. Hein’s. To the extent that Commonwealth law requires the
payment of such debts in full, it is inconsistent with the discharge
of such debts and therefore subject to preemption. To the extent
that Mr. Hein’s objection is that other creditors are being treated
favorably notwithstanding Commonwealth law that provides
his claims with an entitlement to certain streams of revenues or
priority treatment over other debts, such arguments are precluded
by the acceptance of the Plan by each class of bonds, including the
bondholder classes of which Mr. Hein is a member. The Bankruptcy
Code’s requirements that a plan “not discriminate unfairly, and [be]
fair and equitable” are applicable only as “to each class of claims or
interests that is impaired under, and has not accepted, the plan.” 11
U.S.C. § 1129(b)(1); see 7 Collier on Bankruptcy ¶ 1129.03 (16th 2021)
(“[S]ection 1129(b)(1) requires that the plan proponent prove, as to
the dissenting class, that the plan is both fair and equitable and not
unfairly discriminatory.”) (emphasis added). Those requirements of
section 1129(b) are applied on a class-wide basis, not on a creditor-
by-creditor basis, and “a disapproving creditor within a class that
approves a plan [therefore] cannot claim unfair discrimination” or a
lack of fair and equitable treatment. In re Nuverra Envtl. Sols., Inc.,
834 F. App’x 729, 735 (3d Cir. 2021), as amended (Feb. 2, 2021), cert.
denied, No. 21-17, 2021 U.S. LEXIS 4984, 2021 WL 4733333 (U.S.
Oct. 12, 2021); In re W.R. Grace & Co., 475 B.R. 34, 175 (D. Del. 2012)
(“It is a well-known legal rule in Chapter 11 reorganization litigation
that ‘[u]nder § 1129(b), a finding that a plan is ‘fair and equitable’ is
required only in the context of a cramdown.’”) (quoting In re Dow
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Appendix C

Constitutional Challenges to the Plan

157. Several creditors, including Mr. Hein, object

to the Plan on the grounds that it allegedly violates
the Contracts Clause or the Takings Clause of the
Constitution of the United States. Having considered
carefully the parties’ submissions and arguments on
these issues, the objections are overruled, with the
exception of the objections concerning Eminent Domain/
Inverse Condemnation Claims. The objections concerning
Eminent Domain/Inverse Condemnation Claims are
sustained, and such Allowed Claims must be paid in
accordance with Debtors’ Full-Payment Proposal (as set
forth in Plan §§ 58.1, 77.1(e)).

Contracts Clause

158. The Plan contains no provision that would

constitute or create a violation of the Contracts Clause
of the Constitution of the United States. The Contracts
Clause provides that no state shall pass any law impairing
the obligation of contracts. U.S. Const. art. I, § 10, cl. 1.
Although the Constitution prohibits a state or territory
from impairing contractual obligations through legislative
action, it imposes no such prohibition on Congress and,
indeed, empowers Congress to impair contractual
obligations through article I, section 8 of the Constitution,

Corning Corp., 244 B.R. 678, 693 (Bankr. E.D. Mich. 1999)), aff’d,
729 F.3d 332 (3d Cir. 2013). Finally, to the extent that Mr. Hein
contends that the Plan fails to meet the “best interests” test due to
such treatment, the Court will address his argument in connection
with its discussion below of section 314(b)(6) of PROMESA.
 164a

Appendix C

which provides that Congress shall have the power to

establish uniform laws on the subject of bankruptcies
throughout the United States. U.S. Const. art. I, § 8, cl.
4. It has long been recognized that one of the fundamental
goals of bankruptcy law is to adjust the debtor-creditor
relationship, that is, to alter contract rights. See Ass’n of
Retired Emps. of Stockton v. City of Stockton (In re City
of Stockton), 478 B.R. 8, 14-15 (Bankr. E.D. Cal. 2012).
“While bankruptcy law endeavors to provide a system of
orderly, predictable rules for treatment of parties whose
contracts are impaired, that does not change the starring
role of contract impairment in bankruptcy.” Id. at 16.
Congress is, therefore, “‘expressly vested with the power
of passing [bankruptcy] laws, and is not prohibited from
passing laws impairing the obligation of contracts. . . .’”
Id. at 15 (citing Sturges v. Crowninshield, 17 U.S. 122, 191,
4 L. Ed. 529 (1819)). Further, the Plan does not implicate
the Contracts Clause because it is not a legislative action.
A federal court’s confirmation of a reorganization plan
under federal law cannot violate the Contracts Clause.
See Pension Benefit Guar. Corp. v. R.A. Gray & Co., 467
U.S. 717, 732 n.9, 104 S. Ct. 2709, 81 L. Ed. 2d 601 (1984)
(holding that the Contracts Clause does not apply to
federal government actions). It follows that this Court may
approve the Plan under PROMESA, a federal law enacted
by Congress pursuant to the Territories Clause of the
Constitution that incorporates key bankruptcy concepts
and provisions, 34 with the express purpose of allowing
Puerto Rico to achieve fiscal responsibility and access to
the capital markets through, inter alia, adjustment of its

34.  See ¶¶ 6, 35-36 supra.

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Appendix C

debts and those of its instrumentalities, without violating

the Contracts Clause. 35

159. Mr. Hein has also failed to demonstrate that

the fiscal plans constitute territorial laws subject to the
restrictions of the Contracts Clause, and his Contracts
Clause objection with respect to the fiscal plans is therefore
overruled. To the extent that Mr. Hein argues that the
Commonwealth’s Act 53 (the “New Bond Legislation”)
authorizing the issuance of new bonds and contemplating
the cancellation of currently outstanding bonds is within
the scope of the Contracts Clause, the Court concludes,
as explained below, that such legislation does not violate
the Contracts Clause because the record establishes that
it is reasonable and necessary in light of the surrounding
circumstances. Although the language of the Contracts
Clause is “unequivocal,” it “‘does not make unlawful
every state law that conflicts with any contract.’” United
Auto., Aero., Agric. Impl. Workers of Am. Int’l Union v.
Fortuño, 633 F.3d 37, 41 (1st Cir. 2011) (quoting Loc. Div.
589, Amalgamated Transit Union v. Massachusetts, 666
F.2d 618, 638 (1st Cir. 1981)). In considering claims brought
under the Contracts Clause, courts must “‘reconcile the
strictures of the Contract[s] Clause with the essential
attributes of sovereign power necessarily reserved by
the States to safeguard the welfare of their citizens.’” Id.
(quoting Mercado-Boneta v. Administracion del Fondo
de Compensacion al Paciente, 125 F.3d 9, 14 (1st Cir.
35.  To the extent the objection of the Asociación de Jubilados
de la Judicatura de Puerto Rico (the “AJJPR”) may construed as
objecting to the Plan on the basis of the Contracts Clause, that
aspect of the AJJPR’s objection is overruled for the same reasons.
(See Docket Entry No. 18549 ¶ 10.)
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1997)). In doing so, courts apply a two-pronged test: they

examine first “‘whether the state law has . . . operated as
a substantial impairment of a contractual relationship,’”
id. (quoting Energy Rsrv. Grp., Inc. v. Kan. Power &
Light Co., 459 U.S. 400, 411, 103 S. Ct. 697, 74 L. Ed.
2d 569 (1983)), and then, if the law has, “whether the
impairment was ‘reasonable and necessary to serve an
important government purpose.’” Id. (quoting U.S. Tr.
Co. of N.Y. v. New Jersey, 431 U.S. 1, 20 (1977), 97 S. Ct.
1505, 52 L. Ed. 2d 92) Assuming arguendo that New
Bond Legislation will substantially impair contractual
obligations, the Court examines its reasonableness and
necessity. The First Circuit considers “the reasonableness
inquiry” to “ask[ ] whether the law is ‘reasonable in light
of the surrounding circumstances,’” while “the necessity
inquiry focuses on ‘whether [Puerto Rico] ‘imposed a
drastic impairment when an evident and more moderate
course would serve its purposes equally well.’’” Id. at 45-46
(quoting Mercado Boneta, 125 F. 3d at 15.) In analyzing
these questions, courts may consider “whether the act
(1) was an emergency measure; (2) was one to protect a
basic societal interest, rather than particular individuals;
(3) was tailored appropriately to its purpose; (4) imposed
reasonable conditions; and (5) was limited to the duration
of the emergency.” Id. at 46 (quoting Energy Rsrv. Grp.,
459 U.S. at 410 n.11.)

160. The circumstances surrounding the enactment of

the New Bond Legislation are clear: the Commonwealth
Legislature enacted the New Bond Legislation in
response to the Commonwealth’s unprecedented fiscal and
economic crisis, the need to resolve litigation concerning
the Commonwealth’s bond obligations, and the need to
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enable the Commonwealth to effectuate the Plan so that

it can regain access to capital markets. The Legislature’s
decision is a reasonable one under the surrounding
circumstances. The legislation, which provides for the
cancellation of instruments representing restructured
debts and eliminates potential disputes regarding the
validity of the issuance of new bonds that could affect the
marketability of those bonds, is also necessary in light of
the ongoing fiscal emergency in Puerto Rico. The Court
concludes that the Contracts Clause does not prohibit
confirmation of the Plan, and Mr. Hein’s objections
invoking the Contracts Clause are therefore overruled.

Takings Clause

161. For the reasons that follow, confirmation

objections invoking the Takings Clause of the Constitution
of the United States are overruled, with the exception of
certain objections to the Debtors’ proposed treatment of
Eminent Domain/Inverse Condemnation Claims. With
respect to those Claims, the Debtors’ Full-Payment
Proposal would provide sufficient treatment and payment
in the event the Court finds their original proposal to
pay only a portion of Allowed Eminent Domain Claims
violative of the Takings Clause. As explained below, the
Court finds that the original proposal for such Claims does
not comport with the requirements of the Takings Clause
and the Court has directed the Debtors to revise the Fifth
Modified Eighth Amended Plan, to ensure consistency
and compliance with the treatment contemplated by
the Debtors’ Full-Payment Proposal. The Debtors have
done so, and the Court finds that the further revised
Plan (Docket Entry No. 19784) meets the requirements
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of section 314(b)(3) of PROMESA. For the avoidance of

doubt, the provisions of this FFCL are incorporated by
reference in the Confirmation Order, and so the Debtors’
position that their original proposal does not violate the
Takings Clause is preserved for purposes of appeal.

162. Various claimants have objected to the Plan,

arguing that the treatment of their claims violates the
Fifth Amendment’s Takings Clause. Generally, these
objectors fall into three categories: (1) those asserting that
they hold Eminent Domain/Inverse Condemnation Claims
that may not be impaired by the Plan; (2) bondholders
who argue that the Plan takes their property interest
in bonds—specifically, the alleged lien on revenues that
they claim secures repayment of the bonds issued by the
Commonwealth—without just compensation; and (3) Suiza
Dairy, which argues that the Plan authorizes a regulatory
taking without just compensation. 36

36.  The Court here does not address the objection filed by
Ismael L. Purcell Soler and Alys Collazo Bougeois concerning
their inverse condemnation claim. (See Docket Entry No. 18504.)
The substance of the objection makes clear that Mr. Purcell Soler’s
and Ms. Collazo Bougeois’ inverse condemnation claim concerns
actions by PREPA. (See, e.g., id. at 4.) Mr. Purcell Soler and Ms.
Collazo Bougeois are therefore creditors of PREPA, not of the Title
III debtors currently before this Court. The Plan does not adjust
PREPA’s debts or provide for any releases or exculpations of PREPA.
Accordingly, Mr. Purcell Soler and Ms. Collazo Bougeois have no
standing to challenge the Plan and their objection is overruled.
See Bank of N.Y. Mellon v. P.R. Sales Tax Fin. Corp. (In re Fin.
Oversight & Mgmt. Bd. for P.R.), 301 F. Supp. 3d 306, 312 (D.P.R.
2017) (finding that creditors of Commonwealth lacked standing in
adversary proceeding concerning COFINA bonds).
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163. Federal statutes, such as the Bankruptcy

Code and PROMESA, are subject to the strictures
of the Constitution, including the Fifth Amendment’s
requirement that government takings of property for
public use be justly compensated. Indeed, the bankruptcy
power conferred by article I, section 8 of the Constitution of
the United States is itself subject to the Fifth Amendment.
See Louisville Joint Stock Land Bank v. Radford, 295
U.S. 555, 589, 55 S. Ct. 854, 79 L. Ed. 1593 (1935) (“The
bankruptcy power, like the other great substantive powers
of Congress, is subject to the Fifth Amendment.”). This
principle was reaffirmed and extended by the Supreme
Court in Security Industrial Bank, where the Court

Additionally, for the reasons set for th in this Cour t’s

Memorandum Opinion Granting Defendants’ Motions to Dismiss
Second Amended Complaint (Docket Entry No. 192 in Adv. Proc.
No. 18-00028), the Court overrules the objection of Cooperativa de
Ahorro y Crédito Abraham Rosa, Cooperativa de Ahorro y Crédito
de Ciales, Cooperative de Ahorro y Crédito de Rincón, Cooperative
de Ahorro y Crédito Vega Alta, Cooperativa de Ahorro y Credito
Dr. Manuel Zeno Gandía, and Cooperativa de Ahorro y Crédito de
Juana Díaz (the “Credit Unions”) to the extent it incorporates the
allegations set forth in their adversary complaint, which has now
been dismissed without leave to amend, alleging that their claims are
protected by the Takings Clause. Because the Court has concluded
that the Credit Unions have not stated a claim upon which relief could
be granted under the Takings Clause, the Court finds that their
claims for payment concerning that alleged taking are not protected
by the Fifth Amendment and may be impaired and discharged by
the Plan. Moreover, to the extent the Credit Unions have asserted a
claim that approval of the Plan itself would constitute a taking, the
Credit Unions’ objection is also overruled for the reasons discussed
in connection with the objections of other bondholders (see infra
¶¶ 170-73).
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cautioned that, “however ‘rational’ the exercise of the

bankruptcy power may be, that inquiry is quite separate
from the question whether the enactment takes property
within the prohibition of the Fifth Amendment.” United
States v. Sec. Indus. Bank, 459 U.S. 70, 75, 103 S. Ct.
407, 74 L. Ed. 2d 235 (1982). In keeping with traditional
takings jurisprudence, the predicate inquiry must concern
the nature of the property at issue and whether a taking
occurred. See also id. at 76-77 (classifying secured
interests in contract rights as properly analyzed under
the factors set forth in Penn Cent. Transp. Co. v. City of
New York, 438 U.S. 104, 124, 98 S. Ct. 2646, 57 L. Ed. 2d
631 (1978), as distinguished from jurisprudence governing
fee simple interests in real property).

164. Throughout the confirmation process, the

Debtors have argued that, while Supreme Court decisions
have recognized that the Fifth Amendment restricts
the Bankruptcy Code, it does so only to the extent that
property interests are secured. See Sec. Indus. Bank,
459 U.S. at 75-76, 78; Wright v. Union Cent. Life Ins. Co.,
311 U.S. 273, 278, 61 S. Ct. 196, 85 L. Ed. 184 (1940) (the
constitution protects “the rights of secured creditors,
throughout the proceedings, to the extent of the value” of
the creditors’ collateral). See also Cobb v. City of Stockton
(In re City of Stockton), 909 F.3d 1256 (2018); Poinsett
Lumber Mfg. v. Drainage Dist. No. 7, 119 F.2d 270 (8th
Cir. 1941). This conclusion is inconsistent with the Fifth
Amendment, which is implicated by a governmental
act—the taking of private property for public use—and
whose just compensation requirement is not conditioned
on whether the government g ives secur ity for a
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compensation obligation that is not satisfied immediately.

While a security interest is a type of property that can
be protected by both the Fifth Amendment and the
Bankruptcy Code, its absence is not determinative of Fifth
Amendment protection.

165. The Supreme Court’s takings jurisprudence

requires evaluation of whether the real property was
subject to a physical invasion (implicating per se takings
analysis) or whether, for example, it was subjected to a
use restriction (in which case the Penn Central factors
are applied to determine whether a regulatory taking
occurred). Cedar Point Nursery v. Hassid, 141 S. Ct. 2063,
2071-72, 210 L. Ed. 2d 369 (2021).

166. Eminent Domain/Inverse Condemnation

Objections: With respect to the objections raised by
holders of alleged Eminent Domain/Inverse Condemnation
Claims, the creditors assert, and the Debtors do not
dispute, that their Claims arise from the physical invasion
by the Commonwealth of privately owned real property.
The objectors aptly rely on Supreme Court decisions
for the propositions that a physical invasion of property
constitutes a per se taking (Cedar Point Nursery, 141 S.
Ct. at 2071), for which an irreducible entitlement to just
compensation immediately ripens under the Takings
Clause (Knick v. Twp. of Scott, 139 S. Ct. 2162, 2171, 204
L. Ed. 2d 558 (2019); Blanchette v. Conn. Gen. Ins. Corp.,
419 U.S. 102, 155 (1974) (“[A]ny deficiency of constitutional
magnitude in the compensation [of seized property]
. . . will indeed be a taking of private property for public
use.”)), and that the Bankruptcy Code is subject to the
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Takings Clause (see Radford, 295 U.S. at 589, 601-02;

Sec. Indus. Bank, 459 U.S. at 75, 78, 80, 82). See also In
re City of Detroit, 524 B.R. 147, 304-07 (Bankr. E.D. Mich.
2014). 37 The Court therefore confines its examination of
these Claims to a per se takings analysis. “These sorts
of physical appropriations constitute the ‘clearest sort
of taking,’ and we assess them using a simple, per se
rule: The government must pay for what it takes.” Cedar
Point Nursery, at 2071 (emphasis in original) (internal
citation omitted). The Court now turns to the question

37.  The Debtors respond that, to the extent portions of these

Eminent Domain/Inverse Condemnation Claims are not “secured”
by deposits of funds with a Clerk of Court, they are simply unsecured
claims that are subject to impairment and discharge under the
Bankruptcy Code and that, while Supreme Court decisions have
recognized that the Fifth Amendment restricts the Bankruptcy
Code, it does so only to the extent that property interests are
secured. See Sec. Indus. Bank, 459 U.S. at 75-76, 78; Wright v. Union
Cent. Life Ins. Co., 311 U.S. 273, 278, 61 S. Ct. 196, 85 L. Ed. 184
(1940) (the constitution protects “the rights of secured creditors,
throughout the proceedings, to the extent of the value” of the
creditors’ collateral). See also Cobb v. City of Stockton (In re City of
Stockton), 909 F.3d 1256 (2018); Poinsett Lumber Mfg. v. Drainage
Dist. No. 7, 119 F.2d 270 (8th Cir. 1941). The Debtors’ application of
the distinction, however, between secured and unsecured interests
under the Bankruptcy Code to determine whether a Takings
Clause-related obligation can be impaired is inconsistent with the
Fifth Amendment, which requires first assessing the origin of the
payment obligation: whether it arises from a government taking of
private property for public use. As explained further below, while a
security interest is a type of property that can be protected by both
the Fifth Amendment and the Bankruptcy Code, a physical invasion
(in this case, of real property) falls squarely within the ambit of Fifth
Amendment protection, whether or not the government entity has
provided any security for its obligation to pay just compensation.
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of just compensation and whether valid claims for just

compensation can be impaired in bankruptcy. For the
reasons set forth below, and for materially the same
reasons set forth in this Court’s order of December 14,
2021 (Docket Entry No. 19517 at 6-15), the Court finds
that such claims may not be impaired.

167. Unlike other constitutional prohibitions of

government conduct, in connection with which the
Framers did not specify remedies, the Takings Clause of
the Constitution of the United States itself mandates the
provision of “just compensation” in the event that “private
property [is] taken for public use.” U.S. Const. am. V. The
Supreme Court has recently and expressly recognized the
unique status of cases involving the governmental takings
of real property. In Knick, the Supreme Court stated
that “[t]he Fifth Amendment right to full compensation
arises at the time of the taking, regardless of post-taking
remedies that may be available to the property owner,” a
principle derived from Jacobs v. United States, 290 U.S.
13, 17, 54 S. Ct. 26, 78 L. Ed. 142 (1933), in which the Court
stressed that the owner of a “valid takings claim is entitled
to compensation as if it had been ‘paid contemporaneously
with the taking’—that is, the compensation must generally
consist of the total value of the property when taken, plus
interest from that time.” Knick, 139 S. Ct. at 2170. See
also Cedar Point Nursery, 141 S. Ct. at 2071-72 (“When
the government physically acquires private property
for a public use, the Takings Clause imposes a clear and
categorical obligation to provide the owner with just
compensation.”). Thus, unlike judgment creditors whose
statutory remedies for violations of other constitutional
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Appendix C

provisions are dischargeable, holders of takings claims

have a constitutional right to just compensation that is
not subject to impairment or discharge under a plan
of adjustment. See Blanchette, 419 U.S. at 155 (“[A]ny
deficiency of constitutional magnitude in the compensation
[of seized property] . . . will indeed be a taking of private
property for public use.”); see also In re City of Detroit,
524 B.R. at 268-70. Put differently, “just compensation”
is not a statutory damages remedy for a constitutional
violation but is instead a necessary condition to the
exercise of government power to take private property
for public use. 38

168. The federal appellate cases cited by the Debtors

are inapposite, both because they are materially
distinguishable and because they do not support an
alternative interpretation of the Supreme Court’s clear
jurisprudence distinguishing the Takings Clause from
other constitutional provisions. First, the case of Poinsett
Lumber does not purport to directly address the issue
before this Court, and the Oversight Board places more

38.  The Oversight Board argues, without citation, that

the only reason the Takings Clause specifies the need for “just
compensation” is that, unlike in other constitutional provisions,
the government action is permitted rather than prohibited, and
that Eminent Domain/Inverse Condemnation Claims are therefore
not otherwise entitled to preferential treatment when damages
for other constitutional violations are subject to impairment and
discharge. (See Docket Entry No. 19574 ¶ 22.) Such an argument itself
acknowledges, however, that the Takings Clause is, in fact, unique
in requiring just compensation as the condition for taking private
property for public use. The conclusion is textually inescapable, and
accordingly inflexible.
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weight on it than it will support. Unlike the instant matter,

in which claimants have timely filed proofs of Claim and
objected to the treatment of their Claims under the Plan,
the claimant in Poinsett Lumber had failed to timely
preserve its right to object to the readjustment until
after the plan had been confirmed. Poinsett Lumber
Mfg., 119 F.2d at 274 (“Appellant could not remain silent
until the proceedings had advanced to the stage of a final
decree and then, in a collateral attack, make the claim
successfully that its cause of action is not included in the
plan of composition, nor affected by it, nor dealt with
therein.”). Moreover, although the Eighth Circuit did
reject the creditor’s argument that the Takings Clause
protected its claim from discharge, Poinsett Lumber
concerned a challenge to the constitutionality of a federal
bankruptcy statute, the validity of which apparently
hinged on the determination that the drainage district was
“not a governmental agency,” making that case dissimilar
from the instant dispute, which concerns whether a plan
of adjustment is unconstitutional because it authorizes
a government actor to withhold just compensation owed
for the taking of private property for public use. 119
F.2d at 272 (citing Luehrmann v. Drainage Dist. No. 7
of Poinsett Cnty., 104 F.2d 696, 703 (8th Cir. 1939) (“the
Act of August 16, 1937, is valid as applied to this drainage
district, which is not a governmental agency.”)). Indeed,
Poinsett Lumber’s narrow reliance on Luehrmann
appears to be for the limited purpose of determining
that the federal bankruptcy statute was valid. Poinsett
Lumber, 119 F.2d at 272-73. 39 Here, by contrast, the

39.  It apparently mattered to the Poinsett Lumber court that

the federal bankruptcy statute was previously deemed valid in light
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Appendix C

question is whether government action under the Plan

(rather than the proper interpretation of a federal statute)
permits a taking in violation of the Fifth Amendment by
impairing the constitutional right of just compensation.
Id. at 272-73. Poinsett Lumber does not clearly support
the Debtors’ theory that a government debtor may impair
and discharge a valid Takings Clause Claim for just
compensation, let alone for the reason that the claim for
just compensation is unsecured rather than secured.

169. The Debtors’ reliance on In re City of Stockton

is likewise unavailing. First, the creditor in that Ninth
Circuit case had slept on his rights to oppose the discharge

of the fact that drainage districts were not government agencies. See
id. at 272-73 (citing Luehrmann, 104 F.2d at 703)). Nevertheless, even
if the 1941 decision of Poinsett Lumber does not refute the Oversight
Board’s position that Arkansas law recognized drainage districts
as potentially liable for Takings Clause claims (see Docket Entry
No. 19574 ¶¶ 31-32 (citing St. Francis Drainage Dist. v. Austin, 227
Ark. 167, 296 S.W.2d 668, 668-69 (Ark. 1956))), and that therefore
Poinsett Lumber assumes the dischargeability of Takings Clause
claims, it is at best unclear whether the Poinsett Lumber court
squarely considered that precise question and whether it factored
into the decision it reached. See Poinsett Lumber, 119 F.2d at 272-73.
It is therefore inappropriate to infer from silence that the Poinsett
Lumber court maintained or even acknowledged the Oversight
Board’s theory. Moreover, the general dicta of Luehrmann at pages
702 and 703 (on which Poinsett Lumber relies) largely did not concern
any prepetition per se taking, and to the extent it upheld the lower
court’s disallowance of an unliquidated claim for alleged overflow
damage, it did so for the limited purpose of acknowledging that the
lower courts rightly overruled the objection that the debtor was not
insolvent. As such, Luehrmann does not even establish a thin reed
of support for the Oversight Board’s theory. 104 F.2d at 702-03.
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of his claim under the plan of adjustment. The majority

determined that the creditor, a Mr. Cobb, had not sought
any stay relief, that the plan had already been substantially
consummated, that reversal of the confirmation order
would have threatened the settlements underlying the
plan to the prejudice of settlement participants, and that
the relief sought required dismantling the plan, and so his
claim was deemed equitably moot. In re City of Stockton,
909 F.3d at 1263-65. Such questions of equitable mootness
are simply not present at this pre-confirmation stage in
the instant proceeding. Second, and more importantly,
the Debtors’ reliance on the Ninth Circuit’s alternate
finding that Mr. Cobb’s claim was dischargeable because
his interest was unsecured rather than secured, not only
lacks any clear basis in Supreme Court jurisprudence, but
it appears to derive from a conflation of the constitutional
guarantee of just compensation under the Takings
Clause with statutory remedies for other constitutional
violations. See id. at 1268 (“[O]ther constitutionally based
lawsuits seeking money damages, such as § 1983 claims,
are routinely adjusted in bankruptcy[.]”). See also id.
at 1278 (Friedland, J. dissenting) (“[T]he Constitution’s
mandate that takings claims be excepted from discharge
does not depend on whether those claims were initially
classified in any bankruptcy proceeding as secured or
unsecured; the whole point of nondischargeability is
that nondischargeable claims pass through bankruptcy
unaffected[.]”). 40 The Court declines any invitation to

40.  Despite the Oversight Board’s argument that Judge

Friedland’s dissent distinguished between pre-petition and post-
petition transfers of title (Docket Entry No. 19574 ¶ 33 (discussing
In re City of Stockton, 909 F.3d at 1276)), it does not support the
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overlook the unique nature of the Takings Clause here

by conditioning the Fifth Amendment requirement of
just compensation on the existence of security for the
obligation. To hold otherwise would be to make the
Takings Clause subject to federal bankruptcy law, which
is precisely the opposite of what the Supreme Court has
done.41

Oversight Board’s theory. The dissent made that distinction for the
purpose of disputing the procedural posture of Mr. Cobb’s claim
under California law and is a far cry from constituting support for
the Oversight Board’s generalized theory that only post-petition
condemnations are not subject to impairment, let alone that they
(and they alone) should be treated as administrative expenses.
The Oversight Board obscures the relevance of Judge Friedland’s
dissent, which reached the conclusion that this Court announces
today. Id. at 1278.

41.  The Oversight Board also contended, for the first time,
at oral argument that the Court should allow the impairment
and discharge of per se takings Claims because (i) Congress can
otherwise bar Takings Clause claims through the operation of
statutes of limitations, just like any other claim (see, e.g., Nov. 22,
2021, Hr’g Tr. 60:10-25 (discussing Block v. North Dakota, 461 U.S.
273, 292, 103 S. Ct. 1811, 75 L. Ed. 2d 840 (1983))), and (ii) “the
bankruptcy power is not always subject to the Fifth Amendment
when it comes to discharge and avoidance of property interests,”
such that “if you can avoid a property interest under Bankruptcy
Code section 544, surely you can discharge an unsecured claim to
just compensation under section 944.” (Nov. 23, 2021, Hr’g Tr. 26:20-
27:5. See also Docket Entry No. 19574 ¶¶ 35-36.) The first argument
fails because (a) the cases cited by the Oversight Board (including
Block) are distinguishable, because none of them directly involved
any limitation periods for raising Takings Clause claims in federal
district courts, nor does any of them provide an analytical basis for
determining that Congress can statutorily limit a constitutional claim
to which sovereign immunity is not a barrier (cf. Soriano v. United
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Appendix C

States, 352 U.S. 270, 273-77, 77 S. Ct. 269, 1 L. Ed. 2d 306 (1957)
(statute of limitations pertaining to claim for just compensation
before Court of Federal Claims)); (b) statutes of limitations concern
the procedural bounds of litigation decisions over which claimants
have control, such as the timing of filing a claim, and therefore they
do not support by analogy the Oversight Board’s argument that
PROMESA or the Bankruptcy Code can substantively affect Takings
Clause claims in a manner beyond the control of the claimants; and,
relatedly, (c) whereas statutes of limitations serve as a procedural
bar to claims and may therefore be harmonized with the Takings
Clause without impairing the substance of a litigant’s right to
just compensation, the Oversight Board’s theory would affect the
substance of Takings Clause claims in a manner that appears to
abridge litigants’ rights to just compensation itself, regardless of
when their claims are brought. Ultimately, the Court need not, and
does not, express any opinion here as to the application of statutes
of limitation to Takings Clause claims.
The Oversight Board’s second argument fares no better: 11
U.S.C. §  544(b)(1) only allows for the avoidance of transfers that
would be voidable under applicable law. Section 544(b)(1) is thus
already restricted to transfers that are “voidable under applicable
law,” which accommodates restrictions imposed by non-bankruptcy
law, including the Takings Clause. 11 U.S.C. § 544(b)(1). Further, the
Takings Clause serves only as a narrow boundary to the Debtors’
avoidance powers, particularly with respect to per se takings.
In situations where regulatory takings are potentially at issue,
the authority under section 544(b)(1) to avoid transfers may still
be exercised in cases where the Penn Central analysis permits.
See also 11 U.S.C. §§  544(a), 547(b), 548(a). The Oversight Board
essentially posits that, because it can conceive of a highly fact-specific
hypothetical in which an attempt to avoid an unrecorded transfer of
real property under section 544(a) might constitute a taking under
this Court’s analysis, the avoidance provisions of the Bankruptcy
Code would be broadly endangered if the Takings Clause could
preclude such avoidances. (See Docket Entry No. 19574 ¶ 26.) Not
only does the Court decline to decide hypothetical cases not before
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170. Accordingly, the Court concludes that the per

se claims asserted by the holders of alleged Eminent
Domain/Inverse Condemnation Claims, to the extent
they are ultimately allowed, are not subject to impairment
or discharge, and that such creditors’ objections to
confirmation are hereby sustained to the extent the
provisions of the Fifth Modified Eighth Amended Plan
(dated December 21, 2021) would treat such allowed
claims as general unsecured claims. The Debtors have
proffered the Full-Payment Proposal for the treatment
of the Claims in the event the Court, as it has done here,
rejects the proposal to treat unfunded portions of Eminent
Domain/Inverse Condemnation Claims on parity with
general unsecured claims. That Full-Payment Proposal
provides for full satisfaction of Allowed Eminent Domain/
Inverse Condemnation Claims when this decision and
determinations allowing such Claims become final. The
Court directed the Debtors to revise the Fifth Modified
Eighth Amended Plan to provide solely for such treatment
of the Claims (although the Debtors’ original position
that the Claims are dischargeable and may be treated as
general unsecured claims to the extent they are unfunded
is preserved for appeal) and the Debtors have done so.42

it, but the Oversight Board’s argument is self-defeating. It does not

follow that, because the Takings Clause could conceivably preclude
a debtor’s exercise of avoidance powers in a highly specific set of
circumstances, the Bankruptcy Code is endangered root and branch.

42.  The Court’s analysis should not be construed to prejudge

whether particular Eminent Domain/Inverse Condemnation
creditors must receive “full” compensation for their Takings Clause
Claims. The Fifth Amendment mandates that a meritorious takings
claimant receive just compensation, as determined by the court. See
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The Court, accordingly, finds that the Plan’s treatment of

Eminent Domain/Inverse Condemnation Claims is not a
barrier to confirmation.

171. Bondholders’ Objections: With respect to the

objectors who have raised Takings Clause arguments with
respect to their status as bondholders (see Samodovitz
Obj.; Hein Obj.), the proper analytical framework for
addressing these claims is set forth in Penn Central. 438
U.S. at 124; see Patriot Portfolio, LLC v. Weinstein (In
re Weinstein), 164 F.3d 677, 685 (1st Cir. 1999) (applying
Penn Central analysis to constitutional challenge to lien
avoidance pursuant to section 522(f) of the Bankruptcy
Code). Pursuant to that test, courts consider three factors:
“(1) the economic impact of the regulation on the claimant;
(2) the extent to which the regulation interferes with the
claimant’s reasonable investment-backed expectations;
and (3) the character of the governmental action.” Patriot
Portfolio, 164 F.3d at 685.

172. Considering the first factor, the Court notes that

the actions challenged by the Bondholders will not result
in the total destruction of the value of the liens allegedly

In re City of Stockton, 909 F.3d at 1279 (Friedland, J. dissenting).

The Court does not decide or prejudge today the meaning or
quantum of just compensation for any particular claimant. For some
claimants, that amount has already been adjudicated. For others,
that determination has not yet been made. Rather, the Court’s limited
determination here is that the Fifth Amendment prohibits the Plan
from providing less than just compensation for allowed Eminent
Domain/Inverse Condemnation Claims by way of impairment and
discharge through bankruptcy.
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securing the existing bonds. Pursuant to the terms of

the Plan (see Plan §§ 1.199, 1.359, 74.1), bondholders will
receive substantial value in new secured bonds and, in
some cases, cash. (See also Disclosure Statement, Docket
Entry No. 17628 at 61 (“The New GO Bonds will be
secured by a statutory first lien and pledge of the amounts
on deposit in the Debt Service Fund and a pledge of the
Commonwealth’s full faith, credit and taxing power[.]”).)

173. Second, although the proposed treatment

of bondholders’ claims may interfere with certain
bondholders’ subjective investment expectations, a proper
assessment of bondholders’ reasonable expectations must
take account of the general risk that a government issuer
may have higher payment priorities in the event of a
reorganization or economic crisis, and the more specific
risks of potential economic instability resulting from the
indebtedness of the Commonwealth, at the time they made
their bond investments. Cf. New Haven Inclusion Cases,
399 U.S. 392, 491-92, 90 S. Ct. 2054, 26 L. Ed. 2d 691
(1970) (noting that security holders “invested their capital
in a public utility that does owe an obligation to the public
. . . [and thereby] assumed the risk that in any depression
or any reorganization the interests of the public would
be considered as well as theirs”) (citation and quotation
marks omitted)).

174. Third, the character of the governmental action

strongly indicates that the Plan does not result in an
unconstitutional taking. The challenged proposals are
not physical invasions of property by the government.
Rather, the restructuring of the relationships between
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the Commonwealth and its bondholders, using the powers

established by Congress in PROMESA, is a quintessential
example of a “public program adjusting the benefits and
burdens of economic life to promote the common good.”
Penn Cent. Transp. Co., 438 U.S. at 124. The Takings
Claim aspect of the Bondholders’ objections is therefore
overruled.

175. Suiza Dairy Objection: Unlike the objecting

holders of Eminent Domain/Inverse Condemnation
Claims, Suiza Dairy (“Suiza”) has not demonstrated that
it has a factual or legal basis for its assertion that it holds
a valid Takings Clause Claim that is protected by the
Fifth Amendment. Suiza objects to the Plan, asserting,
on the basis of a preliminary injunction it had obtained
prepetition in the District of Puerto Rico against the
Milk Industry Regulatory Office of Puerto Rico, that it
has an adjudicated regulatory taking claim against the
Commonwealth (Docket Entry No. 18594) (the “Suiza
Objection”). See Vaqueria Tres Monjitas, Inc. v. Laboy,
Civil No. 04-1840 (DRD), 2007 U.S. Dist. LEXIS 98950,
2007 WL 7733665 (D.P.R. July 13, 2007). The Plan’s
impairment of Suiza’s claim does not violate the Takings
Clause of the Constitution of the United States for the
simple reason that, prior to receiving a final judgment on
its Takings Clause claim, see Vaqueria Tres Monjitas,
Inc. v. Irizarry, 587 F.3d 464, 484 (1st Cir. 2009), Suiza
(and other plaintiffs) entered into a stipulation (Docket
Entry No. 2322 in Civil Case No. 04-1840 and Docket
Entry No. 19361-6 in Case No. 17-3283) (the “Dairy
Producer Settlement”), under which the parties agreed
to abide by certain regulatory accrual formulae set forth
 184a

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therein (Dairy Producer Settlement ¶ 14.) The Dairy

Producer Settlement made no concession of the plaintiffs’
claims, made no concession of the validity of any of the
prior district and circuit court determinations, and
provided that entry of court approval would operate as
a final and unappealable judgment dismissing the action
with prejudice (Dairy Producer Settlement ¶¶  1-2.) In
assessing the nature of the regulatory accrual which the
preliminary injunction required (and the Dairy Producer
Settlement would thereafter incorporate), the First
Circuit determined that it was not just compensation for
a taking, but instead resembled an equitable remedy. See
Irizarry, 587 F.3d at 479-80. The court’s judgment was
thereafter entered on November 6, 2013, incorporating
the terms of the Dairy Producer Settlement. (Docket
Entry No. 2347 in Civil Case No. 04-1840 and Docket
Entry No. 19361-7 in Case No. 17-3283.) Thus, there was
no favorable adjudication of Suiza’s Takings Clause claim,
which was dismissed with prejudice by the order entered
in 2013. See Irizarry, 587 F.3d at 479-80 (“[H]ere there
has been no award of damages that the state must pay.
That an equitable remedy results in the payment of monies
to plaintiff does not, in itself, render the relief monetary
compensation for a taking.”), rh’g denied, 600 F.3d 1 (1st
Cir. 2010). Accordingly, it follows that Suiza merely has a
contract-based claim for payment pursuant to the Dairy
Producer Settlement.

176. The Court looks to the three factors of Penn

Central to determine whether the impairment of Suiza’s
property interest in its settlement agreement rises to the
level of a taking. Concerning the first factor, the Plan’s
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Appendix C

treatment of Suiza’s claim will not result in the total

destruction of the value of Suiza’s interest in the Dairy
Producer Settlement. Rather, to the extent the Plan’s
treatment of Class 53 affects Suiza’s claim, the plan
provides for the payment of 50% of the Allowed Dairy
Producer Claim and preserves other rights under the
Dairy Producer Settlement. (Plan § 57.1.)

177. Second, notwithstanding Suiza’s subjective

economic expectations at the time the Dairy Producer
Settlement was executed, any assessment of its reasonable
expectations must account for an awareness of the
Commonwealth’s indebtedness, as well as the general
risk that the Commonwealth might have higher payment
priorities in the event of a reorganization or economic
crisis. See New Haven Inclusion Cases, 399 U.S. at 492.

178. Third, the character of the governmental action

strongly supports the Court’s determination that the
Plan’s treatment of Suiza’s claim does not result in an
unconstitutional taking. Rather, the restructuring of
the relationships between the Commonwealth and its
creditors under the powers established by PROMESA
is a prime example of a “public program adjusting the
benefits and burdens of economic life to promote the
common good.” Penn Cent. Transp. Co., 438 U.S. at 124.
Accordingly, the Plan’s treatment of Suiza’s claim does not
constitute a taking without just compensation in violation
of the Takings Clause of the Constitution of the United
States. Suiza’s objection is therefore overruled.
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Discrimination Provisions: Due Process, Equal

Protection, and Privileges and Immunities Clauses

179. Objector Peter Hein contends that the Plan’s

different treatment of mainland investors from Puerto
Rico-resident investors violates discrimination provisions
of the Constitution of the United States, to the extent the
Plan makes distinctions based on investors’ geographic
location. (Hein Obj. at 26.) 43 Such discrimination, he
argues, violates the Due Process, Equal Protection, and
Privileges and Immunities Clauses of the Constitution of
the United States. U.S. Const. art. IV, § 2, cl.1; am. V; am.
XIV § 1. The Plan does not, however, violate any of these
provisions of the Constitution.

180. Regarding the Privileges and Immunities

Clause, not only are the Court’s decisions concerning
the confirmability of the Plan not limited by the Clause,
Hawes v. Club Ecuestre El Comandante, 535 F.2d 140, 145
(1st Cir. 1976) (“Article IV, s 2 is a limitation on powers of
states and in no way affects the powers of a federal district
court.”), the Plan’s taxable bond election provision does not
fall within the purview of the Privileges and Immunities
Clause because it does not burden an activity that is
sufficiently basic to the “vitality of the nation as a single
entity,” Baldwin v. Fish & Game Comm’n of Mont., 436
U.S. 371, 383, 98 S. Ct. 1852, 56 L. Ed. 2d 354 (1978); see

43.  Specifically, Mr. Hein argues that all bondholders of a

particular bond series, and not just Puerto Rico investors, should be
given the option to elect to receive a single maturity of potentially
taxable higher coupon bonds, and that failure to do so causes
discrimination based on place of residence. (Hein Obj. at 26.)
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Appendix C

also id. at 388, and it is closely related to the advancement

of a substantial state interest, namely, the reorganization
of the Commonwealth’s debts. Supreme Court of Va. v.
Friedman, 487 U.S. 59, 65, 108 S. Ct. 2260, 101 L. Ed.
2d 56 (1988).

181. As for the Due Process and Equal Protection

Clauses of the Fifth and Fourteenth Amendments,
Mr. Hein has exercised his right to challenge the
differential treatment before this tribunal, he has cited
no fundamental right as being impaired, and has not
identified any discrimination based on any constitutionally
protected class or status. His objections citing these
constitutional amendments thus have no factual basis.
Mr. Hein’s argument that due process prevents the
Court from merely deferring to the Oversight Board’s
determinations and certifications (see Hein Obj. at 18), is
beside the point because the Court has indeed undertaken
an independent review of the Plan, in accordance with the
legal standards applicable under PROMESA, which do
not authorize the Oversight Board to act as a judge in its
own case, nor to discharge or impair claims unilaterally.
See In re Fin. Oversight & Mgmt. Bd. for P.R. 583 B.R.
626, 632-33 (D.P.R. 2017). Moreover, the Plan’s taxable
election provision is supported by a rational basis because
it seeks, by providing an opportunity to maximize the
availability of non-taxable bonds for mainland investors
who pay federal taxes, to enhance recoveries for mainland
investors without harming local investors. See United
States v. Kras, 409 U.S. 434, 446, 93 S. Ct. 631, 34 L. Ed.
2d 626 (1973).
 188a

Appendix C

182. Mr. Hein’s objections are therefore overruled.

183. The Plan complies with PROMESA section 314(b)

(3).

D. PROMESA § 314(b)(4): The Plan Provides Each

Holder of an Administrative Claim Cash, Equal to
the Allowed Amount of Such Claim, on the Effective
Date.

184. Section 3.1 of the Plan states: “On the later to

occur of (a) the Effective Date and (b) the date on which
an Administrative Expense Claim shall become an
Allowed Claim, the Reorganized Debtors shall (i) pay
to each holder of an Allowed Administrative Expense
Claim, in Cash, the full amount of such Administrative
Expense Claim or (ii) satisfy and discharge such Allowed
Administrative Expense Claim in accordance with such
other terms no more favorable to the claimant than as
may be agreed upon by and between the holder thereof
and the Reorganized Debtors; provided, however, that
Allowed Administrative Expense Claims representing
indebtedness incurred in the ordinary course prior to the
Effective Date by the Debtors shall be paid in full and
performed by the Reorganized Debtors in accordance with
the terms and subject to the conditions of any agreement
governing, investment evidencing, or other document
relating to such transactions; and, provided, further,
that, if any such ordinary course expense is not billed,
or a written request for payment is not made, within one
hundred fifty (150) days after the Effective Date, such
ordinary course expense shall be barred and the holder
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Appendix C

thereof shall not be entitled to, or receive, a distribution

pursuant to the Plan.”

185. Consummation Costs, Restriction Fees, and

Retail Support Fees will be paid in Cash on the Effective
Date. All other Allowed Administrative Expense Claims,
if any, will likewise be paid pursuant to section 3.1 of the
Plan.

186. The Plan complies with section 314(b)(4) of

PROMESA.

E. PROMESA § 314(b)(5): The Plan Has Obtained all

Necessary Legislative, Regulatory, and Electoral
Approvals.

187. The Plan has obtained all necessary legislative,

reg ulator y, and electoral approvals. Further, by
approving and certifying the Fiscal Plan, the Oversight
Board provided approval for the issuance of securities
contemplated by the Plan as required by section 207
of PROMESA. The debt authorization in Act 53 is
conditioned only on the Plan’s removal of the Monthly
Benefit Modification that was provided for in the Seventh
Amended Plan and does not require removal of the pension
freezes or the elimination of COLAs from the Plan. Act
53 (Debtors Ex. 134), arts. 104, 605. Pursuant to Puerto
Rico law, legislation of the Commonwealth is presumed to
be valid if enacted by the Legislative Assembly of Puerto
Rico and signed into law by the Governor. See, e.g., Brau
v. ELA, 190 D.P.R. 315, 337 (P.R. 2014); Partido Socialista
Puertorriqueño v. Puerto Rico, 7 P.R. Offic. Trans. 653,
 190a

Appendix C

107 D.P.R. 590, 609 n.11 (P.R. 1978), holding modified by

Partido Independentista Puertorriqueño v. Comisión
Estatal de Elecciones y Ostros, 20 P.R. Offic. Trans. 607,
120 D.P.R. 580, 1988 Juris P.R. 23 (P.R. 1988) (“To begin
with, laws are presumed to be constitutional and the
movant [objector] should place the courts in a position
to decide by introducing evidence to sustain the facts
alleged, and then stating the legal arguments on which
its assignment of unconstitutionality is based, specifically
mentioning the constitutional provisions involved and the
legal precedents supporting its assignment.

F. PROMESA § 314(b)(6): The Plan Is Feasible and in

the Best Interests of Creditors.

188. The Plan complies with section 314(b)(6) of

PROMESA because it is feasible and in the best interests
of creditors.

i. Feasibility

“[T]he Court has an independent duty to determine

[feasibility] and to make specific findings of fact.” In re
City of Detroit, 524 B.R. 147, 220 (Bankr. E.D. Mich.
2014). Under PROMESA, a plan of adjustment must be
supported by financial projections that are “reasonable
and demonstrate a probability that [the debtor] will be
able to satisfy its obligations under the Plan.” In re Fin.
Oversight & Mgmt. Bd. for P.R., 361 F. Supp. 3d 203, 246
(D.P.R. 2019). Additionally, as in chapter 9, a PROMESA
debtor, as a government entity, must show that it is
“probable that [the] debtor can both pay post-petition debt
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Appendix C

and provide future public services at the level necessary

to its viability as a [territory].” In re Mount Carbon
Metro. Dist., 242 B.R. 18, 35 (Bank. D. Colo. 1999). The
core inquiry has been articulated as follows: “Is it likely
that the [debtor], after the confirmation of the Plan of
Adjustment, will be able to sustainably provide basic
municipal services to the citizens of [the debtor] and to
meet the obligations contemplated in the Plan without the
significant probability of a default?” In re City of Detroit,
524 B.R. at 222.

a. The Plan is Feasible as to ERS

189. The Plan is feasible with respect to ERS.

ERS no longer has pension and other obligations to
beneficiaries, those obligations having been assumed
by the Commonwealth upon the enactment of Act 106.
Pursuant to the Plan, ERS’s assets are being sold and
transferred to the Commonwealth in exchange for $373
million and the agreement to purchase the ERS Private
Equity Portfolio for $70,750,000, subject to certain
conditions. ERS’s obligations pursuant to the Plan include
distributing the $373 million in cash received from the
Commonwealth to the holders of Allowed ERS Bond
Claims, as well as payments to holders of Allowed ERS
General Unsecured Claims in a de minimis amount.
(Jaresko Decl. ¶ 98; Plan §§ 2.4, 69.2, 77.1(c).)

190. Pursuant to the Plan, ERS will place the ERS

Private Equity Portfolio in the ERS Trust, which will then
be purchased by either the Commonwealth or holder(s) of
Allowed ERS Bond Claims on or before April 25, 2023 for
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Appendix C

no less than $70,750,000, which funds will be distributed

to holders of Allowed ERS Bond Claims. (Jaresko Decl.
¶ 99; Plan §§ 2.4, 69.2, 77.1(c).) Further, on the Effective
Date, each holder of an ERS General Unsecured Claim
will receive such holder’s Pro Rata Share of the ERS
GUC Pool, which is comprised of $500,000 plus the net
recoveries by the Avoidance Actions Trust allocable to the
Avoidance Actions ERS Interests, capped at $5 million.
(Plan §§ 70.1, 1.223.) ERS will dissolve after the Effective
Date of the Plan and all remaining assets of ERS will
be deemed sold and transferred to the Commonwealth.
(Jaresko Decl. ¶ 99; Plan § 88.2.) Any excess amount in the
ERS GUC Pool will be reallocated, on a pro rata basis, to
holders of Allowed CW General Unsecured Claims. (Plan
§ 1.223.) ERS will therefore have no material obligations
after the Effective Date. (Jaresko Decl. ¶ 99.) Accordingly,
the Plan is feasible with respect to ERS and is not likely
to result in the need for a further restructuring of ERS.

b. The Plan is Feasible as to PBA

191. The Plan is feasible with respect to PBA, as

PBA holds sufficient cash to pay its obligations to all of
its creditors pursuant to the Plan, including any Allowed
Claims on account of loans made by GDB to PBA. (Jaresko
Decl. ¶ 100.) Holders of PBA Bond Claims will receive
their Pro Rata Share of the Vintage PBA Bond Recovery,
2011 PBA Bond Recovery, or 2012 PBA Bond Recovery,
as applicable, in the aggregate amount of approximately
$1.1 billion to be paid by the Commonwealth. (Shah Decl.
¶ 59; Plan arts. V-XV.) Holders of Claims in Classes 12
(PBA/DRA Secured Claims), 13 (PBA General Unsecured
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Appendix C

Claims), and 14 (PBA/DRA Unsecured Claims) will each

receive Cash in an amount equal to ten percent (10%) of
such Claims. (Plan arts. XVI-XVIII.)

192. The Debtors seek an order providing that

each of the Unexpired Leases to which PBA is a party
(collectively, the “PBA Leases”) will be deemed rejected
upon the earliest to occur of (a) June 30, 2022, (b) the date
upon which such PBA Lease expires in accordance with
its terms, (c) the date upon which PBA enters into a new
or amended lease with respect to the leased property
subject to such PBA Lease, (d) such other date of which
PBA, as lessor, provides written notice to the counterparty
to a PBA Lease, and (e) the date upon which AAFAF
provides written notice to PBA that such PBA Lease is
rejected; provided, however, that during the period from
the Effective Date up to the date of such rejection, with
respect to any PBA Lease between PBA as lessor and
the Commonwealth or any Commonwealth agency, public
corporation, or instrumentality, as lessee, monthly lease
payments shall be limited to the lower of (y) the amount
budgeted and approved pursuant to a certified fiscal plan
and (z) the monthly costs and expenses associated with the
applicable leased property; and provided, further, that any
accruals on the books of PBA or any of the Commonwealth
or an agency, public corporation, or instrumentality of the
Commonwealth as counterparty to a PBA Lease for the
unpaid debt service component of rent under any PBA
Lease shall be deemed released, settled, and discharged
as of the rejection date. (See Confirmation Ord. ¶ 84.) The
treatment of PBA Leases has been consented to by the
Oversight Board, on behalf of the Debtors. The Oversight
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Appendix C

Board represents, and AAFAF has not denied, that

AAFAF, on behalf of the agencies, instrumentalities, and
public corporations, has also consented to the treatment
of the PBA Leases set forth in the Plan.

193. Accordingly, the Plan is feasible with respect to

PBA and is not likely to result in the need for a further
restructuring of PBA.

c. The Plan is Feasible as to the Commonwealth

194. The Plan is feasible w ith respect to the

Commonwealth. The Plan provides for the following types
of payments to financial creditors: (1) cash on the Effective
Date, (2) new debt issued by the Commonwealth in the
form of New GO Bonds, and (3) CVIs. (Zelin Decl. ¶ 47;
Malhotra Decl. ¶ 9.) In addition, the Plan contemplates
payments to retirees of pensions and other benefits,
without adjustment for any Monthly Benefit Modification,
as well as additional payments to Commonwealth
employees. (Malhotra Decl. ¶ 9.)

195. The Plan provides for the payment of Cash on the

Effective Date and over time, in the aggregate amount
of approximately $8 billion, plus up to $801 million in
consummation costs, restriction fees, and retail support
fees. (See Malhotra Decl. ¶ 10; Zelin Decl. ¶¶ 48, 86.)

196. The Plan provides that the Reorganized

Commonwealth will issue New GO Bonds on the Effective
Date with different maturity dates, having an aggregate
original principal amount of $7,414,063,543.25. (Malhotra
 195a

Appendix C

Decl. ¶ 11; Zelin Decl. ¶ 49; Plan art. LXXIV.) All holders of
general obligation debt and general obligation guaranteed
debt will receive New GO Bonds having thirteen (13)
CUSIP numbers, which distribution was calculated to
provide each holder with incremental value of 2.25% of their
par claims, which increment exceeds any liquidity charge
by approximately 1.75% of their par claims. (See Nov.
12, 2021, Hr’g Tr. 108:15-111:1.) Minimizing the number
of CUSIPs would not be in the interest of bondholders
as a whole; rather, the issuance pursuant to the Plan of
thirteen (13) CUSIPs to each bondholder provides each
holder with as significant a recovery as possible within the
boundaries of the municipal bond market and the need to
keep annual debt service sustainable, and a significantly
greater total amount of value. (See Nov. 12, 2021, Hr’g Tr.
105:11-106:4; 108:18-111:4.) The aggregate amount owed,
including all principal and interest over the life of the New
GO Bonds from the Deemed Issuance Date of July 1, 2021
to the maturity of the final New GO Bond on July 1, 2046,
is $10,914,969,303.20. (Malhotra Decl. ¶ 12; Zelin Decl.
¶ 49.) The Plan provides for a Debt Service Fund to be
established. On the first business day of each month after
the Effective Date until the obligations of the applicable
New GO Bonds are satisfied, the Commonwealth will
deposit the portion of principal and accrued interest
for that month into the Debt Service Fund. (Malhotra
Decl. ¶  16; Plan §  74.1(f).) The Plan also provides that,
on the Effective Date, the Reorganized Commonwealth
shall deposit into the Debt Service Fund such additional
amounts necessary to account for the New GO Bonds being
issued as of the Deemed Issuance Date. (Plan § 74.1(f).)
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Appendix C

197. The Plan provides for the issuance of (i) GO

CVIs in the aggregate original notional amount of $3.5
billion, having a maturity date of July 1, 2043 and a final
redemption payment date of November 1, 2043, and (ii)
Clawback CVIs in the aggregate original notional amount
of $5.239 billion, having a maturity date of July 1, 2051
and a final redemption payment date of November 1,
2051. (Malhotra Decl. ¶ 19; Zelin Decl. ¶ 54; Plan § 74.2.)
The Commonwealth’s obligation to pay under the CVIs
arises only if certain outperformance conditions specified
in the Plan and the CVI indentures occur. Specifically,
the Plan provides for the establishment of threshold
metrics based on tax revenue projections contained in
certified fiscal plans. Only if actual revenues exceed the
established threshold at the end of a given fiscal year will
an obligation to pay come into being, subject to certain
caps. (Malhotra Decl. ¶ 20; Zelin Decl. ¶ 55; Plan Ex. J.)
Further, payments on the CVIs are triggered only when
both cumulative and annual outperformance occurs, which
protects the Commonwealth from making substantial CVI
payouts when it experiences one year of outperformance
after experiencing several years of underperformance.
(Malhotra Decl. ¶¶ 35-37; Zelin Decl. ¶¶ 60-65.)

198. In addition, the Plan provides for (i) payments

of pension and other post-employment benefits to retired
Commonwealth employees, without adjustment for
any Monthly Benefit Modification, (ii) the restoration
of contributions made by Commonwealth employees
to the System 2000 program, and (iii) payments to the
Pension Reserve Trust. (Malhotra Decl. ¶ 21; Plan art.
LV.) Participants in System 2000 will not be subject to
benefit reductions, but instead will receive the amount
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Appendix C

of their contributions to System 2000 from its enactment

until June 30, 2017. (Plan §  55.1.) The aggregate sum
of such contributions plus interest accrued thereon is
approximately $1.2 billion. (Malhotra Decl. ¶ 23.) The
Pension Reserve Trust will receive an initial contribution
of $5 million on the Effective Date and, for the next ten (10)
fiscal years, the Commonwealth will make a contribution in
an amount equal to (1) the Base Contribution, $175 million
or, for any fiscal year in which the projected Fiscal Plan
Surplus set forth in the Fiscal Plan is equal to or greater
than $1.75 billion, an amount equal to fifty percent (50%)
of that amount, plus (2) an additional amount calculated as
(i) the lower of the actual primary surplus for such fiscal
year and the projected Fiscal Plan surplus for such fiscal
year, minus (ii) the sum of the Base Contribution, plus
the Commonwealth’s debt service obligations pursuant to
the Plan for such fiscal year, plus $200 million. (Plan art.
LXXXIII; Malhotra Decl. ¶ 24; Malhotra Sup. Decl. ¶¶ 12-
13; Jaresko Sup. Decl. ¶¶ 10-11; Santambrogio Sup. Decl.
¶¶ 8-9.) The Commonwealth’s contributions to the Pension
Reserve Trust are estimated to total approximately
$2.4 billion during the ten years of funding based on
the Fiscal Plan, all of which will be paid during the time
period in which the Fiscal Plan projects surpluses. The
Pension Reserve Trust is projected to have a balance of
$3.1 billion through the end of fiscal year 2031 based on
the Fiscal Plan. (Malhotra Sup. Decl. ¶ 14; Santambrogio
Sup. Decl. ¶ 10.) Further, the Pension Reserve Trust will
be professionally and independently managed to insulate
the funding available to pay pensions from political or
economic influences. (Malhotra Decl. ¶ 34.)44

44.  AAFAF objects to portions of this finding, and to similar

conclusions in ¶ 224 concerning the Pension Reserve Trust, arguing
 198a

Appendix C

199. The Seventh Amended Plan contained a Monthly

Benefit Modification pursuant to which reductions to
monthly pension payments would be made. The New
GO Bond Legislation and CVI Legislation, Act 53,
is conditioned on the removal of the Monthly Benefit
Modification from the Plan and so, consistent with
Act 53, the Plan no longer contains a Monthly Benefit
Modification provision. (See Plan art. LV.) The Plan
nevertheless remains feasible, provided there are no
other modifications to the Plan involving pensions.
The elimination of the Monthly Benefit Modification is
estimated to add an average of approximately $87 million
annually to the cost of the Commonwealth’s PayGo
obligations for the first ten years, which represents less
than five percent (5%) of the Commonwealth’s estimated
PayGo expenses for this period, and less than one
percent (1%) of the Commonwealth’s overall budget for
this period. The additional cost will be payable from the
surpluses projected in the Fiscal Plan during this period.
Over the thirty-year period of Fiscal Plan projections,
the aggregate cost of eliminating the Monthly Benefit
Modification is approximately $1.9 billion. (Malhotra Sup.
Decl. ¶ 9, Ex. 1; Levy Sup. Decl. ¶ 10; Jaresko Sup. Decl.

the factual evidence supporting the funding details is based on

declarations that were submitted prior to changes made to the
funding provisions during the Confirmation Hearing. (See Docket
Entry No. 19402 at 12; see also Docket Entry No. 19173; Docket Entry
No. 19320). The Debtors have, however, provided an explanation of
the need for such changes and the factual support for the feasibility of
the new provisions in the supplemental declarations of Ms. Jaresko,
Mr. Malhotra, and Mr. Santambrogio. (See Jaresko Sup. Decl.
¶ ¶ 9-11; Malhotra Sup. Decl. ¶¶ 12-13; Santambrogio Sup. Decl.
¶¶ 8-9.) AAFAF’s objection is therefore overruled.
 199a

Appendix C

¶ 8.) The elimination of the Monthly Benefit Modification

does not materially affect the feasibility of the Plan.
(Malhotra Sup. Decl. ¶ 10; Jaresko Sup. Decl. ¶¶ 8-12.)

200. If the Plan were modified to (i) eliminate the

freeze of JRS and TRS pension benefit accruals and
(ii) retain any future pension benefit cost of living
adjustments, the Plan would be at risk of not being
feasible. (Malhotra Sup. Decl. ¶ 8; Jaresko Sup. Decl.
¶  13.) Specifically, the PayGo impact of eliminating the
pension freeze and reinstating COLAs relative to the
Fiscal Plan is estimated to be approximately $5.6 billion
over thirty (30) years, or approximately $4.7 billion after
taking into account social security costs. (Levy Sup. Decl.
¶ 14.) By 2047, the incremental PayGo cost associated with
eliminating the pension freeze and maintaining COLAs
is estimated to increase the annual PayGo obligation by
twenty-five percent (25%). Unlike the elimination of the
Monthly Benefit Modification, the incremental cost of
which decreases as the Commonwealth approaches the
deficits projected by the Fiscal Plan, the incremental
costs associated with eliminating the pension freeze and
reinstating any COLAs are projected to grow larger as
the Commonwealth approaches the deficits projected by
the Fiscal Plan, thus presenting the risk that the Plan
may not be feasible.45 (Malhotra Sup. Decl. ¶¶ 17-18; Levy

45.  AMPR objects that, even with the inclusion of the JRS
and TRS benefit freeze, the Plan may not be feasible because the
employees whose benefits are frozen will have a damages claim
based on the loss of their future accruals that is not provided for in
the Plan. (See Docket Entry No. 18585 at 16 n.12). AMPR does not
proffer any evidence concerning the potential cost of such claims
 200a

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Sup. Decl. ¶¶ 9-17.) Absent the Pension Freeze, TRS and

JRS pension liabilities will continue to increase relative
to the Fiscal Plan. Eliminating the pension freeze would
create an open-ended incremental defined benefit liability
because TRS and JRS participants would continue to
accrue new benefits for as long as they continue to work
for the Commonwealth. (Malhotra Sup. Decl. ¶ 18.)
Moreover, not implementing the pension freeze and the
reinstatement of COLAs would increase the likelihood of
needing to rely on the Pension Reserve Trust for payment
of the Commonwealth’s PayGo obligations, and increase
the risk of completely exhausting the Pension Reserve
Trust during the Fiscal Plan projection period. (Malhotra
Sup. Decl. ¶ 18; Levy Sup. Decl. ¶ 16.)

201. Section 83.4 of the Plan ensures that pension-

related provisions contained in the Plan will not be undone
in the short term such that pension payments become

to the Commonwealth. The Debtors proffer that the Plan already

provides for the treatment of these claims by ensuring the payment
of any defined benefits accrued up to the Effective Date, providing
a tax deferred defined contribution account, and providing matching
contributions to Social Security for those who opt in. (Nov. 15, 2021,
Hr’g Tr. 51:2 - 51:7.) To the extent AMPR would be able to assert a
rejection damages claim, the Court finds that the Plan anticipates
any such claim from the employees subject to the freeze of their
benefits, (see Plan §  1.487 (defining “TRS Participant Claim” to
include “any right to accrue additional retiree benefits in TRS from
and after the Effective Date”)) and provides a treatment for such
claims (see Plan §§ 55.3, 55.9) that is accounted for in the Debtors’
feasibility demonstration. AMPR has not provided any evidence
showing that prospective claims from its members would render the
Plan infeasible. AMPR’s feasibility objection is therefore overruled.
 201a

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unaffordable, providing that: “Before the tenth (10th)

anniversary of the Effective Date, the Government of
the Commonwealth of Puerto Rico, including, without
limitation, by any Entity or Person acting for or on behalf
thereof, shall not (a) implement existing legislation or
enact new legislation to create or increase any defined
benefit pension payment or obligation to current or
future retirees from or related to any defined benefit
plans over the benefits provided by the Plan, regardless
of funding source, or (b) undo (in whole or part) the
Plan’s eliminations of defined benefit plan accruals and
cost of living adjustments for government employees;
provided, however, that the Governor and Legislature
of the Commonwealth of Puerto Rico, subsequent to
termination of the Oversight Board, may apply to the Title
III Court for relief from this provision upon showing (i)
the need therefor, (ii) the affordability of the requested
changes, (iii) the reasons why the requested changes will
not create a risk of the financial distress caused by the
Commonwealth’s prior defined benefit plans under which
the Commonwealth and other governmental employers
accrued nearly $55 billion of unfunded pension obligations,
(iv) the means of funding the requested changes and
reasons why there is little risk of such funding not being
carried out, (v) the reasons why the requested changes will
not create a material risk of defaults on any of the then
outstanding obligations pursuant to the Plan, and (vi) the
reasons why the defined contribution plans are insufficient
and defined benefit plans are both prudent and required;
and, provided, however, that, prior to the termination
of the Oversight Board, the Oversight Board shall not
reduce any defined benefit pension payment or obligation
 202a

Appendix C

to current or future retirees from the benefits provided by

the Plan.” (Plan § 83.4.) This prohibition on new defined
benefits for a ten (10) year period is enforceable and is
essential to the Plan’s continued feasibility.46 (See Nov.
15, 2021, Hr’g Tr. 181:16-182:14; see also Malhotra Sup.
Decl. ¶ 20 (explaining the costs of pension-related laws
proposed by the government would increase the risk the
Plan will not be feasible).)

202. The Plan also provides for additional payments

to be made to current employees who are members of
certain public employee unions affiliated with AFSCME
and non-union rank and file employees. Pursuant to the
Plan, the Commonwealth’s monthly contribution for
healthcare benefits to Commonwealth employees who are
members of AFSCME-affiliated unions will increase from
$125 per employee per month to $170 per employee per
month. (See Santambrogio Decl. ¶ 31; Malhotra Decl. ¶ 26.)
In addition, the Plan provides for $500 signing bonuses
to each member of an AFSCME-affiliated union and, if
the Commonwealth has an excess cash surplus after CVI
payments that is greater than $100 million, 25% of that
surplus will be allocated to a bonus pool for the benefit
of members of the AFSCME-affiliated unions and other
non-union rank and file employees. (Plan art. LVI; Plan
Ex. G; Malhotra Decl. ¶¶ 25-26, 29 & n.6; Santambrogio
Decl. ¶¶  22-23.) Subject to a minimum cash bonus of
$2,000 per year per AFSCME-represented employee for
the five-year term of the amended collective bargaining
agreement, such employees only receive the cash surplus

46.  See supra n.23.

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Appendix C

bonuses if the government outperforms the Fiscal Plan, so

employees are incentivized to ensure that the government
is operating efficiently. (Nov. 10, 2021, Hr’g Tr. 62:25-63:4;
Santambrogio Sup. Decl. ¶ 11.)

203. The Plan also provides that the Debtors shall

transfer ACR-eligible claims pursuant to the ACR Order,
which claims shall be reconciled and paid in the ordinary
course of business. The Commonwealth has reserved $229
million for payment of such claims. (Plan § 82.7; Malhotra
Decl. ¶¶ 27, 29.)

204. Further, the Plan provides ERS Bondholders a

right to receive a future payment of $70.75 million from
the purchase of the ERS Private Equity Portfolio. (Plan
§ 69.2; Malhotra Decl. ¶¶ 27, 29.)

205. The Plan, including each of these provisions, is

feasible with respect to the Commonwealth.47 (Malhotra

47.  The Plan remains feasible even accounting for the payment
in full of the total of Eminent Domain/Inverse Condemnation Claims
asserted to arise out of the Takings Clause. See supra ¶¶ 65, 160,
169. Based on a review and reconciliation of claims to date, the cost
of such Claims is currently estimated to be approximately $390
million. (See Herriman Sup. Decl. ¶ 11.) The Debtors have proffered
credible evidence to support the conclusion that the Plan would still
be feasible because the Commonwealth will have sufficient cash
remaining after fulfilling its Effective Date obligations under the
Plan to pay such Eminent Domain/Inverse Condemnation Claims,
to the extent they are Allowed, in full. Additionally, not all Allowed
Eminent Domain/Inverse Condemnation Claims will need to be
paid out immediately on the Effective Date, as some have not yet
been adjudicated. (See Debtors Ex. 30 at 3; Malhotra Sup. Decl. Ex.
1; Herriman Sup. Decl.; Nov. 22, 2021, Hr’g Tr. 15:11-17:20.)such
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Appendix C

Decl. ¶ 29.) Confirmation of the Plan is not likely to be

followed by the need for further financial reorganization
not contemplated in the Plan, and will enable the
Commonwealth to provide future public services and
remain a viable public entity. That is true notwithstanding
the fact that, based on the 2021 Fiscal Plan (Debtors Ex.
10) projections, deficits after debt service are projected to
reemerge in approximately FY 2035. (Malhotra Decl. ¶ 29.)
By the time deficits are projected to emerge, the amount
of Commonwealth general obligation debt outstanding
will only be $2.1 billion, as compared to pre-petition debt
liabilities of $30.5 billion. (Id.) The Commonwealth will
not likely need further reorganization notwithstanding
projected deficits due to a number of factors, including the
following: (i) the Plan reduces the Commonwealth’s overall
debt; (ii) the Plan includes multiple provisions designed
to insulate the Commonwealth from downside risks; (iii)
the Commonwealth can implement certain reforms the
Oversight Board identified that could result in additional
liquidity, which could eliminate the projected deficit;48

Claims is currently estimated to be approximately $390 million.

(See Herriman Sup. Decl. ¶ 11.) The Debtors have proffered credible
evidence to support the conclusion that the Plan would still be feasible
because the Commonwealth will have sufficient cash remaining after
fulfilling its Effective Date obligations under the Plan to pay such
Eminent Domain/Inverse Condemnation Claims, to the extent they
are Allowed, in full. Additionally, not all Allowed Eminent Domain/
Inverse Condemnation Claims will need to be paid out immediately
on the Effective Date, as some have not yet been adjudicated. (See
Debtors Ex. 30 at 3; Malhotra Sup. Decl. Ex. 1; Herriman Sup. Decl.;
Nov. 22, 2021, Hr’g Tr. 15:11-17:20.)

48.  Mr. Hein argues that the Commonwealth has previously

failed to implement structural reforms put forth by the Oversight
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Appendix C

and (iv) the Plan does not take into account potential
upside factors which, if they materialize, would result in
additional liquidity. (See id.)

Board and that there is no evidence that the Commonwealth

government would now adopt such proposals, such that the Debtors’
representation that the Plan is feasible is unpersuasive. (See, e.g.,
Docket Entry No. 19400 at 41-42.) The Commonwealth government’s
commitment to implementing proposed structural changes cannot be
guaranteed, but the Plan provides incentives for the Commonwealth
and interested parties to ensure that the government pursues
policies to achieve strong fiscal performance. (See, e.g., Malhotra
Decl. ¶ 26 (describing Upside Bonus Participation pool for certain
public employees if the Commonwealth has an Excess Cash Surplus);
Zelin Decl. ¶¶ 60-66 (explaining alignment of incentives between
the Commonwealth and CVI holders to achieve outperformance).)
Furthermore, as set forth supra, the proposed structural reforms
are not the only protections the Plan offers to combat projected
deficits starting in FY 2035. The Plan also provides mechanisms
such as the Pension Reserve Trust, the CVI structure, and the
Debt Management Policy to ensure obligations are met even if the
Commonwealth begins to run deficits. (See Malhotra Decl. ¶ 33.)
The projections underlying the Fiscal Plan and the Plan also do not
account for potential upsides that could increase the Commonwealth’s
liquidity in the future. (Id. ¶¶ 41-51.) Thus, the uncertainty of the
Commonwealth’s support for proposed structural changes does not
render the Plan infeasible.the Commonwealth and CVI holders to
achieve outperformance).) Furthermore, as set forth supra, the
proposed structural reforms are not the only protections the Plan
offers to combat projected deficits starting in FY 2035. The Plan also
provides mechanisms such as the Pension Reserve Trust, the CVI
structure, and the Debt Management Policy to ensure obligations are
met even if the Commonwealth begins to run deficits. (See Malhotra
Decl. ¶ 33.) The projections underlying the Fiscal Plan and the Plan
also do not account for potential upsides that could increase the
Commonwealth’s liquidity in the future. (Id. ¶¶ 41-51.) Thus, the
uncertainty of the Commonwealth’s support for proposed structural
changes does not render the Plan infeasible.
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Appendix C

206. The Plan also reduces the Debtors’ debt

significantly. After confirmation, the Commonwealth’s
general obligation and g ua ranteed debt w i ll be
approximately $7.4 billion, considerably lower than
the $30.5 billion pre-restructuring total, and all ERS
and PBA debt will be eliminated. (Malhotra Decl. ¶ 31;
Jaresko Decl. ¶¶ 98-100.) Prior to the commencement of
the Title III Cases, annual Commonwealth debt service
was approximately $2.1 billion, and post-Effective Date,
the Commonwealth’s average annual debt service during
the first ten years will be approximately $666 million.49
(Malhotra Decl. ¶¶ 30-31.) Over 50% of the newly issued
debt under the Plan will have amortized within 10 years of
its issuance date. (Id. ¶ 32.) Debt levels will continuously

49.  The Service Employees International Union (“SEIU”)

argues in its objection that the Plan leaves the Commonwealth with
an unaffordable debt burden that renders the Plan infeasible. (See
Docket Entry No. 18511 ¶¶ 23-25; Docket Entry No. 19386 ¶ 13.)
The SEIU relies on a study by economist Joseph Stiglitz, which
was not proffered into evidence, in arguing that the economic and
social needs of Puerto Rico are far greater than those of mainland
U.S. states and therefore that Puerto Rico should not have a larger
debt load than the average U.S. state. (See Docket Entry No. 18511
¶ 23.) Based on the metric of net tax-supported debt per capita, the
SEIU argues that, under the Plan, Puerto Rico would rank ninth
from the top in the rankings of most indebted states in the United
States. (See id. ¶ 25.) The Court is not persuaded that this sole
metric, net tax-supported debt per capita, is the proper standard
by which to judge whether the Plan is feasible. The Debtors have
put forth persuasive evidence that the Plan will allow the Debtors to
meet their obligations and is not likely to be followed by the need for
further reorganization (Malhotra Decl. ¶ 29), and the SEIU has not
proffered any evidence to the contrary. Thus, the SEIU’s objection
with respect to the Plan’s feasibility is overruled.
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Appendix C

decline and remain low until full repayment of the

Commonwealth’s general obligation and guaranteed
debt, which is projected to occur in fiscal year 2046.
(Id.) Thereafter, the only commitments that will remain
outstanding will be the CVIs and COFINA debt. The CVIs
are paid only if specific revenues outperform projections,
and COFINA debt is serviced via a pledged portion of
sales and use tax. (Id.) The Commonwealth will have the
ability to pay debt service pursuant to the Plan through at
least 2034, and the Plan proposes additional reforms and
potential factors that could increase the Commonwealth’s
resources and create surpluses that could extend this
projection. (Wolfe Decl. Ex. 1 ¶¶ 12, 13, 15-27.)

207. In addition, several Plan provisions—the Pension

Reserve Trust, the CVI structures, the Debt Management
Policy, and the Comprehensive Cap—mitigate the impact
of potential financial underperformance and the effects
of projected deficits. (See Malhotra Decl. ¶¶ 33-40.) The
Commonwealth will also establish an emergency reserve
and a certain level of unrestricted cash, and the Oversight
Board has agreed to fund a temporary disaster aid
revolving line of credit, which mitigate against potential
downside risks. (Id. ¶¶ 49-51; Chepenik Decl. ¶¶ 9, 28, 30,
36, 38.) The Commonwealth will retain an unrestricted
cash balance of $1 billion to help maintain uninterrupted
government operations when unforeseen fiscal challenges
emerge. (Malhotra Decl. ¶ 49; Chepenik Decl. ¶ 28; Nov.
12, 2021, Hr›g Tr. 50:21-51:5.) The emergency fund will
be funded with $130 million annually for a period of ten
years, until the reserve balance reaches $1.3 billion, or 2%
of Puerto Rico›s Fiscal Year 2018 Gross National Product,
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Appendix C

in line with International Monetary Fund guidance.

(Malhotra Decl. ¶ 51; Chepenik Decl. ¶ 38.)

208. The Plan is not dependent on new borrowings that

would impede the Debtors› ability to achieve compliance
with the Fiscal Plan. The Fiscal Plan (Debtors Ex. 10)
does not show a need for incremental borrowing, and
therefore the Plan›s borrowing restrictions will not
impede the Commonwealth›s ability to implement the
Fiscal Plan. (Murray Decl. Ex. 1 ¶¶ 99-102.) The Plan
will leave the Debtors with a level of cash consistent
with the cash necessary to implement the undertakings
referenced in the Fiscal Plan. (Murray Decl. Ex. A ¶ 65.)
In addition, the Plan imposes a comprehensive cap on net
tax-supported debt equal to 7.94% of debt policy revenues,
and the expected level of net tax supported debt service
is projected to be 7.6% of debt policy revenues. (Murray
Decl. Ex. A ¶¶ 100-01; Plan § 74.4.)

209. The Commonwealth has sufficient resources to

pay debt service pursuant to the Plan until 2034, through
annual surpluses. (Wolfe Decl. Ex. 1 ¶ 12.) Additional
options for payment of debt service will become available
in later years because the Commonwealth can implement
structural reforms to increase the Commonwealth›s
resources and create surpluses. (Wolfe Decl. ¶¶ 13, 15-
27.) Proactively implementing structural reforms would
create a stream of fiscal surpluses sufficient to cover
the Commonwealth›s debt service obligations pursuant
to the Plan and could build cumulative surpluses not
incorporated into the Fiscal Plan totaling $32.4 billion for
fiscal years 2022 through 2046, well above the cumulative
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Appendix C

debt service over that same period of $10.9 billion. (Wolfe

Decl. Ex. 1 ¶¶ 13, 27.) There are additional potential upside
factors not incorporated into the Plan which, if they occur,
will produce additional revenues. These factors include
a potential increase in federal Medicaid funding, and
potential provision of Social Security Income to Puerto
Rico residents that could increase economic activity. (See
Malhotra Decl. ¶¶ 44-48.)

210. Accordingly, the Plan is feasible with respect to

the Commonwealth and is not likely to result in the need
for a further restructuring of the Commonwealth.

ii. Best Interests Test

211. As in chapter 9 of the Bankruptcy Code,

PROMESA’s “best interests” test differs substantially
from the chapter 11 “best interests” requirement. In
chapter 11, the test requires a court to determine whether
an individual creditor would receive more if the chapter 11
debtor were to liquidate its assets. In contrast, the chapter
9 test is not a liquidation test (because municipalities
cannot be liquidated) and is focused on the collective
recovery of creditors in the aggregate. Cf. In re City of
Detroit, 524 B.R. at 212-13 (comparing the “best interests”
tests in chapter 9 and chapter 11 of the Bankruptcy Code);
see also In re Fin. Oversight & Mgmt. Bd. for P.R., 361
F. Supp. 3d 203, 250-51 (D.P.R. 2019). The PROMESA
best interests test additionally modifies the chapter 9
best interests test, only requiring the Court “to consider
whether available remedies under the non-bankruptcy
laws and constitution of the territory would result in a
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Appendix C

greater recovery for the creditors than is provided by

[the] plan.”50 48 U.S.C.A. § 2174(b)(6) (Westlaw through
P.L. 117-80) (emphasis added). Thus, the PROMESA best
interests test does not impose a litmus test or establish a
floor for creditor recoveries. See id.

212. Accordingly, PROMESA’s best interests test

requires the Court only to consider whether creditors of
each Debtor in the aggregate receive an equal or greater
recovery on their Claims pursuant to the Plan than they
would outside of Title III if the Debtor’s Title III case
were dismissed and creditors exercised their remedies.
An analysis of creditor recoveries in such hypothetical
circumstances requires the application of a number of
assumptions, including (i) estimates of the resources
that would be available for debt service, which requires
an assessment of available cash, revenues, and operating
expenses in the absence of a confirmed plan of adjustment;
(ii) the outstanding creditor obligations due and payable
that would exist outside of Title III; and (iii) the priority
in which creditor claims would be paid outside of Title III,
which in certain circumstances requires consideration of
assumptions regarding the potential outcome of litigation
matters. (Shah Decl. ¶ 8.)

213. The Debtors have met their burden of showing

that recoveries for claimholders of each Debtor pursuant
to the Plan, in the aggregate, are within the range or
greater than the range of the projected recoveries for

50.  Notably, Section 314(b)(6) speaks in terms of a single

“recovery” for “creditors” (plural). 48 U.S.C.A. § 2174(b)(6) (Westlaw
through P.L. 117-80)
 211a

Appendix C

such claimholders in the aggregate if the Title III Cases

were dismissed for each of the Debtors, as demonstrated
by the best interest test reports attached to the Shah
Declaration as Exhibits A, B, and C. (Shah Decl. ¶ 35,
Exs. A, B, and C; Debtors Exs. 130, 131.) Additionally, the
recovery pursuant to the Plan for holders of GO Bonds
is within the range of the projected recoveries for such
claimholders pursuant to the Oversight Board’s best
interest test analysis if the Commonwealth’s Title III
case were dismissed, assuming all GO Bonds were validly
issued. (See Shah Decl. ¶ 45; Shah Decl. Ex. 7 to Ex. A.)

214. In the aggregate, excluding the payment of

Restriction Fees or Consummation Costs (which are
not being paid on account of Claims), and excluding
Federal Claims, 51 there are an estimated $22.8 billion in
Claims asserted against the Commonwealth, which are
projected to receive $15.7 billion pursuant to the Plan,
for an aggregate recovery for all claimholders of 69%,
exclusive of any payments to be made with respect to
CVIs or payments from the Avoidance Actions Trust.
(Id. ¶ 48.) This compares favorably to the projected range
of recoveries pursuant to the Oversight Board’s best
interest test analysis if the Commonwealth’s Title III
case is dismissed: $9.3-15.3 billion (34%-62%). (Id. ¶ 35.)
Realized Commonwealth creditor recoveries could be
even higher pursuant to the Plan, as the 69% estimated
recovery excludes any additional recoveries available on

51.  Federal Claims are excluded from the aggregate recovery

computation because they are being paid at 100% and would
artificially inflate the demonstration as to other claims. (See Plan
§ 73.1; Shah Decl. ¶ 35 n.3.)
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Appendix C

account of payments from the Avoidance Action Trust or

CVIs. (Id. ¶ 48.)

215. Pursuant to the Plan, exclusive of the payment

of the ERS Restriction Fee (which is not being paid on
account of Claims), ERS Bondholders are projected to
receive a recovery of approximately $444 million on $3.169
billion of Claims, and ERS General Unsecured Claims are
projected to receive a recovery of 100% on approximately
$300,000 of Claims, for an implied aggregate recovery of
14%. (Shah Decl. ¶ 54.) This is within the range of projected
recoveries pursuant to the Oversight Board’s best interest
test analysis if ERS’s Title III case is dismissed: $0.2-3.7
billion (5%-100%). (Id. ¶ 35.)52

216. Pursuant to the Plan, PBA Bondholders are

projected to receive a recovery of $1.1 billion against
PBA. (Id. ¶ 59.) The Plan provides that the PBA/DRA
Secured Claim, PBA General Unsecured Claims, and
PBA/DRA Unsecured Claims, will receive recoveries

52.  While it is theoretically possible there would be a 100%

recovery on ERS Claims outside of Title III, that result is very
unlikely because it would require a court to rule that ERS
Bondholders hold liens on PayGo payments. Notably, the First
Circuit has already determined that the ERS Bondholders’
collateral, which consists of statutory employer contributions to
ERS, was subject to material impairment by legislative action,
stating: “Importantly, the Bond Resolution explicitly states that the
legislature of the Commonwealth might reduce (or, by implication,
eliminate) Employers’ Contributions, and so ‘adversely affect[]’ the
Bondholders.” Fin. Oversight & Mgmt. Bd. for P.R. v. Andalusian
Global Designated Activity Co. (In re Fin. Oversight & Mgmt. Bd.
for P.R.), 948 F.3d 457, 468-69 (1st Cir. 2020).
 213a

Appendix C

of approximately $6.6 million, $41.0 million, and $13.4

million, respectively. (Id.) Accordingly, holders of Claims
against PBA are projected to receive an implied aggregate
recovery of $1.1 billion, or 21%. (Id.) This compares
favorably to the projected recoveries pursuant to the
Oversight Board’s best interest test analysis if PBA’s Title
III case is dismissed: $0.3 billion (5%). (Id. ¶ 35.)

217. Accordingly, for each Debtor, creditors in the

aggregate will receive a percentage recovery on their
Claims pursuant to the Plan that is within the range of
or greater than projected recoveries outside of Title III.53
(Id. ¶ 13.)

218. These results are unsurprising. Absent a

mechanism to restructure the Debtors’ outstanding
debt and pension liabilities, the Commonwealth would
face great uncertainty, financial and political instability,

53.  Several creditors have argued that the Plan is not in their
best interests because they would, individually, receive better
recoveries under non-bankruptcy laws. (See Samodovitz Obj.; Docket
Entry No. 18551 (Ahorro Objection); Docket Entry No. 18585 (AMPR
Objection); Docket Entry No. 18566 (Finca Matilde Objection); Hein
Obj.). These creditors do not appropriately apply the “best interest”
standard under PROMESA. Under the PROMESA standard, as
explained above, the Court does not assess each individual creditor’s
recovery. Furthermore, these objectors have provided no alternative
best interest analysis or evidence to suggest that the Plan as a whole
is not in the best interests of creditors in the aggregate. Many
of these objectors also assume in their analysis of their recovery
under non-bankruptcy laws that they would prevail in litigation of
hotly contested issues that will be settled by the Plan. Thus, such
objections are overruled.
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Appendix C

and significant lawsuits. In such an environment, the

Government would face significant challenges to enact
legislation and enforce cooperation among agencies to
institute structural reforms. Without the benefit of the
uptick in growth from such reforms, overall economic
growth and tax revenue would be lower, reducing the
amounts available to pay all creditors. (Id. ¶ 12.) Outside
of Title III and without a confirmed plan of adjustment,
creditors would race to the courthouse to recover on their
claims. “Clearly, such a result is chaos . . . .” 6 Collier on
Bankruptcy § 943.03 (16th ed. 2021).

219. Accordingly, the Court finds that the Plan is in the

best interests of creditors within the meaning of Section
314(b)(6) of PROMESA.

G. PROMESA § 314(b)(7): Fiscal Plan Consistency.

220. Section 314(b)(7) of PROMESA requires that

the Plan merely be consistent with, not identical to, the
applicable certified fiscal plan. (Jaresko Decl. ¶ 103;
Murray Decl. Ex. A ¶ 62.) The Plan is consistent in all
respects with the Fiscal Plan—nothing contained in the
Plan would violate or otherwise interfere with the Fiscal
Plan. (Jaresko Decl. ¶ 103; see Debtors Ex. 10.)

221. The Fiscal Plan provides a blueprint for the

Commonwealth to achieve, among other things, fiscal
responsibility and access to capital markets, and contains
a debt sustainability analysis (“DSA”), which creates a
range established by the Oversight Board as the amount
of debt and long-term capacity of the Government to pay
 215a

Appendix C

debt service on its debt. (Zelin Decl. ¶ 57; Malhotra Decl.

¶¶ 55-56; Debtors Ex. 10.) The aggregate principal and
total debt service of the New GO Bonds falls within the
bounds of the debt range implied by the DSA. (Zelin Decl.
¶ 57; Malhotra Decl. ¶¶ 58-59, 61.) The cash payments due
on the Effective Date do not count as debt for purposes
of the DSA because the cash payments do not create a
debt obligation after the Effective Date. (Malhotra Decl.
¶ 60.) Any cash payments under the CVIs do not count as
debt for purposes of the DSA because the CVIs are only
payable out of outperformance. (Id.) The CVI payments
are contingent in nature and are, by definition, paid from
excess cash available relative to baseline Fiscal Plan
projections. (Zelin Decl. ¶ 58; Malhotra Decl. ¶ 60.) The
debt levels under the Plan are consistent with the debt
levels set forth in the Fiscal Plan, and the debt proposed
to be issued pursuant to the Plan is consistent with the
DSA. (Skeel Decl. ¶ 52; Murray Decl. Ex. A ¶¶ 72, 78;
Malhotra Decl. ¶ 61.)

222. The Plan is also consistent with the Fiscal Plan

because it includes the freeze of accruing pension benefits
and elimination of all COLAs under Act 91-2004, amended
by 160-2013 for TRS, and under Act 12-1954, amended
by 162-2013, for JRS. (See Plan §§  55.8, 55.9, Exs. E,
F.) The Fiscal Plan requires the pension freeze and the
elimination of COLAs, and the failure to include the
pension freeze and elimination of future COLAs in the
Plan would cause it to be materially inconsistent with the
Fiscal Plan due to the significant additional spending and
unpredictable costs that would result from the exclusion
of the pension freeze and COLA elimination provisions.
 216a

Appendix C

(Jaresko Sup. Decl. ¶ 13; see Debtors Ex. 10.) Moreover,

the costs of removing the pension freeze and elimination of
COLAs would increase over time and grow larger during
periods in which deficits are projected by the Fiscal Plan.
(Jaresko Sup. Decl. ¶¶ 8, 13; Malhotra Sup. Decl. ¶ 17.)

223. If Act 53 were interpreted to require the removal

of the freeze and COLA elimination, and the Plan were
modified to implement such changes, the Plan would not
be consistent with the Fiscal Plan. (Jaresko Sup. Decl.
¶ 13.) The Court›s conclusion that the Plan is consistent
with the Fiscal Plan is dependent on, among other things,
the Plan›s inclusion of the pension freeze and elimination
of COLAs.

224. The Plan remains consistent with the Fiscal

Plan notwithstanding the elimination of the Monthly
Benefit Modification. The Fiscal Plan contemplates the
possibility that pensioners would be restored to the full
amount of their accrued pension benefits under certain
circumstances. (Debtors Ex. 10 at 279.) Unlike the costs
of removing the pension freeze and elimination of COLAs,
the majority of the costs associated with removal of the
Monthly Benefit Modification will be incurred during
periods of budget surplus. (Jaresko Sup. Decl. ¶ 12;
Santambrogio Sup. Decl. ¶ 10; Malhotra Sup. Decl. ¶ 9;
Debtors Ex. 10 at 59.)

225. The Fiscal Plan explicitly provides for the

establishment of the Pension Reserve Trust to ensure
that the future pension benefits contemplated by the Plan
will be supported regardless of the future economic or
 217a

Appendix C

political circumstances of the Commonwealth. (Jaresko

Decl. ¶ 103.) To ensure adequate funding to cover the
increased costs resulting from the elimination of the
Monthly Benefit Modification, additional funds will be
set aside in the Pension Reserve Trust during years in
which the Fiscal Plan projects a surplus. (Jaresko Sup.
Decl. ¶ 9.) An increase to the funding amounts for the
Pension Reserve Trust using a surplus-based funding
mechanism does not render the Plan inconsistent with the
Fiscal Plan because such increased funding levels come
out of projected surpluses and do not impose additional
obligations on the Commonwealth that would interfere
with carrying out the Fiscal Plan. (See Jaresko Decl. ¶ 103;
Jaresko Sup. Decl. ¶¶ 9-12.)

226. In addition, the Plan modifies the Seventh

Amended Plan to provide that the Upside Participation
Bonus pursuant to the AFSCME Plan Support Agreement
(Debtors Ex. 21) will be a minimum of $2,000 for each
A FSCME-represented employee during the five-
year term of the new AFSCME collective bargaining
agreement. (See Plan App’x II.) The additional cost of this
modification is only an incremental cost of approximately
$18.3 million per year for the five years beginning in fiscal
year 2022 as compared to the lower Upside Participation
Bonus contemplated in the Seventh Amended Plan.
(Santambrogio Sup. Decl. ¶ 11.)

227. Accordingly, the Plan complies with PROMESA

section 314(b)(7). The Court’s determination sustaining
objections that allowed Eminent Domain /Inverse
Condemnation Claims are protected by the Fifth
 218a

Appendix C

Amendment’s Takings Clause and, accordingly, may

not be impaired by the Plan, does not vitiate the Plan’s
compliance with PROMESA section 314(b)(7) because
there are sufficient uncommitted funds to satisfy Takings
Clause Claim obligations without requiring modification
of the certified fiscal plan. (See supra ¶ 204 n.47.)

H. Bankruptcy Rule 3019: The Plan Does Not Adversely

Change the Treatment of Claims of Creditors.

228. The Oversight Board filed the Eighth Amended

Plan after the Voting Deadline had passed. The Eighth
Amended Plan eliminated the Monthly Benefit Modification
that was contained in the Seventh Amended Plan and
makes minor revisions to address concerns raised by
certain parties. None of the modifications adversely
changes the treatment of the Claims of any Creditor that
accepted the Seventh Amended Plan. To the contrary,
the Plan was amended to enhance the treatment of the
pension Claims in Classes 51A through 51I, 51K, and 51L
through the removal of the Monthly Benefit Modification
(see Malhotra Sup. Decl. ¶¶ 8-9). Treatment of Claims in
other Classes is not affected in any way by this change.

229. In addition, following the passage of the Voting

Deadline, the Oversight Board filed the First Modified
Eighth Amended Plan, which separately classified the
GDB/PET Claim in Class 58A. (See First Modified
Eighth Amended Plan art. LXII.) The GDB/PET Claim
was previously classified as a CW General Unsecured
Claim in Class 58. Pursuant to section 62.4 of the Plan,
the holder of the GDB/PET Claim will receive “payments
 219a

Appendix C

from the Commonwealth equal to, and on the same

timeframe, as the pro rata payments to be made to holders
of Allowed CW General Unsecured Claims pursuant to
the terms and provisions [governing treatment of CW
General Unsecured Claims],” (Plan § 62.4), but Debtors
represent that the GDB/PET Claim is not intended, nor
shall it be construed, as a CW General Unsecured Claim
pursuant to the Plan. The GDB/PET Claim is treated in
the same manner as it would have been treated pursuant
to the Seventh Amended Plan. (See id.) Accordingly, this
modification does not adversely change the treatment of
the Claims of any Creditor that accepted the Seventh
Amended Plan.

230. The Oversight Board subsequently filed the

Plan, which contains additional technical changes from
intermediate amended versions that do not adversely
affect the treatment of any Claims, as well as modifications
to comply with this Court’s determination regarding the
proper treatment of Allowed Eminent Domain/Inverse
Condemnation Claims and the proper scope of the
preemption provision.

231. The modifications do not materially or adversely

modify the treatment to be afforded to creditors pursuant
to the Plan and do not require the resolicitation of
acceptances or rejections thereof. Accordingly, the Plan
can be confirmed without the filing of a new disclosure
statement and resolicitation with respect to the Plan. See
Bankr. R. 3019.
 220a

Appendix C

I. Nulli f ic ation of L aws Cond itioni ng D ebt

Authorization on Elimination of Freeze of Accruing
Pension Benefits and Cost of Living Adjustments.

232. The Debtors represent that all parties in

interest, including, without limitation, the Governor and
the Legislature, know that the Plan’s consistency with
the Fiscal Plan, feasibility, and implementation are each
dependent on the freezes in the accruals of future pension
benefits under TRS and JRS and elimination of cost of
living adjustments. (See supra n.23.) All objections that
suggest that Act 53 or any other law causes the new debt
issued under the Plan to be unauthorized by Act 53 due to
the freezes in the accruals of future pension benefits under
TRS and JRS and elimination of cost of living adjustments
have been overruled as set forth in the Confirmation
Order. To the extent any law is interpreted to mean such
freezes and eliminations cause the new debt issuable
under the Plan to be unauthorized, Act 53 and such other
laws, if any, may not be enforced pursuant to section 108
of PROMESA to the limited extent of eliminating such
impact on the debt’s authorization. The Debtors have
proven to the Court’s satisfaction that the unambiguous
language of Act 53 does not provide that such freezes
and eliminations cause the new debt issuable under the
Plan to be unauthorized. Notice of the request for such
determination was adequately provided to all former and
present governmental employees. (See Docket Entry No.
19182.)
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Appendix C

The Releases, Exculpations, and Injunctions

Pursuant to the Plan

233. The Plan includes certain discharge, release,

exculpation, and injunction provisions, which are essential
to the Debtors’ restructuring, and without which a
consensual restructuring could not be successfully
accomplished. (Jaresko Decl. ¶ 217; Zelin Decl. ¶ 95.)

234. A critical element of the Plan is the complete

resolution of the Commonwealth Title III Case, the ERS
Title III Case, and the PBA Title III Case. To achieve
this, the Debtors and certain claimholders agreed to
a mutual release of all Claims and Causes of Action
arising, in whole or in part, prior to the Effective Date.
(Jaresko Decl. ¶ 218.) The Debtors’ releases incentivized
claimholders to support, and undertake actions to support,
the Plan and its confirmation, without fear of lawsuits in
the future. Certain creditors would not have supported the
Plan absent its release provisions. (Jaresko Decl. ¶ 219;
Zelin Decl. ¶ 100.) Further, the releases of claims by the
Debtors affect only those parties that made a significant
contribution to the negotiation and development of the
Plan and incurred cost and expense during their essential
participation in negotiations. (Jaresko Decl. ¶ 221; Zelin
Decl. ¶¶ 102, 106.) The Plan’s discharges and releases
likewise provide the Debtors and Reorganized Debtors
with assurance that the restructuring balance struck by
the Plan will not be upset by further claims against the
Reorganized Debtors after the Effective Date. (Jaresko
Decl. ¶ 220; Zelin Decl. ¶ 106.)
 222a

Appendix C

A. Releases

235. The Plan’s release provisions include, among

other provisions, subject to certain exclusions as set forth
in the Plan: (i) a release by the GO/PBA PSA Creditors
(solely in their capacity as Creditors of the Debtors),
which includes the Monolines, against certain government
parties, including the Oversight Board, AAFAF, and the
Debtors, of certain Claims and Causes of Action arising
prior to the Plan Effective Date, including the Revenue
Bond Claims litigation and the Lift Stay Motions, and
(ii) a release by the Debtors and Reorganized Debtors of
Claims and Causes of Action related to the Debtors and
their assets in the Title III Cases. (Zelin Decl. ¶ 96.)

236. The Plan’s release of Claims or Causes of Action

by the GO/PBA PSA Creditors against the Oversight
Board, its committees and subcommittees, AAFAF, and
the Debtors, of certain Claims and Causes of Action,
including those related to the Revenue Bond Claims
Litigation and Lift Stay Motions, is a key component of the
Plan. (Id. ¶ 97.) Litigation over such Claims and Causes of
Action was hard-fought and remained active as between
the Commonwealth, on the one hand, and the Monolines
(who would ultimately become GO/PBA PSA Creditors)
on the other. (Id.) By agreeing to settle these disputes,
the GO/PBA PSA Creditors provided a clear benefit to
the Debtors by eliminating the need to incur additional
costs for, and mitigating the substantial risk associated
with, further litigation. (Id.) To create global peace upon
the effectiveness of the Plan, the Debtors and Reorganized
Debtors agreed to release Claims and Causes of Action
 223a

Appendix C

against, among other entities, the Government Parties,

official committees, and PSA Creditors. (Id. ¶ 99.) The
Plan’s release provisions were essential to get the key
stakeholders to engage in negotiations over a potential
consensual release of claims against the Commonwealth.
(Id. ¶ 100.)

237. The parties receiving releases all made significant

contributions to the negotiation and development of the
Plan and incurred costs and expenses during the course
of their essential participation in the negotiations. (Id.
¶ 102.) The releases were a product of robust, mediator-
supervised negotiations and the stakeholders had an
opportunity to be heard as to the scope and content
of the releases. (Id. ¶ 105.) To incentivize the PSA
Creditors to grant the concessions outlined above, and in
consideration of the substantial benefits provided by the
Released Parties, the Debtors agreed that the Debtors
and Reorganized Debtors would prosecute and pursue the
releases, exculpation, and injunction provisions set forth
in the Plan. The Oversight Board has determined that the
releases are fair, reasonable, and in the best interests of
the Debtors. (Id. ¶ 103.)

238. The Plan does not provide for non-consensual

third-party releases; the Plan’s releases are limited to
those necessary to effectuate the Debtors’ successful
restructuring. Except as explicitly agreed to by the
creditors in their respective plan support agreements,
the Plan does not release any claims of a creditor of the
Debtors, in its capacity as such, against a party that is
not a Debtor. (Jaresko Decl. ¶ 223; Zelin Decl. ¶ 107.)
 224a

Appendix C

Specifically, section 92.2(a) of the Plan provides that

“without prejudice to the exculpation rights set forth in
Section 92.7 [of the Plan], nothing contained in the Plan
or the Confirmation Order is intended, nor shall it be
construed, to be a grant of a non-consensual third-party
release of the PSA Creditors, AFSCME, and of their
respective Related Persons by Creditors of the Debtors.”
(Plan § 92.2(a).) Further, sections 92.2(d), (e), and (f) of
the Plan carve out from the Released Claims certain
claims, causes of action, or other rights or powers that
are held by the Securities and Exchange Commission,
the United States, and parties to certain Underwriter
Actions. Likewise, as confirmed by the definitions of
Related Persons (see id. §  1.420) and Released Claims
(see id. § 1.421), claims against AFICA, CCDA, COFINA,
COSSEC, HTA, MBA, MFA, PFC, PRASA, PRIDCO,
PRIFA, UPR, and PREPA, which are or may be subject
to their own restructuring proceedings, are not released
pursuant to the Plan and such entities are not “Related
Persons” of the Released Parties or Releasing Parties.
Further, Avoidance Actions generally are not released
under the Plan. (See id. § 1.421.) These carve-outs ensure
that only those releases that are reasonable and necessary
to Plan confirmation are being provided. (Jaresko Decl.
¶ 224; Zelin Decl. ¶¶ 108-09.)

239. For these reasons, the Court finds that the

releases contemplated by the Plan are reasonable,
necessary, and appropriate to implementation of the
Plan and, therefore, the consensual releases are hereby
approved.
 225a

Appendix C

B. Exculpation

240. Section 92.7 of the Plan provides for exculpation

of the Government Parties, PSA Creditors, Retiree
Committee, Creditors’ Committee, AFSCME, and
the Monolines for, among other things, any acts taken
consistent with the Plan or in connection with the
formulation, preparation, dissemination, implementation,
acceptance, confirmation or approval of the Plan and the
settlements contained therein (including, but not limited
to, the Plan Support Agreements). (Jaresko Decl. ¶ 225;
Zelin Decl. ¶ 110.) The expectation that parties would
be exculpated incentivized them to participate in the
negotiations and support confirmation of the Plan without
fear of future lawsuits. Without the Plan’s exculpation
provisions, parties would likely be exposed to litigation
after extensive good-faith negotiations. (Zelin Decl. ¶ 111.)
The Plan’s exculpation provisions are narrowly tailored to
the exculpated parties’ efforts related to the formulation
of the Plan. All of the parties being exculpated in the
Plan played key roles in the negotiation of the Plan and
the settlements that enabled the Plan, including through
their participation in mediation. The Plan’s exculpation
provisions do not alter the liability of any entity that is
determined to have acted or failed to act in a manner
that constitutes intentional fraud or willful misconduct.
(Jaresko Decl. ¶ 226; Zelin Decl. ¶¶ 110, 112.) In addition,
decretal paragraph 61(g) of the Confirmation Order
provides for exculpation of the DRA Parties, which
is substantially the same as the exculpation provided
pursuant to the Plan and is appropriate in light of the
Stipulation in Connection with DRA Related Disputes,
 226a

Appendix C

dated as of November 5, 2021, by and among the Oversight

Board, as representative of the Debtors and HTA, and the
DRA Parties. (See Confirmation Ord. ¶ 61(g); Debtors Ex.
146.) Exculpation provisions are appropriate for parties’
acts or omissions in connection with or related to the
“pursuit of confirmation of a plan.” See In re Montreal
Me. & Atl. Ry, Ltd., Bk. No. 13-10670, 2015 Bankr. LEXIS
3737, 2015 WL 7431192, at *9 (Bankr. D. Me. Oct. 9, 2015)
(approving exculpation provisions “as appropriate under
applicable law because it is part of a Plan proposed in
good faith, was vital to the Plan formulation process and is
appropriately limited in scope . . ., including its carve-out
for gross negligence and willful misconduct”). 54

C. Injunction

241. The Plan’s injunction provisions (sections 92.3,

92.6, and 92.11) are necessary to the reorganization
and are fair to those parties involved. The injunctions
ensure that the releases and exculpations discussed
above are preserved and enforced by prohibiting legal
action concerning the Released Claims, avoiding the time,
burden and expense that could be incurred if parties

54.  Mr. Hein contends that the exculpation provision should

not extend to acts or omissions by the PSA Creditors in connection
with their role in negotiating plan support agreements. Exculpation
provisions are, however, appropriate when narrowly tailored to the
acts or omissions of a party in the pursuit of confirmation of a Plan.
See In re Montreal Me. & Atl. Ry., Ltd., 2015 Bankr. LEXIS 3737,
2015 WL 7431192, at *9. Mr. Hein does not allege any facts suggesting
willful misconduct or gross negligence of a PSA Creditor. Thus,
the exculpation provision as crafted is appropriate and Mr. Hein’s
objection thereto is overruled.
 227a

Appendix C

were permitted to pursue Released Claims. The Plan’s

injunction provisions are narrowly tailored to serve that
purpose. (Zelin Decl. ¶ 113; Jaresko Decl. ¶ 227.)

242. The releases, exculpation provisions, and

injunctions pursuant to the Plan are integral and critical
parts of the Plan and the compromises and settlements
implemented pursuant to the Plan. (Plan §§ 2.3, 92.4.) The
approval of such releases is a condition to the occurrence
of the Effective Date, and all Released Parties have relied
on the efficacy and conclusive effects of such releases
and injunctions and on the Title III Court’s retention of
jurisdiction to enforce such releases and injunctions when
making concessions pursuant to the Plan and by agreeing
to, accepting, and supporting the settlement and treatment
of their respective Claims, Causes of Action, and other
rights pursuant to the Plan. (Zelin Decl. ¶¶ 96, 98, 100-04,
106, 110-12; Plan § 86.1.) Accordingly, such provisions are
justified and warranted based upon the circumstances of
the Title III Cases and the consideration being provided
by all Released Parties in connection with the Plan.

243. To maintain and protect the integrity and

feasibility of the Plan, while the Oversight Board is in
existence, any and all governmental units and any officer
or employee thereof shall neither recreate by statute,
regulation, rule, policy, or executive order nor repay by
any means, any debt discharged by the Plan without the
Oversight Board’s express prior written consent or except
as may otherwise be provided by a certified fiscal plan or
budget. Without limitation, the debt referred to herein
includes any and all pension obligations frozen and cost
 228a

Appendix C

of living adjustments in amount such that they shall not

increase from their levels in existence on the Effective
Date of the Plan.

Validity of Bonds and CVIs

244. Pursuant to section 4 of PROMESA, as well as

sections 94455 and 1123 of the Bankruptcy Code, and in
accordance with the Confirmation Order and the Plan, the
Court determines that the New GO Bonds and CVIs, and
the covenants by the Commonwealth for the benefit of the

55.  Section 944(b)(3) of the Bankruptcy Code the requires the

Court, as a condition to providing a discharge, to determine the
validity of obligations imposed under a plan of the debtor and of
any provision made to pay or secure payment of such obligations. 11
U.S.C. § 944(b)(3). See generally In re City of Stockton, Cal., 526 B.R.
35, 49-50 (Bankr. E.D. Cal. 2015) (“The structure of the federal-state
relationship . . . regarding restructuring of municipal debt is dictated
by the U.S. Constitution. . . . [T]he Supremacy Clause operates to
cause federal bankruptcy law to trump state laws, including state
constitutional provisions, that are inconsistent with the exercise by
Congress of its exclusive power to enact uniform bankruptcy laws”
(citing Ass’n of Retired Emps. of the City of Stockton v. City of
Stockton, Cal. (In re City of Stockton, Cal.), 478 B.R. 8, 14-16 (Bankr.
E.D. Cal. 2012); U.S. Const. art. VI, cl. 2; Int’l Bhd. of Elec. Workers,
Local 2376 v. City of Vallejo, Cal. (In re City of Vallejo, Cal.), 432
B.R. 262, 268-70 (E.D. Cal. 2010) (additional citations omitted)). As
set forth in the leading bankruptcy treatise, “[t]he requirement of
a court determination of validity is extra assurance for those who
might be skittish about the nature of the bonds being issued . . . . It
has the added feature of removing any doubt concerning the matter,
because the determination of the court on that issue should be binding
in the future.” 6 Alan N. Resnick & Henry J. Sommer, Collier on
Bankruptcy § 944.03[1][b] (16th ed. 2013).
 229a

Appendix C

holders of the New GO Bonds and CIVs, are legal, valid,

binding, and enforceable obligations of the Reorganized
Debtors benefitting from the following protections, each
of which is legal, valid, binding, and enforceable against
the Reorganized Debtors, the Commonwealth, and other
persons and entities, as applicable, under Puerto Rico,
New York, and federal law:

a. The Confirmation Order is full, final, complete,

conclusive, and binding and shall not be subject
to collateral attack or other challenge in any
court or other forum, except as permitted under
applicable law.

b. The New GO Bond Legislation and the CVI

Legislation are incorporated into Act 53-
2021, which has been validly enacted by the
Commonwealth and is valid and effective in
accordance with its terms.

c. The New GO Bonds and the CVIs are bonds

or notes within the meaning of Section 2 of
Article VI of the Commonwealth Constitution
to which the Commonwealth may legally pledge
its full faith, credit and taxing power under the
Commonwealth Constitution and applicable
Puerto Rico law for the payment of principal and
interest.

d. Pursuant to the New GO Bond Legislation and

the CVI Legislation, the Commonwealth has
validly pledged its full faith, credit and taxing
 230a

Appendix C

power under the Commonwealth Constitution

and applicable Puerto Rico law for the payment
of principal and interest with respect to the New
GO Bonds and payment with respect to the CVIs.

e. Subject to the occurrence of the Effective Date

and as of the date of issuance of the New GO Bonds
and CVIs, the Commonwealth is in compliance
with any applicable debt limits, including the
Comprehensive Cap and any applicable debt
limit (if any) contained in the Commonwealth
Constitution.

f. Pursuant to the New GO Bonds Legislation and

other applicable law, upon the issuance of the New
GO Bonds, the New GO Bonds shall be secured by
a first priority statutory lien (statutory lien being
defined in 11 U.S.C. §  101(53)) over the funds
deposited in the Debt Service Fund, including
any revenues generated therefrom, which
statutory first lien shall occur automatically
and shall automatically attach and be perfected,
valid and binding from and after the Effective
Date, without any further act or agreement by
any Person, and shall remain in full force and
effect until the New GO Bonds have been paid or
satisfied in full in accordance with their terms.

g. The statutory first lien on funds deposited

into the Debt Service Fund, as provided for in
the New GO Bonds Legislation, and all other
provisions to pay the New GO Bonds are valid,
 231a

Appendix C

binding, legal and enforceable, including, without

limitation, covenants not to impair such property,
maintain available tax exemption and provide for
the conditions regarding substitution of collateral
(including, without limitation, the statutory lien
thereon as adequate protection for the property
rights in the Plan and in the Confirmation Order).

h. The statutory first lien on funds deposited into

the Debt Service Fund, as provided for in the
New GO Bonds Legislation, creates the valid
pledge and the valid lien upon the right, title and
interest of the Commonwealth in such funds in
favor of the Trustee (for the benefit of the holders
of the New GO Bonds) which it purports to create,
subject only to the provisions of the New GO
Bonds Indenture permitting the withdrawal,
payment, setting apart or appropriation thereof
for the purposes and on the terms and conditions
set forth in the New GO Bonds Indenture and
each applicable supplemental indenture.

i. The Commonwealth has waived, and shall be

deemed to have waived, the automatic stay in
any future insolvency proceeding commenced on
behalf of the Commonwealth (whether under Title
III of PROMESA or otherwise) with respect to
monies on deposit in the Debt Service Fund as
of the commencement thereof.

j. The Plan meets all conditions set forth in the New

GO Bond Legislation and the CVI Legislation for
issuance of the New GO Bonds and CVIs.
 232a

Appendix C

k. In light of the enactment of the New GO Bond

Legislation and the CVI Legislation, and upon
execution by all parties thereto, the New GO
Bonds Indenture and the CVI Indenture shall
(i) have been duly and lawfully authorized by the
Commonwealth, and (ii) be in full force and effect
and valid and binding upon the Commonwealth
and enforceable in accordance with their terms,
except that enforceability of rights and remedies
may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws
affecting creditors’ rights generally or as to the
availability of any particular remedy.

l. At the time of issuance and delivery of the New

GO Bonds, the GO CVIs, and the Clawback
CVIs, the Reorganized Commonwealth is hereby
directed to cause to be stamped or written on
each of the New GO Bonds, the GO CVIs, and the
Clawback CVIs, a legend substantially as follows:

DETERMINED BY THE UNITED STATES

DISTRICT COURT FOR THE DISTRICT
OF PUERTO RICO PURSUA NT TO 11
U.S.C. §§  944(b) AND 1123 TO BE VALID,
LEGALLY BINDING, AND ENFORCEABLE
PURSUANT TO THE JUDGMENT AND
CONFIRMATION ORDER, ENTERED ON
THE 18TH DAY OF JANUARY, 2022.
 233a

Appendix C

GDB Loan Priority Determination

245. The Plan provides for the issuance of the HTA

Clawback CVI as consideration for the settlement of
CW/HTA Claims under the HTA/CCDA Plan Support
Agreement. The CVI Indenture provides for four
separate Sub-Subseries of such HTA Clawback CVI to
be issued, and for payments on such Sub-Subseries of the
HTA Clawback CVI to be made first, on account of CW/
HTA Claims related to the HTA 68 Bonds; second, on
account of CW/HTA Claims related to the HTA 98 Senior
Bonds; third, on account of CW/HTA Claims related to
the HTA 98 Sub Bonds; and fourth, subject to the GDB
Loan Priority Determination, on account of either CW/
HTA Claims related to the GDB HTA Loans or CW/
HTA Claims related to the HTA Bonds. (CVI Indenture
§§ 2.01(c)(i), 5.07(c); see also Plan at J-12, §§ 1.172, 63.2,
Ex. J at Annex 6.)

246. Certain disbursements under the “CVI Payment

Reserve” are dependent on the “GDB Loan Priority
Determination,” (Plan §  1.172), which is defined as “[t]
he determination, in either the Commonwealth Title III
Case or the HTA Title III Case, (a) with respect to the
relative rights of recovery and priority of payment of the
[19]68 Bonds and the [19]98 Bonds to the rights of GDB
with respect to the GDB HTA Loans, and/or (b) that the
[DRA] does not possess an allowable claim or entitlement
to recover with respect to the HTA Clawback CVI based
upon such GDB HTA Loans.” (Plan § 1.259.)
 234a

Appendix C

247. On June 26, 2021, the DRA Parties filed a

complaint initiating an adversary proceeding against the
Defendants, 56 with the stated purpose of “provid[ing] a
means to resolve the priority question with respect to the
payments made by the Commonwealth on account of the
clawback claims, and any payments that may be made on
account of the Loan Claims and the HTA Bonds under a
future plan for HTA.” (Docket Entry No. 1 in Adv. Proc.
No. 21-00068-LTS ¶ 101.)

248. The complaint sought declaratory relief on four

counts: (i) Count 1, “that the DRA is the only party with
(i) a valid, perfected, first-priority lien on the Act 30-31
Revenues and (ii) a right to collect from the Act 30-31
Revenues;” (ii) Count 2, “that the HTA Bondholders
have limited collateral to secure the bonds, that the HTA
Bonds are limited recourse obligations, and neither the
collateral pledged to secure the bonds, nor the bond
revenues to which the bondholders have recourse, includes
the Act 30-31 Revenues;” (iii) Count 3, “that the DRA’s
Loans are not subordinate to the bonds;” and (iv) Count 4,
“that the DRA’s Loans are entitled to collect on the loan
claims from the bond revenues not deposited in the bond
revenue accounts.” (Docket Entry No. 1 in Adv. Proc. No.
21-00068-LTS.)

56.  “Defendants” means Ambac Assurance Corporation,

Assured Guaranty Corp., Assured Guaranty Municipal Corp.,
Financial Guaranty Insurance Company, National Public Finance
Guarantee Corporation, Peaje Investments LLC, and The Bank of
New York Mellon.
 235a

Appendix C

249. On August 26, 2021, the Defendants moved to

dismiss all four counts (Docket Entry No. 44 in Adv. Proc.
No. 21-00068-LTS ¶¶ 2-6) (the “Motion to Dismiss”). On
September 23, 2021, the DRA Parties filed an opposition to
the Motion to Dismiss and on October 8, 2021, Defendants
filed their reply in support of the Motion to Dismiss, which
concluded briefing on the motion. 57

250. On October 29, 2021, the Court entered an opinion

and order dismissing all four counts of the DRA Parties’
complaint under Rule 12(b)(6) of the Federal Rules of
Civil Procedure for failure to state a claim upon which
relief could be granted (Docket Entry No. 83 in Adv.
Proc. No. 21-00068-LTS at 27) (the “GDB Loan Priority
Determination Opinion”).

251. As to Count 1, the Court held that the plain

language of Acts 30 and 3158 and the Assignment and
Security Agreement59 make clear that the HTA Bonds are
payable from Act 30-31 Revenues.60 (GDB Loan Priority
Determination Op. at 18-20.)

57.  The Oversight Board and A AFAF were granted full

intervention rights in Counts 1, 2, and 4 of Adversary Proceeding No.
21-00068-LTS and moved to dismiss those counts, but their motion
was denied as moot in light of the order granting the Defendants’
Motion to Dismiss.

58.  “Acts 30 and 31” means Commonwealth Act 30-2013 and

Act 31-2013, both approved on June 25, 2013.

59.  “A ssig nment and Secur ity Ag reement” means the

agreement between HTA and GDB executed on August 28, 2013.

60.  “Act 30-31 Revenues” means certain crude oil taxes, motor
vehicle license fees, and other excise taxes levied pursuant to Acts
30 and 31.
 236a

Appendix C

252. As to Count 3, the Court held that HTA

Bondholders had standing to enforce the subordination
provisions of the Assignment and Security Agreement
and Loan Agreements61 under 3 L.P.R.A. §  2013(a)(3).
The Court further held that the Assignment and Security
Agreement unambiguously subordinates the GDB HTA
Loans to the HTA Bonds (including, for the avoidance
of doubt, the HTA 68 Bonds and the HTA 98 Bonds), a
conclusion that was reinforced by the GDB HTA Loan
Agreement attached to the Complaint. (GDB Loan
Priority Determination Op. at 21-23.)

253. The Court dismissed Counts 2 and 4 because they

“logically depend[ed]” on the Court granting Counts 1
and 3, because the Assignment and Security Agreement
“unambiguously compels the conclusion that, before
any funds are paid toward the Loans, Bond payment
obligations must first be satisfied.” (GDB Loan Priority
Determination Op. at 25.)

254. In the GDB Loan Priority Determination Opinion,

the Court directed the Clerk of Court to enter judgment
consistent therewith, and a final judgment dismissing
Counts 1, 2, 3, and 4 was entered thereafter. (GDB Loan
Priority Determination Op. at 27; Docket Entry No. 86 in
Adv. Proc. No. 21-00068-LTS.)

255. The Court’s rulings in the GDB Loan Priority

Determination Opinion are incorporated by reference
herein.

61.  “GDB HTA Loan Agreements” means the loan agreements

between GDB and HTA that were executed between 2008 and 2014.
 237a

Appendix C

256. The Court’s ruling that the GDB HTA Loans and
any liens securing such GDB HTA Loans are subordinated
to the HTA Bonds qualifies as the “GDB Loan Priority
Determination” for purposes of the Plan.62

Miscellaneous Provisions

257. Plan Supplement. All materials contained in the

Plan Supplement comply with the terms of the Plan, and
the filing, notice, and service of such documents were done
in accordance with the Bankruptcy Code, the Bankruptcy
Rules, and the Local Rules, and no other or further notice
is or shall be required. (See Service Affidavits; Plan Sup.)

258. Satisfaction of Confirmation Requirements.

Based on the foregoing, the Plan satisfies the requirements
for confirmation set forth in section 314 of PROMESA.

259. Oversight Board Certification. For purposes of

section 209 of PROMESA, the discharge of debt to occur
as of the Effective Date pursuant to the Plan and the
Confirmation Order is necessary for the Oversight Board
to certify that expenditures do not exceed revenues for
the Commonwealth, as determined in accordance with
modified accrual accounting standards.

260. Implementation. All documents necessary to

implement the Plan, including those contained in the

62.  Pursuant to section 1.172 of the Plan, Cash payable from the
HTA Clawback CVI in the CVI Payment Reserve will be distributed
upon entry of a Final Order with respect to the GDB Loan Priority
Determination.
 238a

Appendix C

Plan Supplement and all other relevant and necessary

documents, have been negotiated in good faith and at arm’s
length and shall, upon completion of documentation and
execution, be valid, binding, and enforceable agreements
and not be in conflict with any federal or state law. Without
limiting the generality of the foregoing, the Debtors, prior
to the Effective Date, and Reorganized Debtors, from and
after the Effective Date, are authorized to consummate
the transactions contemplated in the Plan and Plan
Supplement. The execution, delivery, or performance by
the Debtors or Reorganized Debtors, as the case may be,
of any documents in connection with the Plan Supplement,
and compliance by the Debtors or Reorganized Debtors,
as the case may be, with the terms thereof, is hereby
authorized by, and will not conflict with, the terms of the
Plan or the Confirmation Order.

261. Good Faith. The Debtors will be acting in good

faith if they proceed to (i) consummate the Plan and the
agreements, settlements, transactions, and transfers
contemplated thereby and (ii) take the actions authorized
and directed by the Confirmation Order.

262. Retention of Jurisdiction. This Court may

properly and, upon the Effective Date shall, subject to
the terms and provisions of article XCI of the Plan, and
except as otherwise provided in the Plan or Confirmation
Order, pursuant to sections 105, 945(a), and 1142(b) of the
Bankruptcy Code, for the time necessary for the successful
implementation of the Plan, retain exclusive jurisdiction
to the extent it has exclusive subject matter jurisdiction,
and concurrent jurisdiction to the extent it has concurrent
 239a

Appendix C

subject matter jurisdiction, over all matters arising under

PROMESA, arising out of, and related to, the Title III
Cases to the fullest extent legally permissible, including,
but not limited to, subject matter jurisdiction over the
matters set forth in article XCI of the Plan.

263. Without limiting the generality of any of the

foregoing, the Court shall retain jurisdiction to (i)
enter appropriate orders with respect to the payment,
enforcement, and remedies of the bonds and any other
instruments issued pursuant to the plan, (ii) enter and
implement such orders as may be necessary or appropriate
to execute, implement, or consummate the provisions of
the Plan, (iii) adjudicate any and all controversies, suits,
or issues that may arise regarding the validity of any
action taken by any entity pursuant to or in furtherance
of the Plan or the Confirmation Order including,
without limitation, issuance of bonds, and (iv) to enforce
prohibitions against any subsequent collateral attack on
provisions contained in the Plan and the Confirmation
Order.

264. Governing Law. Except to the extent that other

federal law is applicable, or to the extent that an exhibit
to the Plan or any document entered into in connection
with the Plan or Plan Supplement provides otherwise,
the rights, duties, and obligations arising pursuant to the
Plan shall be governed by, and construed in accordance
w ith, PROMESA (including the provisions of the
Bankruptcy Code make applicable pursuant to section
301 of PROMESA), and to the extent not inconsistent
therewith, the laws of the Commonwealth of Puerto Rico
giving effect to principles of conflicts of laws.
 240a

Appendix C

265. Enforceability. Pursuant to Bankruptcy Code

sections 1123(a), 1123(b), and 944(a) as well as general
principles of federal supremacy, the provisions of this
Memorandum, the Confirmation Order, and the Plan shall
apply and be enforceable notwithstanding any otherwise
applicable nonbankruptcy law. The documents contained
in the Plan Supplement (as such documents may be further
modified and filed with the Court prior to the Effective
Date) provide adequate means for implementation of the
Plan pursuant to section 1123(a)(5) of the Bankruptcy
Code and, as of the occurrence of the Effective Date, shall
constitute valid legal obligations of the Debtors and valid
provisions to pay or secure payment of the bonds pursuant
to section 944(b)(3) of the Bankruptcy Code, and shall be
enforceable in accordance with their terms.

266. No Precedential Effect. The findings of fact

and conclusions of law herein concerning the separate
classification of certain Claims from Class 58 CW
General Unsecured Claims, including the governmental
or business reasons for such classifications, are made with
respect to the Title III cases of the Commonwealth, ERS,
and PBA, and shall not have any precedential effect for
other Title III cases.

Conclusion

For the foregoing reasons, the Debtors’ motion to

confirm the Plan is granted and a Confirmation Order
will be entered contemporaneously herewith.
 241a

Appendix C

SO ORDERED.

Dated: January 18, 2022

/s/ Laura Taylor Swain

LAURA TAYLOR SWAIN
United States District Judge
 242a

Appendix D
APPENDIX D — CONFIRMATION ORDER OF
THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO,
FILED JANUARY 18, 2022
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
PROMESA
Title III
No. 17 BK 3283-LTS
(Jointly Administered)

In re: THE FINANCIAL OVERSIGHT AND

MANAGEMENT BOARD FOR PUERTO RICO,

as representative of

THE COMMONWEALTH OF PUERTO RICO et al.,

Debtors.1

1.  The Debtors in these Title III Cases, along with each Debtor’s
respective Title III case number and the last four (4) digits of each
Debtor’s federal tax identification number, as applicable, are the (i)
Commonwealth of Puerto Rico (the “Commonwealth”) (Bankruptcy
Case No. 17-BK-3283-LTS) (Last Four Digits of Federal Tax ID:
3481); (ii) Puerto Rico Sales Tax Financing Corporation (“COFINA”)
(Bankruptcy Case No. 17-BK-3284-LTS) (Last Four Digits of Federal
Tax ID: 8474); (iii) Puerto Rico Highways and Transportation
Authority (“HTA”) (Bankruptcy Case No. 17-BK-3567-LTS) (Last
Four Digits of Federal Tax ID: 3808); (iv) Employees Retirement
System of the Government of the Commonwealth of Puerto Rico
(“ERS”) (Bankruptcy Case No. 17-BK-3566-LTS) (Last Four Digits
of Federal Tax ID: 9686); (v) Puerto Rico Electric Power Authority
(“PREPA”) (Bankruptcy Case No. 17-BK-4780-LTS) (Last Four
 243a

Appendix D

ORDER AND JUDGMENT CONFIRMING

MODIFIED EIGHTH AMENDED TITLE III
JOINT PLAN OF ADJUSTMENT OF THE
COMMONWEALTH OF PUERTO RICO, THE
EMPLOYEES RETIREMENT SYSTEM OF THE
GOVERNMENT OF THE COMMONWEALTH
OF PUERTO RICO, AND THE PUERTO RICO
PUBLIC BUILDINGS AUTHORITY

[TABLE OF CONTENTS OMITTED]

T h e C o m m o n w e a l t h o f P u e r t o R i c o (t h e
“Commonwealth”), the Employees Retirement System
of the Government of the Commonwealth of Puerto Rico
(“ERS”), and the Puerto Rico Public Buildings Authority
(“PBA” and, collectively with the Commonwealth and
ERS, the “Debtors”), by and through the Financial
Oversight and Management Board for Puerto Rico (the
“Oversight Board”), as Title III representative of the
Debtors under section 315(b) of the Puerto Rico Oversight,
Management, and Economic Stability Act (“PROMESA”),1
having proposed and filed with the United States District
Court for the District of Puerto Rico (the “Court”)
the Modified Eighth Amended Title III Joint Plan of
Adjustment of the Commonwealth of Puerto Rico, et al.,

Digits of Federal Tax ID: 3747); and (vi) Puerto Rico Public Buildings
Authority (“PBA”) (Bankruptcy Case No. 19-BK-5523-LTS) (Last
Four Digits of Federal Tax ID: 3801) (Title III case numbers are
listed as Bankruptcy Case numbers due to software limitations).
1.  PROMESA is codified at 48 U.S.C. § 2101 et seq. References to
“PROMESA” section numbers in the remainder of this Confirmation
Order are to the uncodified version of the legislation.
 244a

Appendix D

dated January 14, 2022 (Docket Entry No. 19784 in Case

No. 17-3283)2 (as amended, supplemented, or modified
prior, at, or subsequent to the Confirmation Hearing as
set forth in this Confirmation Order through the date
hereof, including the Plan Supplement, and as may be
amended, supplemented, or modified pursuant to section
313 of PROMESA, the “Plan” 3 through the date hereof);4
and the Court having entered, pursuant to, inter alia,
section 1125 of the Bankruptcy Code and Bankruptcy Rule
3017(b), after due notice and a hearing, an order, dated
August 2, 2021 (Docket Entry No. 17639) (the “Disclosure
Statement Order”), (i) approving the adequacy of the
information set forth in the Disclosure Statement, (ii)
establishing procedures for the solicitation, voting, and

2.  All docket entry references are to entries in Case No. 17-3283
unless otherwise indicated.
3.  The use of the term “Plan” herein, unless otherwise indicated
by context, refers to the confirmable final version filed at Docket
Entry No. 19784, as described herein. The penultimate version of the
plan, which required final modifications to be confirmable, was filed
as the Modified Eighth Amended Title III Joint Plan of Adjustment
of the Commonwealth of Puerto Rico, et al., dated December 20, 2021
(Docket Entry No. 19568 in Case No. 17-3283) (the “Fifth Modified
Eighth Amended Plan”).
4.  Capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Plan, the Disclosure Statement
Order, the Confirmation Brief (each as defined herein), or the
Findings of Fact and Conclusions of Law Regarding Confirmation
of Modified Eighth Amended Title III Plan of Adjustment of the
Commonwealth of Puerto Rico, et al. (the “Findings of Fact and
Conclusions of Law”), entered contemporaneously herewith, as
applicable. A composite copy of the Plan is annexed hereto as Exhibit
A.
 245a

Appendix D

tabulation of votes on and elections with respect to the

Plan, (iii) approving the forms of ballots, master ballots,
and election notices used in connection therewith, and (iv)
approving the form of notice of the Confirmation Hearing;
and the Court having entered the Order Establishing
Procedures and Deadlines Concerning Objections to
Confirmation and Discovery in Connection Therewith
(Docket Entry No. 17640); and the following documents
having been filed by the Debtors or the PSA Creditors in
support of or in connection with confirmation of the Plan:

(a) Plan Supplement (Docket Entry No. 18470);

(b) Cer tificate of Ser vice of Solicitation

Materials (Docket Entry Nos. 19107-1
through 19107-9);

(c) Af f id av it of Publication and Ra dio

Advertisements (Docket Entry Nos. 19108-1
through 19108-4);

(d) Omnibus Reply of the Commonwealth of

Puerto Rico, the Employees Retirement
Sys t e m o f t h e G o v e r n m e n t o f t h e
Commonwealth of Puerto Rico, and the
Puerto Rico Public Buildings Authority
to Objections to Seventh Amended Title
III Plan of Adjustment (Docket Entry No.
18874);

(e) Memorandum of Law in Suppor t of

Confirmation of Seventh Amended Title
 246a

Appendix D

III Joint Plan of Adjustment of the

Commonwealth of Puerto Rico, et al.
(Docket Entry No. 18869) (the “Confirmation
Brief”);

(f) Declaration of Natalie Jaresko in Respect

of Confirmation of Seventh Amended
Title III Joint Plan of Adjustment for
the Commonwealth of Puerto Rico, et al.
(Docket Entry Nos. 18729 and 19054-4);

(g) Declaration of David M. Brownstein

in Respect of Confirmation of Seventh
Amended Title III Plan of Adjustment
of Commonwealth of Puerto Rico et al.
(Docket Entry Nos. 18726 and 19054-1);

(h) Declaration of David Skeel in Respect of

Confirmation of Plan of Adjustment for
the Commonwealth of Puerto Rico, et al.
(Docket Entry Nos. 18731 and 19054-9);

(i) Declaration of Steven Zelin of PJT Partners

LP on Behalf of the Financial Oversight
and Management Board for Puerto Rico
in Respect of Confirmation of Seventh
Amended Title III Joint Plan of Adjustment
of the Commonwealth of Puerto Rico, et al.
(Docket Entry Nos. 18734 and 19054-10);

(j) Declaration of Ojas N. Shah in Respect

of Confirmation of Seventh Amended
 247a

Appendix D

Title III Joint Plan of Adjustment of the

Commonwealth of Puerto Rico, et al.
(Docket Entry Nos. 18730 and 19054-8);

(k) Declaration of Gaurav Malhotra of Ernst

& Young LLP in Respect of Confirmation
of Seventh Amended Title III Joint Plan
of Adjustment for the Commonwealth of
Puerto Rico, et al. (Docket Entry Nos.
18738 and 19054-6);

(l) Decl ar a ti o n of Ju an Sant amb r ogi o

in Respect of Confirmation of Seventh
Amended Title III Joint Plan of Adjustment
of the Commonwealth of Puerto Rico, et al.
(Docket Entry Nos. 18736 and 19054-7);

(m) Declaration of Adam Chepenik in Respect

of the Confirmation of Seventh Amended
Title III Joint Plan of Adjustment for
the Commonwealth of Puerto Rico, et al.
(Docket Entry Nos. 18735 and 19054-2);

(n) Declaration of Sheva R. Levy in Respect

of Confirmation of Seventh Amended
Title III Joint Plan of Adjustment of the
Commonwealth of Puerto Rico, et al.
(Docket Entry Nos. 18737 and 19054-5);

(o) Declaration of Jay Herriman in Respect of

Confirmation of Seventh Amended Title III
Plan of Adjustment of the Commonwealth
 248a

Appendix D

of Puerto Rico, et al. (Docket Entry Nos.

18732 and 19054-3);

(p) Declaration of Christina Pullo of Prime

Clerk LLC Regarding the Solicitation of
Votes and Tabulation of Ballots Cast on
Seventh Amended Title III Joint Plan of
Adjustment of the Commonwealth of Puerto
Rico, et al. (Docket Entry No. 19056. See
also Docket Entry No. 19144);

(q) Declaration of Andrew Wolfe in Respect

of Confirmation of Seventh Amended
Title III Joint Plan of Adjustment of the
Commonwealth of Puerto Rico, et al.
(Docket Entry No. 18725);

(r) Declaration of Marti P. Murray in Respect

of Confirmation of Seventh Amended
Title III Joint Plan of Adjustment of the
Commonwealth of Puerto Rico, et al.
(Docket Entry No. 18724);

(s) Supplemental Declaration of Gaurav

Malhotra of Ernst &Young LLP in Respect
of Confir mation of Eighth Amended
Title III Joint Plan of Adjustment for
the Commonwealth of Puerto Rico, et al.
(Docket Entry No. 19057);

(t) Supplemental Declaration of Natalie

Jaresko in Respect of Confirmation of
 249a

Appendix D

Eighth Amended Title III Joint Plan of

Adjustment for the Commonwealth of
Puerto Rico, et al. (Docket Entry No.
19058);

(u) Supplemental Declaration of Sheva R.

Levy in Respect of Confirmation of Eighth
Amended Title III Joint Plan of Adjustment
of the Commonwealth of Puerto Rico, et al.
(Docket Entry No. 19059);

(v) Sup pl em ent a l Decl ar a ti o n of Ju an

Santambrogio in Respect of Confirmation
of Eighth Amended Title III Joint Plan of
Adjustment of the Commonwealth of Puerto
Rico, et al. (Docket Entry No. 19060);

(w) Supplemental Declaration of Christina

Pullo of Prime Clerk LLC Regarding
the Solicitation of Votes and Tabulation
of Ballots Cast on Seventh Amended
Title III Joint Plan of Adjustment of the
Commonwealth of Puerto Rico, et al.
(Docket Entry No. 19115); and

(x) Supplemental Declaration of Jay Herriman

in Respect of Confirmation of Modified
Eighth Amended Title III Joint Plan of
Adjustment of the Commonwealth of Puerto
Rico, et al. (Docket Entry No. 19329);

and objections to confirmation of the Plan having been

interposed by certain parties, as reflected on the docket of
 250a

Appendix D

the Title III Cases and on the record of the Confirmation

Hearing; and, except to the extent otherwise provided
herein, each of the objections having been resolved,
overruled, sustained, or withdrawn at, prior to, or
subsequent to the Confirmation Hearing;5 and the Court
having held the Confirmation Hearing commencing on
November 8, 2021; and the appearances of all interested
parties, including members of the public selected by the
Court, having been noted in the record of the Confirmation
Hearing; and after full consideration of the record of the
Commonwealth Title III Case, the ERS Title III Case,
and the PBA Title III Case, including, without limitation,
motions, applications and orders in each of such cases,
the foregoing documents, and the evidence admitted
and arguments of counsel presented at the Confirmation
Hearing; and after due deliberation and good and
sufficient cause appearing therefor, it is hereby

ORDERED, ADJUDGED, DECREED,

AND DETERMINED THAT:

1. Confirmation of the Plan. The Plan and each of

its provisions shall be, and hereby are, CONFIRMED
pursuant to section 314(b) of PROMESA. The documents
contained in the Plan Supplement are authorized
and approved. The terms of the Plan, as amended,
supplemented, or modified by the revisions made prior,
at, or subsequent to the Confirmation Hearing, as set
forth in this Confirmation Order as well as in the revised

5.  All opposition submissions are also listed as part of the

Court’s Findings of Fact and Conclusions of Law.
 251a

Appendix D

composite copy attached hereto as Exhibit A, include the

Plan Supplement, as amended, supplemented, or modified
on or prior to the date hereof, and are incorporated by
reference into and are an integral part of this Confirmation
Order.

2. Objections. With the narrow exception of the

objections of holders of alleged Eminent Domain/Inverse
Condemnation Claims, which are hereby SUSTAINED
to the extent that such Claims are ultimately Allowed
Claims, all objections, responses to, and statements and
comments, if any, in opposition to or inconsistent with
the Plan shall be and hereby are, OVERRULED and
DENIED in their entirety. All withdrawn objections are
deemed withdrawn with prejudice.

3. Findings/Conclusions. The findings of fact and

conclusions of law set forth in the Court’s Findings of
Fact and Conclusions of Law are incorporated herein
as though set forth in full. Notwithstanding such
incorporation, the following summarizes certain of the
Court’s determinations:

(A) Pursuant to PROMESA, on May 3, 2017,

May 21, 2017, and September 27, 2019,
the Commonwea lth, ERS , and PBA ,
respectively, each commenced a case
before the Court in accordance with the
requirements of Title III of PROMESA.
The commencement of these cases vested
the Court with exclusive jurisdiction over
the cases and all respective property of the
 252a

Appendix D

Commonwealth, ERS, and PBA, wherever

located. As a result of the consensual
agreement among the Debtors and their
respective creditor representatives, the
Debtors formulated, duly solicited, and now
seek confirmation of a plan of adjustment in
accordance with federal law.

(B) This Confirmation Order is a final order

intended to be binding on all parties in
interest, and shall not be subject to collateral
attack or other challenge in any other
court or other forum, except as permitted
under applicable law. Confirmation of the
Plan constitutes a judicial determination,
pursuant to section 4 of PROMESA, that
all laws, rules, and regulations giving rise
to obligations of the Debtors discharged
by the Plan and this Confirmation Order
pursuant to PROMESA are preempted by
PROMESA and such discharge shall prevail
over any general or specific provisions
of territory laws, rules, and regulations.
Pursuant to section 4 of PROMESA, to
the extent not previously ruled preempted
pursuant to an order of the Title III Court,
all laws (or such portions thereof) of the
Commonwealth of Puerto Rico, other
than budgets certified by the Oversight
Board, inconsistent with PROMESA, have
been preempted to the extent set forth
in Exhibit A to the Findings of Fact and
 253a

Appendix D

Conclusions of Law. Such preempted laws

include, without limitation, laws enacted
prior to June 30, 2016, that provide for
transfers or other appropriations after
the enactment of PROMESA, including
transfers from the Commonwealth or one
of its instrumentalities to any agency or
instrumentality, whether to enable such
agency or instrumentality to pay or satisfy
indebtedness or for any other purpose, to the
extent inconsistent with the Plan’s discharge
of the Debtors’ obligations. Such laws shall
not be enforceable to the extent they are
inconsistent with the Plan’s discharge of the
Debtors’ obligations. All laws enacted from
and after the commencement of the Title III
Cases to the extent they are inconsistent
with the transactions contemplated by
the Plan are also unenforceable. Without
in any way limiting the foregoing, (a)
the Commonwealth laws preempted by
PROMESA include, without limitation,
those listed on Exhibit C hereto for the
reasons, and to the extent, set forth in
Exhibit A to the Findings of Fact and
Conclusions of Law, and (b) all litigation in
which any Government Party is a defendant,
over whether any Commonwealth law
listed on Exhibit C hereto is preempted
by PROMESA shall be dismissed, with
prejudice, as of the Effective Date and the
parties thereto shall provide the Oversight
 254a

Appendix D

Board prompt notice of such dismissal. For

the avoidance of doubt, the non-inclusion of
a payment obligation arising from a valid
law in a certified fiscal plan or budget is not
a basis for disallowance of such obligation
to the extent the claim arising therefrom
otherwise satisfies the requirements for
allowance of a claim under the relevant
provisions of the Bankruptcy Code.

(C) The Court shall retain jurisdiction to

enforce the terms hereof and of the Plan,
the New GO Bonds, the GO CVIs, and the
Clawback CVIs in accordance with their
terms to ensure compliance with the Plan
and to adjudicate claims arising therefrom,
including rights to specific performance.

(D) At the time of issuance and delivery of

the New GO Bonds, the GO CVIs, and
the Clawback CVIs, the Reorganized
Commonwealth is hereby directed to cause
to be stamped or written on each of the New
GO Bonds, the GO CVIs, the Clawback
CVIs, and the Rum Tax CVI a legend
substantially as follows:

DETERMINED BY THE UNITED

STATES DISTRICT COURT FOR
THE DISTRICT OF PUERTO RICO
PURSUANT TO 11 U.S.C. §§ 944(b)
AND 1123 TO BE VALID, LEGALLY
 255a

Appendix D

BINDING, AND ENFORCEABLE

PURSUANT TO THE JUDGMENT
AND CONFIRMATION ORDER,
ENTERED ON THE 18TH DAY OF
JANUARY, 2022.

(E) The New GO Bonds Legislation and the CVI

Legislation are incorporated into Act No.
53-2021, which has been validly enacted by
the Commonwealth and is valid and effective
in accordance with its terms.

(F) Pursuant to PROMESA, including section

4 thereof, as well as sections 944 6 and

6.  Section 944(b)(3) requires the Court, as a condition to

providing a discharge, to determine the validity of obligations
imposed under a plan of the debtor and of any provision made to
pay or secure payment of such obligations. 11 U.S.C. § 944(b)(3). See
generally In re City of Stockton, Cal., 526 B.R. 35, 49-50 (Bankr.
E.D. Cal. 2015) (“The structure of the federal-state relationship
. . . regarding restructuring of municipal debt is dictated by the U.S.
Constitution. . . . [T]he Supremacy Clause operates to cause federal
bankruptcy law to trump state laws, including state constitutional
provisions, that are inconsistent with the exercise by Congress
of its exclusive power to enact uniform bankruptcy laws.”) (citing
Ass’n of Retired Emps. of the City of Stockton v. City of Stockton,
Cal. (In re City of Stockton, Cal.), 478 B.R. 8, 14-16 (Bankr. E.D.
Cal. 2012); U.S. Const. art. VI, cl. 2; Int’l Bhd. of Elec. Workers,
Local 2376 v. City of Vallejo, Cal. (In re City of Vallejo, Cal.), 432
B.R. 262, 268-70 (E.D. Cal. 2010)) (additional citations omitted). As
set forth in the leading bankruptcy treatise, “[t]he requirement of
a court determination of validity is extra assurance for those who
might be skittish about the nature of the bonds being issued . . . . It
has the added feature of removing any doubt concerning the matter,
 256a

Appendix D

1123 of the Bankruptcy Code, and in

accordance with the Confirmation Order
and the Plan, the Court determines that
the New GO Bonds and the CVIs, and
the covenants by the Commonwealth, for
the benefit of the holders of the New GO
Bonds, and the CVIs as provided in the
New GO Bonds Legislation, the New GO
Bonds Indenture, the CVI Legislation, the
CVI Indenture or the Confirmation Order,
as applicable, constitute valid, binding,
legal and enforceable obligations of the
Commonwealth, under Puerto Rico, New
York, and federal law.

(G) The New GO Bonds and the CVIs are bonds

or notes within the meaning of Section
2 of A rticle VI of the Commonwealth
Constitution to which the Commonwealth
may legally pledge its full faith, credit and
taxing power under the Commonwealth
Constitution and applicable Puerto Rico law
for the payment of principal and interest.

(H) Pursuant to the New GO Bonds Legislation

and the CVI Legislation, the Commonwealth
has validly pledged its full faith, credit and
taxing power under the Commonwealth
Constitution and applicable Puerto Rico law

because the determination of the court on that issue should be binding

in the future.” 6 Alan N. Resnick & Henry J. Sommer, Collier on
Bankruptcy § 944.03[1][b] (16th ed. 2013).
 257a

Appendix D

for the payment of principal and interest

with respect to the New GO Bonds and
payment with respect to the CVIs.

(I) Subject to the occurrence of the Effective

Date and as of the date of issuance of the New
GO Bonds and CVIs, the Commonwealth
is in compliance with any applicable debt
limits, including the Comprehensive Cap and
any applicable debt limit (if any) contained
in the Commonwealth Constitution.

(J) Pursuant to the New GO Bonds Legislation

and other applicable law, upon the issuance
of the New GO Bonds, the New GO Bonds
shall be secured by a first priority statutory
lien (statutory lien being defined in 11 U.S.C.
§ 101(53)) over the funds deposited in the
Debt Service Fund, including any revenues
generated therefrom, which statutory first
lien shall occur automatically and shall
automatically attach and be perfected, valid,
and binding from and after the Effective
Date, without any further act or agreement
by any Person, and shall remain in full force
and effect until the New GO Bonds have
been paid or satisfied in full in accordance
with their terms.

(K) The statutory first lien on funds deposited

into the Debt Service Fund, as provided for
in the New GO Bonds Legislation, and all
 258a

Appendix D

other provisions to pay the New GO Bonds

are valid, binding, legal, and enforceable,
including, without limitation, covenants
not to impair such property, maintain
available tax exemption and provide for
the conditions regarding substitution of
collateral (including, without limitation,
the statutory lien thereon as adequate
protection for the property rights in the
Plan and in the Confirmation Order).

(L) The statutory first lien on funds deposited

into the Debt Service Fund, as provided
for in the New GO Bonds Legislation,
creates the valid pledge and the valid lien
upon the right, title and interest of the
Commonwealth in such funds in favor of
the Trustee (for the benefit of the holders
of the New GO Bonds) which it purports
to create, subject only to the provisions of
the New GO Bonds Indenture permitting
the withdrawal, payment, setting apart
or appropriation thereof for the purposes
and on the terms and conditions set forth
in the New GO Bonds Indenture and each
applicable supplemental indenture.

(M) The Commonwealth has waived, and shall

be deemed to have waived, the automatic
stay in any future insolvency proceeding
commenced on behalf of the Commonwealth
(whether under Title III of PROMESA
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or otherwise) with respect to monies on

deposit in the Debt Service Fund as of the
commencement thereof.

(N) In light of the enactment of the New GO

Bonds Legislation and the CVI Legislation,
upon execution by all parties thereto, the
New GO Bonds Indenture and the CVI
Indenture shall (i) have been duly and
lawfully authorized by the Commonwealth,
and (ii) be in full force and effect and valid
and binding upon the Commonwealth and
enforceable in accordance with their terms,
except that enforceability of rights and
remedies may be limited by bankruptcy,
insolvency, reorganization, moratorium,
or other laws affecting creditors’ rights
generally or as to the availability of any
particular remedy.

(O) For purposes of section 209 of PROMESA,

the discharge of debt to occur as of the
Effective Date pursuant to the Plan and
the Confirmation Order is necessary
for the Oversight Board to certify that
expenditures do not exceed revenues for
the Commonwealth, as determined in
accordance with modified accrual accounting
standards.

(P) The Court’s Opinion and Order Granting

Defen d ants’ Moti o n t o Di smi ss th e
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Appendix D

Complaint (Docket Entry No. 83 in Adv.

Proc. No. 21-00068), including, without
limitation, that the GDB HTA Loans are
subject to subordination to the HTA 68
Bonds and the HTA 98 Bonds qualifies as
the “GDB Loan Priority Determination” for
purposes of the Plan.

4. Litigation Resolution. For the reasons stated

herein and in the Findings of Fact and Conclusions of
Law, the provisions of the Plan constitute a good faith,
reasonable, fair, and equitable compromise and settlement
of all Claims and controversies resolved pursuant to
the Plan, including, without limitation, the compromise
and settlement of asserted and unasserted disputes
concerning the rights of holders of CW Bond Claims,
CW Guarantee Bond Claims, ERS Bond Claims, PBA
Bond Claims, CW/Convention Center Claims, CW/HTA
Claims, CW/MBA Claims, CW/PRIFA Rum Tax Claims,
and PRIFA BANs, and disputes (a) set forth in the Debt
Related Objections challenging, among other things, the
validity, priority, secured status, and related rights of
the 2011 CW Bond Claims, the 2011 CW Series D/E/PIB
Bond Claims, the 2012 CW Bond Claims, the 2014 CW
Bond Claims, the 2014 CW Guarantee Bond Claims, the
2011 PBA Bond Claims, the 2012 PBA Bond Claims, and
the PRIFA BANs, (b) set forth in the Invalidity Actions,
(c) set forth in the Lien Challenge Actions, (d) raised by
certain holders of CW Bond Claims, CW Guarantee Bond
Claims, and GDB HTA Loans asserting rights to receive
revenues historically conditionally appropriated to CCDA,
HTA, the MBA, and PRIFA, as applicable, and subject
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Appendix D

to “clawback” by the Commonwealth pursuant to the

provisions of the Commonwealth Constitution, (e) relating
to the validity, priority, secured status, and related
rights attendant to the GDB HTA Loans, (f) set forth in
the ERS Litigation, the ERS Recovery Actions, and the
ERS Takings Action, (g) between the Commonwealth and
PBA, including, without limitation, the resolution of (i)
the claims and Causes of Action currently being litigated
in the PBA Litigation, (ii) the amount, if any, of the PBA
Administrative Expense Claim, and (iii) the ownership
of the PBA Property, between the Commonwealth and
PBA and the claims that PBA may assert against the
Commonwealth under leases, agreements, and applicable
law, (h) set forth in the Lift Stay Motions and the Clawback
Actions relating to the CW/Convention Center Claims,
the CW/HTA Claims, and the CW/PRIFA Rum Tax
Claims, and (i) set forth in the PRIFA BANs Litigation,
each as incorporated into the Plan, and the entry of this
Confirmation Order constitutes, if required, approval
of all such compromises and settlements pursuant to
Bankruptcy Rule 9019 and sections 105(a) and 1123(b)(5)
of the Bankruptcy Code. Pursuant to this Confirmation
Order, and to the extent provided in the Plan, on the
Effective Date, such compromises and settlements shall
be binding upon the Debtors, all Creditors of the Debtors,
and all other Entities and, to the fullest extent permitted
by applicable law, shall not be subject to collateral attack
or other challenge (other than appeals) in any other court
or forum.

5. Plan Settlements Approved. The Court hereby

approves the compromises and settlements embodied in
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Appendix D

the Plan as fair and reasonable and, as of the Effective

Date of the Plan, authorizes and directs the consummation
thereof.

6. Dismissal of Med Center Litigation. On the

Effective Date, the Med Center Litigation, except the Med
DC Action, shall be deemed dismissed, with prejudice,
and each of the Commonwealth and the respective Med
Centers shall take such action as is necessary to notify
the applicable court of such dismissal, including, without
limitation, within ten (10) Business Days of the Effective
Date, filing notices with the clerk of such court setting
forth the resolution of the Med Center Litigation and
the dismissal thereof (except the Med DC Action), with
prejudice; provided, however, that all appeals taken from
the Med DC Action shall be dismissed, with prejudice, and
each of the Commonwealth and the Med Centers party to
such appeals shall take such action as is necessary to notify
such appellate courts of appeal of such dismissal, with
prejudice; and, provided, further, that the Commonwealth
and the Med Centers shall file a notice with the clerk of
the court in connection with the Med DC Action that (a)
all actions in connection with the Med DC Action shall
be stayed, and (b) in the event that, from and after July
1, 2022, the Commonwealth defaults on its obligations
arising from or relating to the Medicaid Act, 42 U.S.C. §
1396a(bb), such stay shall be lifted and the Med Centers
may pursue relief and the Commonwealth may present
any and all defenses with respect to such alleged future
defaults, with all existing defaults as of the date hereof
having been waived by the Med Centers. Without in any
way limiting the foregoing, from and after the earlier to
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Appendix D

occur of (y) July 1, 2022 and (z) the Effective Date (the
“Med Center Outside Date”), and until otherwise ordered
or agreed upon, the parties shall continue to adhere to
and comply with the terms and provisions of that certain
Stipulation Modifying the Automatic Stay Between
the Commonwealth and Atlantic Medical Center, Inc.,
Camuy Health Services, Inc., Centro de Salud Familiar
Dr. Julio Palmieri Ferri, Inc., Ciales Primary Health
Care Services, Inc., Corp. De Serv. Médicos Primarios y
Prevención de Hatillo, Inc., Costa Salud, Inc., Centro de
Salud de Lares, Inc., Centro de Servicios Primarios de
Salud de Patillas, Inc., and Hospital General Castañer,
Inc., dated July 12, 2019 (the “Med Center Stipulation”)
(see Docket Entry Nos. 8499 and 12918-14), including,
without limitation, the making of quarterly payments to
certain Med Centers in accordance therewith. Payments
made by the Commonwealth, either directly or indirectly
through contractors or subcontractors, to any Med Center
prior to modification of the Med Center Stipulation
or such other agreement between the applicable Med
Centers and the Commonwealth shall not be subject to
setoff or recoupment on account of any claims or causes
of action arising during the period up to and including
the Effective Date; provided, however, that, in the event
that the Commonwealth or any Med Center determines
that any payments made pursuant to the Med Center
Stipulation from and after the Med Center Outside Date
constitute an overpayment or an underpayment, as the
case may be, based upon services provided by the Med
Centers from and after the Med Center Outside Date,
the Commonwealth or such Med Center shall submit such
issue for a determination in connection with the Med DC
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Appendix D

Action, with all parties reserving all rights, defenses,

and counterclaims with respect to such overpayments or
underpayments, as the case may be, notwithstanding the
imposition of any stay.

7. Dismissal of ERS Litigation. On the Effective Date,

(a) the ERS Litigation and the ERS Recovery Actions
shall be dismissed and/or denied, with prejudice, and (b)
the Oversight Board, by itself or through its committees,
the Creditors’ Committee, and the ERS Bondholders (on
their own account or on behalf of affiliates or related funds
or accounts managed by affiliates) shall take any and all
action reasonably necessary, including, without limitation,
filing such notices, stipulations or other pleadings (i) in the
Title III Court to effectuate such dismissal and/or denial
of the ERS Litigation and the ERS Recovery Actions, with
prejudice, and (ii) in the United States Court of Appeals
for the Federal Circuit to effectuate the dismissal and/or
denial of the ERS Takings Action, with prejudice.

8. Dismissal of GO/Clawback Litigation. On the

Effective Date, (a) to the extent extant, the Debt Related
Objections, the Invalidity Actions, the Lien Challenge
Actions, the Lift Stay Motions, the Clawback Actions,
and the Section 926 Motion shall be dismissed and/or
denied, with prejudice, (b) the Oversight Board, by itself
or through its committees, the Creditors’ Committee,
the Monolines and the PSA Creditors (on their own
account or on behalf of affiliates or related funds or
accounts managed by affiliates) shall take any and all
action reasonably necessary, including, without limitation,
filing such notices, stipulations or other pleadings in the
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Appendix D

Title III Court, the United States Court of Appeals for

the First Circuit and the courts of the Commonwealth of
Puerto Rico, as applicable, to effectuate the dismissal of
the aforementioned litigations and motions, with prejudice.

9. Dismissal of PRIFA BANs Litigation. On the

Effective Date, (a) the PRIFA BANs Litigation and the
PRIFA BANs Takings Litigation shall be dismissed and/
or denied, with prejudice, and (b) the Oversight Board, by
itself or through its committees, and the plaintiffs therein
(on their own account or on behalf of affiliates or related
funds or accounts managed by affiliates) shall take any
and all action necessary, including, without limitation,
filing such notices, stipulations or other pleadings (i) in the
Title III Court to effectuate such dismissal and/or denial
of the PRIFA BANs Litigation, with prejudice, and (ii) in
the United States Court of Federal Claims to effectuate
the dismissal and/or denial of the PRIFA BANs Takings
Litigation, with prejudice.

10. Dismissal of the PBA Litigation. On the Effective

Date, (a) the PBA Litigation shall be dismissed, with
prejudice, and (b) the Oversight Board, by itself or through
its committees, and the plaintiffs therein (on their own
account or on behalf of affiliates or related funds or
accounts managed by affiliates) shall take any and all
action necessary, including, without limitation, filing such
notices, stipulations or other pleadings in the Title III
Court to effectuate such dismissal and/or denial of the
PBA Litigation, with prejudice.

11. Implementation of the Plan. On and after

the Effective Date, the Debtors, the Reorganized
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Appendix D

Debtors, and each of their respective authorized agents

and representatives are authorized and directed to
(a) execute, deliver, file, or record such documents,
contracts, instruments, releases, and other agreements
including, without limitation, those contained in the
Plan Supplement, (b) make any and all distributions and
transfers contemplated pursuant to, and as provided for
in, the Plan and the Plan Supplement, (c) take such other
actions as may be necessary to effectuate, implement,
and further evidence the terms and conditions of the
Plan, including, among other things, all such actions
delineated in article LXXXIX of the Plan,7 and (d) direct
or instruct The Depository Trust Company, or such other
person or entity necessary to implement or effectuate
the terms of (i) any custodial trust, escrow arrangement,
or similar structure established pursuant to section
75.5(b) of the Plan and facilitated by Ambac (an “Ambac
Trust”), (ii) the FGIC Trust, (iii) the Syncora Trust,
(iv) any custodial trust, escrow arrangement, or similar
structure established pursuant to section 75.1(b)(ii) of the
Plan (an “Assured Trust”), and (v) the Avoidance Actions
Trust (collectively, the “Trusts”), and (vi) the related
Trust documentation. Without in any way limiting the
foregoing, on the Effective Date, the appropriate officers
or representatives of the Debtors and Reorganized
Debtors, as the case may be, and members of the boards
of directors of the same, as applicable, are authorized,
empowered, and directed to issue, execute, file, and
deliver or record such documents, contracts, instruments,

7.  Article LXXXIV has been amended to reflect that Class 54

is among the Unimpaired Classes (§ 84.2), rather than among the
Impaired Classes (§ 84.1.)
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Appendix D

releases, and other agreements, including those contained

in the Plan Supplement, contemplated by the Plan, and
make, or cause to be made, any and all distributions and
transfers contemplated pursuant to, and as provided for
in, the Plan and the Plan Supplement, in the name of and
on behalf of the Debtors and Reorganized Debtors, as
applicable.

12. Enforceability of New Debt Instruments. Pursuant

to each of Bankruptcy Code section 944(b)(3), the New
GO Bonds Legislation, the CVI Legislation, and all
debt instruments to be issued pursuant to the Plan
will constitute, upon distribution thereof, valid legal
obligations of the Debtor or the Reorganized Debtor, as
the case may be, that issues them, and any provision made
to pay or secure payment of such obligation is valid.

13. Authorization of New GO Bonds and CVIs

and Injunction. The debt authorization in Act 53-2021
is conditioned only on the Plan’s cancellation of the
Monthly Benefit Modification provided for in the proposed
Seventh Amended Title III Joint Plan of Adjustment
of the Commonwealth of Puerto Rico, et al. (Docket
Entry No. 17627) (the “Seventh Amended Plan”), and
does not require satisfaction of any other conditions
including cancellation of (a) the elimination of cost of
living adjustments and/or (b) freeze or terminations of
accrual of defined benefits under the Teachers Retirement
System or the Judiciary Retirement System from and
after the Effective Date. The Plan cancels and eliminates
the Monthly Benefit Modification previously included in
the proposed Seventh Amended Plan, thereby satisfying
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Appendix D

the condition in Act 53-2021 for its debt authorization.

The Commonwealth government shall not repeal such
debt authorization prior to all such indebtedness issued
pursuant to the Plan being satisfied in accordance with the
terms thereof. For avoidance of doubt, the Plan does not
modify benefits comprised of the “Monthly Base Pension,”
“Christmas Bonus,” “Summer Bonus,” “Medicine Bonus,”
and “Medical Insurance Benefit,” each as defined in the
Seventh Amended Plan.

14. Purchase and Sale of Certain ERS Assets. On the

Effective Date, (a) the Commonwealth shall purchase,
and ERS shall sell, assign, transfer, and convey to the
Commonwealth, all of ERS’s right, title and interest in
ERS’s Assets, including, without limitation, such Assets
subject to a valid and perfected lien or security interest
(other than liens or claims discharged pursuant to the Plan
and this Confirmation Order) for an aggregate purchase
price equal to the sum of Three Hundred Seventy-Three
Million Dollars ($373,000,000.00), and (b) in accordance
with the terms and provisions of section 69.2 of the Plan, (i)
the Commonwealth shall be granted an option to purchase
the ERS Private Equity Portfolio or the interests of the
ERS Trust, (ii) in the event the Commonwealth declines to
exercise such option, pursuant to the Bondholder Election,
ERS bondholders shall have the option to purchase the
ERS Private Equity Portfolio or the interests of the
ERS Trust, as the case may be, for Seventy Million
Seven Hundred Fifty Thousand Dollars ($70,750,000.00),
plus such amount as may be necessary to reimburse
the Commonwealth for any funded shortfall amounts in
connection with the ERS Private Equity Portfolio, and (iii)
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Appendix D

in the event that the Bondholder Election is not exercised,

the Commonwealth shall purchase the ERS Private
Equity Portfolio for Seventy Million Seven Hundred Fifty
Thousand Dollars ($70,750,000.00).

15. Monthly Deposits of Interest and Principal.

Pursuant to the New GO Bonds Legislation and the New
GO Bonds Indenture, from and after the Effective Date,
until the New GO Bonds have been paid or satisfied in
full in accordance with their terms, on the first (1st)
Business Day of each calendar month, the Reorganized
Commonwealth shall deposit Cash in the Debt Service
Fund with the New GO Bonds Trustee in the aggregate
amount equal to (i) one-sixth (1/6) of the Reorganized
Commonwealth’s semi-annual obligation with respect to
the payment of interest to accrue on the New GO Bonds
through the next interest payment date, and (ii) e twelfth
(1/12) of the Reorganized Commonwealth’s then annual
obligation with respect to the payment of principal (or
accreted value) on the New GO Bonds. On the Effective
Date, the Reorganized Commonwealth shall deposit into
the Debt Service Fund such additional amounts as may be
necessary to account for the New GO Bonds being issued
as of the Deemed Issuance Date.

16. Comprehensive Cap on All Net Tax-Supported

Debt. During the Debt Policy Period, pursuant to the
Debt Responsibility Act and in accordance with the
New GO Bonds Indenture and the CVI Indenture, the
Commonwealth and the Reorganized Commonwealth, as
applicable, shall adopt and maintain a Debt Management
Policy that includes a Comprehensive Cap on all Net Tax-
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Appendix D

Supported Debt of article IV of the Debt Responsibility

Act, which cap shall be set at seven and ninety-four one
hundredths percent (7.94%) of Debt Policy Revenues as and
when measured in accordance with the Debt Responsibility
Act, including a secured and/or securitized debt sublimit
of twenty-five one hundredths percent (0.25%) of Debt
Policy Revenues above and beyond the percentage of Debt
Policy Revenues required to pay the maximum annual
debt service on the COFINA Bonds outstanding as of the
Effective Date. Debt service payments on New GO CABs
issued pursuant to the Plan to holders or insurers of GO
Bonds and PBA Bonds, and payments on CVIs to be issued
pursuant to the Plan or other contingent value instruments
that may be issued pursuant to or in connection with
a Commonwealth Instrumentality Plan, including a
Commonwealth Instrumentality Plan for HTA, CCDA, or
PRIFA, in satisfaction of claims asserted by (a) holders
or insurers of bonds issued by such instrumentality or
(b) other creditors of such instrumentality, will not apply
towards the Comprehensive Cap. For the avoidance of
doubt, any capital appreciation general obligation bonds
or similar tax supported debt obligations issued to anyone
other than the holders or insurers of GO Bonds and PBA
Bonds pursuant to the Plan, and any contingent value
instruments or similar tax supported debt obligations
issued other than pursuant to or in connection with the
Plan or any Commonwealth Instrumentality Plan, shall
count towards the Comprehensive Cap, irrespective of
whether issued prior to or after the Effective Date. The
Secretary of Treasury’s certification of compliance with
the Debt limit pursuant to section 74.4 of the Plan shall be
conclusive and binding absent manifest error; provided,
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Appendix D

however, that, in issuing such certification, with respect

to the calculation of the revenues of public corporations
included as Debt Policy Revenues, the Secretary of
Treasury may rely on certifications from officers of such
public corporations.

17. Adoption and Maintenance of a Debt Management

Policy. During the Debt Policy Period, the Reorganized
Commonwealth shall maintain and comply with a Debt
Management Policy designed to ensure that certain past
Debt issuance practices of the Commonwealth are not
repeated. The Debt Management Policy shall, unless
otherwise approved, in writing, by the Oversight Board
(to the extent exercising authority in accordance with
the provisions of PROMESA), at all times include the
principles and limitations provided in section 74.5 of the
Plan.

18. Creation of Avoidance Actions Trust. Upon the

execution of the Avoidance Actions Trust Agreement
pursuant to section 78.1 of the Plan, the Avoidance Actions
Trust shall be established and validly created pursuant
to the terms of the Avoidance Actions Trust Agreement,
with no further authorization or legislative action being
required, and the Avoidance Actions Trustee shall be
selected in accordance with the terms and provisions of
the Avoidance Actions Trust Agreement. This Court shall
retain jurisdiction to enforce the terms and provisions of
the Avoidance Actions Trust Agreement.

19. Avoidance Actions Trust Assets. The Avoidance

Actions Trust shall consist of the Avoidance Actions Trust
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Appendix D

Assets. On the Effective Date, the Debtors shall transfer

all of the Avoidance Actions Trust Assets to the Avoidance
Actions Trust and, in accordance with section 1123(b)
(3)(B) of the Bankruptcy Code, the Avoidance Actions
Trust shall have the sole right, authority, and standing
to prosecute, settle or otherwise dispose of all Avoidance
Actions, including, without limitation, those set forth on
Exhibits A and B to the Plan, as of the Effective Date.
The Avoidance Actions Trust Assets may be transferred
subject to certain liabilities, including, without limitation,
all counterclaims and defenses to any such Avoidance
Actions Trust Assets, as provided in the Plan or the
Avoidance Actions Trust Agreement. Such transfer shall
be exempt from any stamp, real estate transfer, mortgage
reporting, sales, use or other similar Tax, pursuant to
section 1146(a) of the Bankruptcy Code. Upon delivery
of the Avoidance Actions Trust Assets to the Avoidance
Actions Trust, the Debtors, the Reorganized Debtors, and
their predecessors, successors and assigns, and each other
Entity released pursuant to section 88.2 of the Plan shall
be discharged and released from all liability with respect
to the delivery of such distributions.

20. Funding, Costs, and Expenses of the Avoidance

Actions Trust. On the Effective Date, the Avoidance
Actions Trust shall be funded on a one-time basis in an
amount up to Fifteen Million Dollars ($15,000,000.00),
as determined by the Creditors’ Committee at or prior
to the Confirmation Hearing. The reasonable costs and
expenses of the Avoidance Actions Trust, including the
fees and expenses of the Avoidance Actions Trustee and its
retained professionals, shall be paid out of the Avoidance
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Appendix D

Actions Trust Assets. Fees and expenses incurred in

connection with the prosecution and settlement of any
Claims shall be considered costs and expenses of the
Avoidance Actions Trust.

21. Indemnification of Avoidance Actions Trustee

and Board. The Avoidance Actions Trustee, the Trust
Advisory Board (as defined in the Avoidance Actions
Trust Agreement), and their respective firms, companies,
affiliates, partners, officers, directors, members,
employees, professionals, advisors, attorneys, financial
advisors, investment bankers, disbursing agents and
agents, and any of such Person’s successors and assigns
(each, an “Indemnified Party”), shall not be liable to
the Avoidance Actions Trust Beneficiaries (as defined
in the Avoidance Actions Trust Agreement) for actions
taken or omitted in their capacity as, or on behalf of, the
Avoidance Actions Trustee or the Trust Advisory Board,
as applicable, except those acts arising from their own
fraud, willful misconduct or gross negligence, and each
shall be entitled to indemnification and reimbursement
by the Avoidance Actions Trust for fees and expenses in
defending any and all actions or inactions in their capacity
as, or on behalf of, the Avoidance Actions Trustee or the
Trust Advisory Board, as applicable, except for any actions
or inactions involving fraud, willful misconduct or gross
negligence. Any indemnification claim of an Indemnified
Party pursuant to section 7.5 of the Avoidance Actions
Trust Agreement shall be satisfied solely from the
Avoidance Actions Trust Assets and shall be entitled to a
priority distribution therefrom. The Indemnified Parties
shall be entitled to rely, in good faith, on the advice of their
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Appendix D

retained professionals. The foregoing indemnity in respect

of any Indemnified Party shall survive the termination of
such Indemnified Party from the capacity for which they
are indemnified.

22. Creation of Pension Reserve Trust. Upon the

execution of the Pension Reserve Deed of Trust pursuant
to section 83.1 of the Plan, the Pension Reserve Trust shall
be established and validly created pursuant to the terms
of the Pension Reserve Deed of Trust, with no further
authorization or legislative action being required, and
shall not be subject to taxation by the Commonwealth.
This Court’s retention of jurisdiction includes jurisdiction
over actions to enforce the terms and provisions of the
Pension Reserve Deed of Trust.

23. Funding of the Pension Reserve Trust. On the

Effective Date, the Commonwealth shall contribute,
or cause to be contributed, to the Pension Reserve
Five Million Dollars ($5,000,000.00) to fund the initial
administrative fees, costs and expenses of the Pension
Reserve Trust, of which One Million Dollars ($1,000,000.00)
shall be deposited into the Pension Reserve Board’s
general account, Two Million Five Hundred Thousand
Dollars ($2,500,000.00) shall be deposited into the
Pension Benefits Council’s administrative and operating
account, and One Million Five Hundred Thousand Dollars
($1,500,000.00) shall be deposited into the Pension Reserve
Board’s administrative and operating account. From
and after the FY in which the Effective Date occurs
up to and including the conclusion of the ninth (9th) FY
following the FY in which the Effective Date occurs,
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Appendix D

the Reorganized Commonwealth shall make, or cause

to be made, annual (but in no event later than October
1st following the conclusion of each FY) contributions to
the Pension Reserve Trust in an amount equal to (a) the
Base Contribution, (b) such additional amount calculated
as the lower of the actual primary surplus for such FY
and the projected Fiscal Plan primary surplus for such
FY, minus the sum of (i) the Base Contribution for such
FY, plus (ii) the Commonwealth debt service obligation
pursuant to the Fiscal Plan for such FY, plus (iii) Two
Hundred Million Dollars ($200,000,000.00); provided,
however, that, in all instances, such additional amount
cannot be lower than zero dollars ($0.00), and (c) subject
to applicable laws, including, without limitation, Titles
I and II of PROMESA, such additional amounts as the
Reorganized Commonwealth may deposit into the Pension
Reserve Trust. The Pension Reserve Trust shall be
managed by an independent entity whose members shall
meet the independence, professionalism, experience and
qualification standards set forth in the Pension Reserve
Deed of Trust and shall be subject to all Commonwealth
contracting, ethics, and conflicts of interest laws and
regulations.

24. No Action. Pursuant to section 1142(b) of the

Bankruptcy Code, the Debtors are directed to, and no
further action of the directors or officers of the Debtors
shall be required to authorize the Debtors to, enter into,
execute, deliver, file, adopt, amend, restate, consummate,
or effectuate, as the case may be, the Plan, and any
contract, instrument, or other document to be executed,
delivered, adopted, or amended in connection with the
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Appendix D

implementation of the Plan, including, without limitation,

the Plan Supplement.

25. Government Action. From the Effective Date up

to and including the satisfaction of the New GO Bonds
and the CVIs in accordance with their respective terms,
(a) pursuant to Bankruptcy Code section 1142(b), the
Government of Puerto Rico, including, without limitation,
any Entity or Person acting for or on behalf thereof,
shall take any and all actions necessary to consummate
the transactions contemplated by the Plan, (b) the
Puerto Rico Department of Treasury and AAFAF, as
applicable, are authorized and directed, notwithstanding
any requirements of Puerto Rico law, to execute any and
all agreements necessary for the implementation of the
Plan and to make any payments required thereunder,
and (c) pursuant to section 108(a)(2) of PROMESA, no
party, individual, official, or officer (elected or appointed),
agency, or Entity shall enact, adopt, or implement any
law, rule, regulation, or policy that (i) impedes, financially
or otherwise, consummation and implementation of
the transactions contemplated by the Plan, including,
but not limited to, those contemplated pursuant to the
New GO Bonds Indenture and the CVI Indenture, or
(ii) creates any inconsistency in any manner, amount,
or event between the terms and provisions of the Plan
or a Fiscal Plan certified by the Oversight Board, each
of which actions has been determined by the Oversight
Board to impair or defeat the purposes of PROMESA. To
the maximum extent permitted by law, the Government
of Puerto Rico, including, without limitation, any Entity
or Person acting for or on behalf thereof, is directed to
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Appendix D

take any and all actions necessary to consummate the

transactions contemplated by the Plan. Without in any way
limiting the foregoing, on the earlier to occur of (y) the
Effective Date and (z) within forty-five (45) days from and
after the date hereof, the agencies and instrumentalities
set forth on Exhibit D hereto are directed to transfer
the funds and the proceeds of liquid securities held on
account and set forth on Exhibit D hereto to the Puerto
Rico Treasury Single Account; provided, however, that
Exhibit D hereto may be amended during the period up
to and including thirty (30) days from the date hereof
upon the agreement of the Oversight Board and AAFAF
and, to the extent amended, the Oversight Board shall
file an informative motion with the Title III Court with
respect thereto.

26. Oversight Board Consent Pursuant to PROMESA

Section 305. Pursuant to section 305 of PROMESA, with
the consent of the Oversight Board and consistent with the
Plan, using all their political and governmental powers,
the Governor and Legislature are directed to take all
acts necessary to carry out and satisfy all obligations and
distributions set forth in the Plan.

27. Binding Effect. This is a full and complete Final

Order intended to be conclusive and binding on all parties
in interest, is not intended to be subject to collateral
attack in any other forum, and may only be challenged
in accordance with applicable rules in this Court and
appealed as provided in PROMESA and other applicable
federal laws, rules, and jurisprudence, by (i) the Debtors,
(ii) the Reorganized Debtors, (iii) the Commonwealth and
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its instrumentalities, (iv) each Entity asserting claims

or other rights against the Commonwealth or any other
Commonwealth instrumentality, including each holder
of a bond claim and each holder of a beneficial interest
(directly or indirectly, as principal, agent, counterpart,
subrogee, insurer or otherwise) in respect of bonds issued
by the Debtors or any Commonwealth agency or with
respect to any trustee, any collateral agent, any indenture
trustee, any fiscal agent, and any bank that receives or
holds funds related to such bonds, whether or not such
claim or other rights of such Entity are impaired pursuant
to the Plan and, if impaired, whether or not such Entity
accepted the Plan, (v) any other Entity, and (vi) each of the
foregoing’s respective heirs, successors, assigns, trustees,
executors, administrators, officers, directors, agents,
representatives, attorneys, beneficiaries or guardians;
provided, however, that the compromises and settlements
set forth in the Plan and this Confirmation Order with
respect to the priority of the New GO Bonds and the CVIs
under PROMESA, the Commonwealth Constitution, or
other applicable law shall not be binding on any party in
interest (including any successor to the Oversight Board)
in a subsequent Title III (or other insolvency) proceeding.

28. Cancellation of Notes, Instruments, Certificates,

and Other Documents. Pursuant to section 77.6 of
the Plan, and except (a) as provided in any contract,
instrument or other agreement or document entered into
or delivered in connection with the Plan, (b) for purposes
of evidencing a right to distribution under the Plan, or (c)
as specifically provided otherwise in the Plan (including
any rejection of Executory Contracts or Unexpired Leases
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pursuant to section 76.1 of the Plan), on the Effective

Date, the PBA Bonds, ERS Bonds and GO Bonds and
all instruments and documents related thereto will be
deemed automatically cancelled, terminated and of no
further force or effect against the Debtors without any
further act or action under any applicable agreement,
law, regulation, order or rule, with the Debtors and the
applicable trustee, paying agent or fiscal agent, as the
case may be, having no continuing obligations or duties
and responsibilities thereunder and the obligations of
the parties to the Debtors, as applicable, under the PBA
Bonds, ERS Bonds and GO Bonds and all instruments and
documents related thereto shall be discharged; provided,
however, that, notwithstanding anything contained in the
Plan or herein to the contrary, the PBA Bonds, ERS Bonds
and GO Bonds and such other instruments and documents
shall continue in effect solely (i) to allow the Disbursing
Agent to make any distributions as set forth in the Plan
and to perform such other necessary administrative
or other functions with respect thereto, (ii) to allow
holders of Allowed Bond Claims and Allowed Insured
Bond Claims to receive distributions in accordance with
the terms and provisions of the Plan, (iii) to allow any
trustee, fiscal agent, agent, contract administrator or
similar entity under all instruments and documents
related thereto, to perform necessary functions, including
making distributions, in accordance with the Plan, and
to have the benefit of all the rights and protections and
other provisions of such instruments and documents, as
applicable, and all other related agreements, (iv) to set
forth the terms and conditions applicable to parties to such
documents and instruments other than the Debtors, (v) to
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allow a Monoline to exercise the redemption or call rights

assigned to such Monoline pursuant to the provisions
of article LXXV of the Plan, (vi) to allow the applicable
trustee or fiscal agent, as the case may be, to appear in
any proceeding in which such trustee or fiscal agent is
or becomes a party with respect to clauses (i) through
(iv) above, or (vii) as may be necessary to preserve any
claims under the respective insurance policies and related
documents issued by a Monoline and the Oversight Board
shall request that the Commonwealth and PBA use their
reasonable efforts to (1) maintain the existing CUSIP
numbers for the Monoline-insured GO Bonds and PBA
Bonds, respectively, and (2) take such other reasonable
steps as may be necessary to preserve and effectuate
such Claims. Notwithstanding the foregoing, and except
as otherwise expressly provided in the Plan, such bonds
or bond documents that remain outstanding shall not
form the basis for the assertion of any Claim against the
Debtors or Reorganized Debtors, as the case may be.

29. Rejection or Assumption of Remaining Executory

Contracts and Unexpired Leases. Pursuant to section
365(b)(2) of the Bankruptcy Code, applicable to the Title
III Case pursuant to section 301 of PROMESA, and
subject to the provisions of sections 76.5 and 76.7 of the
Plan, all Executory Contracts and Unexpired Leases
that exist between the Debtors and any Entity, and
which have not expired by their own terms on or prior to
the Confirmation Date, shall be deemed rejected by the
Debtors as of the Effective Date, except for any Executory
Contract and Unexpired Lease (a) that has been assumed
and assigned or rejected pursuant to an order of the Title
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III Court entered prior to the Effective Date, (b) that is

specifically designated as a contract or lease to be assumed
on the schedules to the Plan Supplement, (c) that has been
registered with the Office of the Comptroller of Puerto
Rico, (d) that has been exempt from registration with
the Office of the Comptroller of Puerto Rico pursuant to
2 L.P.R.A. § 97 and regulations promulgated pursuant
thereto, (e) that has been approved by the Oversight
Board or authorized by the Title III Court, unless
specifically designated a contract to be rejected in the
Plan Supplement, (f) with the United States, or any of its
agencies, departments or agents or pursuant to any federal
program, (g) that is an incentive agreement between the
Government of the Commonwealth of Puerto Rico and
rum producers with respect to rum excise tax “Cover
Over” revenues, or (h) by or between any Commonwealth
of Puerto Rico agencies, departments, municipalities,
public corporations, or instrumentalities (other than
leases to which PBA is a party); provided, however, that
the Debtors reserve the right to amend, on or prior to the
Effective Date, such schedules to delete any Executory
Contract and Unexpired Lease therefrom or add any
Executory Contract and Unexpired Lease thereto, in
which event such Executory Contract(s) and Unexpired
Lease(s) shall be deemed to be, as the case may be, either
rejected, assumed, or assumed and assigned as of the
Effective Date. The Debtors shall serve (y) notice of any
Executory Contract and Unexpired Lease to be assumed
or assumed and assigned through the operation of section
76.1 of the Plan, by including a schedule of such contracts
and leases in the Plan Supplement and (z) notice of any
Executory Contract and Unexpired Lease to be rejected
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through the operation of section 76.1 of the Plan, by

serving a separate notice to the relevant counterparties to
such agreements. To the extent there are any amendments
to such schedules, the Debtors shall provide notice of any
such amendments to the parties to the Executory Contract
and Unexpired Lease affected thereby. The listing of a
document on the schedules to the Plan Supplement or in
any separate notice shall not constitute an admission by
the Debtors that such document is an Executory Contract
and Unexpired Lease or that the Debtors have any liability
thereunder. Except as provided in articles LV and LVI
of the Plan, none of the Debtors’ collective bargaining
agreements shall be treated as Executory Contracts and
none shall be assumed or rejected or otherwise treated
pursuant to the Plan, but shall remain in effect subject, in
all instances, to Puerto Rico law and articles LV and LVI
of the Plan regarding the payment and ongoing treatment
of pension and related claims obligations.

30. Insurance Policies. Subject to the terms and

provisions of section 76.7 of the Plan, each of the Debtors’
insurance policies and any agreements, documents, or
instruments relating thereto, are treated as Executory
Contracts under the Plan; provided, however, that,
such treatment shall not, and shall not be construed to,
discharge or relieve any Monoline with respect to its
respective obligations to holders of Claims under policies
of insurance and applicable law and governing documents
with respect thereto.

31. Rejection Damages Claims. If the rejection of an

Executory Contract and Unexpired Lease by the Debtors
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hereunder results in damages to the other party or parties

to such contract or lease, any claim for such damages, if
not heretofore evidenced by a filed proof of Claim, shall
be forever barred and shall not be enforceable against
the Debtors, or its properties or agents, successors,
or assigns, including, without limitation, Reorganized
Debtors, unless a proof of Claim is filed with the Title
III Court and served upon attorneys for the Oversight
Board and Reorganized Debtors, as the case may be, on
or before thirty (30) days after the later to occur of (i) the
Effective Date, and (ii) the date of entry of an order by
the Title III Court authorizing rejection of a particular
Executory Contract and Unexpired Lease.

32. Payment of Cure Amounts. Any monetary

amount required as a cure payment with respect to each
prepetition executory contract and unexpired lease to be
assumed pursuant to the Plan shall be satisfied, pursuant
to section 365(b)(1) of the Bankruptcy Code, by payment
of the cure amount in Cash on the later to occur of (a) the
Effective Date and (b) within ten (10) Business Days of
the occurrence of a Final Order setting forth the cure
amount as to each executory contract or unexpired ease to
be assumed or assumed and assigned, or upon such other
terms and dates as the parties to such executory contracts
or unexpired leases and the Debtor otherwise agree.

33. Setoffs. Except as otherwise provided in the Plan

or in this Confirmation Order, the Disbursing Agent may,
pursuant to applicable bankruptcy or non-bankruptcy law,
set off against any Allowed Claim and the distributions to
be made pursuant to the Plan on account thereof (before
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any distribution is made on account of such Claim by

the Disbursing Agent), the claims, rights, and Causes of
Action of any nature that the Debtors or Reorganized
Debtors may hold against the holder of such Allowed
Claim; provided, however, that neither the failure to effect
such a setoff nor the allowance of any Claim hereunder
shall constitute a waiver or release by the Debtors or
Reorganized Debtors of any such claims, rights, and
Causes of Action that the Debtors or the Reorganized
Debtors possess against such holder; and, provided,
further, that nothing contained herein is intended to limit
the ability of any Creditor to effectuate rights of setoff
or recoupment preserved or permitted by the provisions
of sections 553, 555, 559, or 560 of the Bankruptcy Code
or pursuant to the common law right of recoupment; and,
provided, further, that nothing in this decretal paragraph
or section 77.11 of the Plan shall affect the releases and
injunctions provided in article XCII of the Plan or this
Confirmation Order.

34. Delivery of Distributions.

(a) Delivery of Distributions Generally. Subject

to the provisions of Rule 9010 of the Bankruptcy Rules,
and except as provided in the Plan or herein, distributions
and deliveries to holders of Allowed Claims shall be made
through The Depository Trust Company or at the address
of each such holder as set forth on the Schedules filed with
the Court, unless superseded by the address set forth on
proofs of Claim filed by such holders, or at the last known
address of such holder if no proof of Claim is filed or if
the Debtors have been notified in writing of a change of
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address; provided, however, that, except as otherwise

provided herein, distributions by the Disbursing Agent
for the benefit of holders of Allowed Bond Claims shall be
made to the trustee or fiscal agent, as applicable, for such
obligation in accordance with the respective governing
documents for such obligations; and, provided, further,
that, except as otherwise provided herein, the Disbursing
Agent may make distributions of PSA Restriction Fees,
the Retail Support Fee Return, and Consummation Costs
in Cash to a party entitled thereto in a manner mutually
agreed upon between such party and the Disbursing
Agent. The trustee or fiscal agent for each such obligation
(or such trustee’s or fiscal agent’s designee) shall, in turn,
deliver the distribution to holders in the manner provided
for in the applicable governing documents. Each trustee
or fiscal agent may conclusively rely upon the distribution
instructions received from the Debtors or their agents
with respect to the delivery of distributions in accordance
with the terms and provisions of the Plan, including the
contra-CUSIP positions and escrow positions established
by the Debtors or their agents with The Depository Trust
Company, and each trustee or fiscal agent shall close and
terminate the original CUSIPs after making distributions
in accordance with the terms and provisions of the
Plan and shall have no further distribution obligations
thereunder. No trustee or fiscal agent shall be required
to post any bond or surety or other security for the
performance of its duties, unless otherwise ordered or
directed by the Title III Court. Subject to any agreements
to the contrary, each trustee or fiscal agent shall only
be required to make the distributions and deliveries
described in this decretal paragraph and the Plan and in
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Appendix D

accordance with the terms of this Confirmation Order, the

Plan and such other governing document, and shall have
no liability for actions reasonably taken in accordance with
the terms of this Confirmation Order, the Plan and such
other governing document, or in reasonable reliance upon
information provided to such trustee or fiscal agent by the
Debtors or their agents in accordance with the terms of
this Confirmation Order, the Plan or in connection with
distributions to be made hereunder or thereunder, except
for liabilities resulting from the gross negligence or willful
misconduct of such trustee or fiscal agent. The New GO
Bonds and the CVIs shall be transferable and recognized
if made in accordance with the terms and conditions of
the New GO Bonds Indenture and the CVI Indenture,
respectively.

(b) Delivery of Distributions with Respect to

Assured Insured Bonds. Notwithstanding any other
provision of the Plan or of this Confirmation Order, (i) to
the extent an Assured Insured Bondholder holding the
Assured Insured Bond with CUSIP number 74514LD46
validly elects (or is deemed to elect) Assured Bondholder
Election 2, the Disbursing Agent will deposit the Assured
New Securities and Cash allocable to such Assured
Insured Bondholder in the applicable Assured Trust in
accordance with the applicable trust agreement; (ii) to the
extent an Assured Insured Bondholder holding the custody
receipt with CUSIP number 74514LGL5 evidencing a
beneficial ownership interest in the Assured Insured
Bond with CUSIP number 745145XZ0, the custody receipt
with CUSIP number 745235UX7 evidencing a beneficial
ownership interest in the Assured Insured Bond with
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Appendix D

CUSIP number 745235SA0, the custody receipt with

CUSIP number 745235YJ4 or 745235UX7 evidencing
a beneficial ownership interest in the Assured Insured
Bond with CUSIP number 745235SA0, the custody receipt
with CUSIP number 745235YZ8 evidencing a beneficial
ownership interest in the Assured Insured Bond with
CUSIP number 745235SA0, the custody receipt with
CUSIP number 745235UY5 evidencing a beneficial
ownership interest in the Assured Insured Bond with
CUSIP number 745235SC6, or the custody receipt with
CUSIP number 745235YV7 or 745235UY5 evidencing
a beneficial ownership interest in the Assured Insured
Bond with CUSIP number 745235SC6 validly elects
(or is deemed to elect) Assured Bondholder Election 2,
such Assured Insured Bondholder will be deemed to
have deposited such custody receipts into the applicable
Assured Trust; the trustee (the “Assured Trustee”) of the
Assured Trusts (as the holder of the applicable custody
receipts) and Assured will be deemed to have collapsed
the existing custodial arrangement, such that the Assured
Trustee will be deemed to hold the Assured Insured Bonds
underlying the applicable custody receipts and the related
Assured Insurance Policies as provided in the applicable
trust agreement, without any further action on the part
of the existing custodian, provided, however, that the
existing custodian is also hereby authorized and ordered
to take any further actions that may be necessary to
confirm the collapse of the existing custodial arrangement
as provided herein; and the Disbursing Agent will transfer
the Assured New Securities and Cash allocable to such
Assured Insured Bondholder to the Assured Trustee for
deposit in the applicable Assured Trust on account of such
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Appendix D

custody receipts and Assured Insured Bonds in accordance

with the applicable trust agreement; (iii) to the extent an
Assured Insured Bondholder holding the custody receipt
with CUSIP number 74514LWE3 evidencing a beneficial
ownership interest in the Assured Insured Bond with
CUSIP number 745145R53 or holding the custody receipt
with CUSIP number 74514LUW5 evidencing a beneficial
ownership interest in the Assured Insured Bond with
CUSIP number 74514LNG8 validly elects (or is deemed
to elect) Assured Bondholder Election 2, such Assured
Insured Bondholder will be deemed to have deposited
such custody receipts into the applicable Assured Trust;
the Assured Trustee (as the holder of the applicable
custody receipts) and Assured will be deemed to have
collapsed the existing custodial arrangement, such that
the Assured Trustee will be deemed to hold the Assured
Insured Bonds underlying the applicable custody receipts
and the related Assured Insurance Policies as provided in
the applicable trust agreement, without any further action
on the part of the existing custodian, provided, however
, that the existing custodian is also hereby authorized
and ordered to take any further actions that may be
necessary to confirm the collapse of the existing custodial
arrangement as provided herein, and, without prejudice
to the ability of the Assured Trustee to draw on the
applicable Assured Insurance Policy, the Assured Trustee
shall be deemed to have deposited such Assured Insured
Bonds (which also qualify as FGIC Insured Bonds), the
related FGIC Insurance Policies, and the related FGIC
Plan Consideration into the applicable FGIC Trust
pursuant to section 75.4(a) of the Plan; and the trustee
for the Assured Trust related to such Assured Insured
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Appendix D

Bonds shall be deemed to have received its Pro Rata

Share of the FGIC Plan Consideration, and shall receive
the FGIC Certificates allocable to such Assured Insured
Bondholder on account of the custody receipts referred to
in this subsection (iii) above and Assured Insured Bonds
(which also qualify as FGIC Insured Bonds) referred to
in this subsection (iii) above for deposit in the relevant
Assured Trust in accordance with the applicable trust
agreement; (iv) pursuant to section 75.1(a) of the Plan,
Assured is hereby deemed to have exercised the Assured
Acceleration Price Payment Option with respect to all
Assured Insured Bonds with respect to which Assured has
exercised the Assured Election, and the Disbursing Agent
shall disburse the Assured New Securities and Cash on
account of any Assured Insured Bonds with respect to
which Assured has exercised the Assured Election or
with respect to which an Assured Insured Bondholder
has validly elected Assured Bondholder Election 1 to
Assured in a manner mutually agreed upon between the
Disbursing Agent and Assured; and (v) on or prior to the
Effective Date, the Disbursing Agent and the Debtors
shall disclose to Assured the Acceleration Price to be paid
with respect to any Assured Insured Bonds with respect
to which Assured has exercised the Assured Election or
with respect to which an Assured Insured Bondholder
has validly elected Assured Bondholder Election 1, and
on the Effective Date (1) with respect to such Assured
Insured Bonds insured in the primary market, the paying
agent for the GO Bonds or the fiscal agent for the PBA
Bonds, as applicable, shall draw down on the applicable
Assured Insurance Policies to pay the applicable Assured
Acceleration Price to the beneficial holders of such
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Appendix D

Assured Insured Bonds insured in the primary market

in accordance with sections 75.1(a) and 75.1(b)(i) of the
Plan, as applicable, and (2) with respect to such Assured
Insured Bonds insured in the secondary market, Assured
shall, or shall cause the applicable custodian of custody
receipts evidencing the beneficial ownership interest of
the holders thereof in such Assured Insured Bonds and
the related Assured Insurance Policies to draw on the
applicable Assured Insurance Policies in order to pay the
applicable Assured Acceleration Price to the beneficial
holders of such Assured Insured Bonds insured in the
secondary market in accordance with sections 75.1(a) and
75.1(b)(i) of the Plan, as applicable; provided, however,
that, for the avoidance of doubt, Assured shall not in any
circumstance be required to pay itself an Acceleration
Price with respect to any Assured Insured Bonds owned
by Assured, by subrogation or otherwise.

(c) Delivery of Distributions with Respect to

National Insured Bonds. Notwithstanding any other
provision of the Plan or of this Confirmation Order, on the
Effective Date, National shall receive, and the Disbursing
Agent shall disburse to National in a manner mutually
agreed upon by the Disbursing Agent and National,
the National Plan Consideration that would otherwise
be allocable to holders of Allowed National Insured
Bond Claims that elected to receive the National Non-
Commutation Treatment by electing such treatment in
accordance with the Election Notice for National Bond
Holders with Claims in Classes 3 and 25 (Docket Entry
No. 17639-30) or the Election Notice for National Bond
Holders with Claims in Class 18 (Docket Entry No. 17639-
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Appendix D

31); provided, however, that, for the avoidance of doubt,

National shall not in any circumstance be required to
pay itself the National Acceleration Price with respect
to any National Insured Bonds owned by National, by
subrogation or otherwise.

(d) D e l i v e r y o f D i s t r i b u t i o n s t o F GIC.
Notwithstanding any other provision of the Plan or of this
Confirmation Order, on the Effective Date, the Disbursing
Agent shall distribute to FGIC FGIC’s share of the
Vintage CW Bond Recovery, the Vintage CW Guarantee
Bond Recovery, and the Vintage PBA Bond Recovery in
accordance with the terms and provisions of section 75.4(b)
of the Plan in a manner mutually agreed upon between
the Disbursing Agent and FGIC.

(e) Delivery of Distributions with Respect to Ambac

Insured Bonds. Notwithstanding any other provision of
the Plan or of this Confirmation Order, (i) to the extent a
holder of any Ambac Insured Bonds with CUSIP numbers
745235D32,745235D40, or 745235B75 validly elects to
receive the Ambac Non-Commutation Treatment, the
Disbursing Agent shall, on the Effective Date or as soon
as reasonably practicable thereafter, distribute to Ambac
the Ambac Plan Consideration payable to such holder on
account of its Allowed Claims in Classes 4 and 26; (ii) to the
extent a holder of any Ambac Insured Bonds with CUSIP
numbers 745235D32, 745235D40, or 745235B75 validly
elects to receive the Ambac Commutation Treatment
or otherwise fails to validly elect to receive the Ambac
Non-Commutation Treatment (including submitting an
election for less than all of its Claims in Classes 4 or 26),
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Appendix D

on the Effective Date or as soon as reasonably practicable

thereafter, the Disbursing Agent shall distribute the
Ambac Commutation Consideration payable on account
of its Allowed Claims in Class 4 and/or 26 under the
Plan to the applicable indenture trustee, which shall
in turn distribute such consideration to the applicable
bondholders, except that Ambac may direct the applicable
indenture trustee to reduce the distribution to any holder
to account for any payments that Ambac has made, or for
any other consideration that Ambac has made available
or will make available, to such holder (collectively, the
“Prior Payments”), and the applicable indenture trustee
shall then pay the portion of the Ambac Commutation
Consideration equal to the applicable Prior Payment to
Ambac; (iii) to the extent a holder of any Ambac Insured
Bonds with CUSIP number 745145AX0 validly elects
to receive the Ambac Non-Commutation Treatment, on
the Effective Date or as soon as reasonably practicable
thereafter, the Disbursing Agent shall distribute to
Ambac the Ambac Plan Consideration payable to such
holder on account of its Allowed Claims in Class 19; (iv)
to the extent a holder of any Ambac Insured Bonds with
CUSIP number 745145AX0 fails to validly elect to receive
the Ambac Non-Commutation Treatment (including by
submitting an election for less than all of its Claims), on
the Effective Date or as soon as reasonably practicable
thereafter, the Disbursing Agent shall distribute the
Ambac Commutation Consideration payable on account
of its Allowed Claims in Class 19 under the Plan to the
applicable indenture trustee, which shall in turn distribute
such consideration to the applicable bondholders, except
that Ambac may direct the applicable indenture trustee
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Appendix D

to reduce the distribution to any holder to account for

any Prior Payments that Ambac has made, or for any
other consideration that Ambac has made available or
will make available, to such holder and the applicable
indenture trustee shall then pay the portion of the Ambac
Commutation Consideration equal to the applicable Prior
Payment to Ambac; and (v) with respect to Ambac Insured
Bonds with CUSIP numbers 745145GB2, 745145A3,
745145 Y Y2 , 7452 35KT7, 7452 35TH4, 7452 35TJ0,
745235TK7, 745235TL5, which are fully matured, on
the Effective Date or as soon as reasonably practicable
thereafter, the Disbursing Agent shall distribute the
Ambac Plan Consideration distributable on account of
Allowed Claims in Classes 4, 19, or 26 to Ambac.

(f) Delivery of Distributions with Respect to

Clawback Recoveries. Notw ithstanding any other
provision of the Plan or of this Confirmation Order, (i) on
the Effective Date, or, in the event the HTA Distribution
Conditions have not been satisfied as of the Effective Date,
upon satisfaction of the HTA Distribution Conditions,
the Disbursing Agent shall distribute to each applicable
Monoline its share of the CW/HTA Clawback Recovery in
accordance with the terms and provisions of section 63.1
of the Plan in a manner mutually agreed upon between
the Disbursing Agent and such Monoline; (ii) on the
Effective Date, the Disbursing Agent shall distribute to
each applicable Monoline its share of the CW/Convention
Center Clawback Recovery in accordance with the terms
and provisions of section 64.1 of the Plan in a manner
mutually agreed upon between the Disbursing Agent and
such Monoline; and (iii) on the Effective Date, or, in the
event the PRIFA Distribution Conditions have not been
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Appendix D

satisfied as of the Effective Date, upon satisfaction of the

PRIFA Distribution Conditions, the Disbursing Agent
shall distribute to each applicable Monoline its share of
the CW/PRIFA Rum Tax Recovery in accordance with
the terms and provision of section 65.1 of the Plan in a
manner mutually agreed upon between the Disbursing
Agent and such Monoline and (iv) on the later to occur
of (A) the Effective Date and (B) satisfaction of the HTA
Distribution Conditions, the Disbursing Agent shall
distribute to National National’s share of the CW/HTA
Clawback Recovery in accordance with the terms and
provisions of section 63.2 of the Plan in a manner mutually
agreed upon by the Disbursing Agent and National.
Upon satisfaction of the HTA Distribution Conditions,
DRA shall be entitled to receive its share of the CW/
HTA Clawback Recovery, as delineated in the Priority
Distribution Waterfall from Clawback CVI Allocation
to Allowed CWHTA Claims set forth in Exhibit J to the
Plan.

35. Disbursing Agent. Pursuant to section 1.204 of the

Plan, the Disbursing Agent shall be, as applicable, such
Entity or Entities designated by the Oversight Board, upon
consultation with AAFAF, on or prior to the Effective Date
to make or to facilitate distributions in accordance with
the provisions of the Plan and this Confirmation Order.
Upon designation thereof, the Oversight Board shall file an
informative motion with the Title III Court setting forth
the name of the Disbursing Agent designated.

36. Payment of Trustee Fees and Expenses. The

distributions to be made pursuant to the Plan are
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Appendix D

intended to be inclusive of any and all Trustee/Fiscal

Agent fees and expenses allegedly due and owing by the
Commonwealth, ERS, and PBA with respect to amounts
discharged pursuant to the Plan. The Plan does not, nor
shall it be construed to, limit the rights of each Trustee/
Fiscal Agent to payment of such amounts (a) from the
distributions to be made hereunder, including, without
limitation, the imposition of any valid Charging Lien, or
(b) pursuant to a contractual fee agreement entered into
by the Debtors, or on their behalf, during the period from
and after the Commonwealth Petition Date, including,
without limitation, that certain Settlement Agreement
and Invoice Instructions (the “Settlement Agreement”),
dated as of December 21, 2018, by and between, among
others, AAFAF, U.S. Bank Trust National Association,
and U.S. Bank National Association (collectively, the “USB
Entities”); provided, however, that (a) with respect to
PBA, the Effective Date, and (b) with respect to PRIFA,
the later of (i) the Effective Date and (ii) effectiveness
of the PRIFA Qualified Modification pursuant to Title
VI of PROMESA, (the “PRIFA Effective Date”) in the
event that, following application of fees and expenses in
accordance with the terms and provisions of the Settlement
Agreement, the USB Entities retain any monies deposited
by PBA or PRIFA, as the case may be, pursuant to the
terms thereof, the USB Entities shall remit such excess
funds to PBA or PRIFA, as the case may be, or such other
Entity as may be designated by PBA or PRIFA, as the case
may be, within fifteen (15) Business Days following the
Effective Date or the PRIFA Effective Date, as applicable,
by wire transfer of immediately available funds.
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Appendix D

37. Securities Laws Exemption. Pursuant to section

1145 of the Bankruptcy Code and/or section 3(a)(2) of the
Securities Act, the offering, issuance, and distribution
of the New GO Bonds, the CVIs, and interests in the
ERS Trust pursuant to the terms of the Plan and this
Confirmation Order (and any subsequent offering of such
securities, including, without limitation, pursuant to a
case under Title VI of PROMESA), or the custodial trusts
created in accordance with articles LXIII, LXIV, LXV, and
LXXV of the Plan shall be exempt from registration under
the Securities Act and any state or local law requiring
registration for the offer, issuance or distribution of
securities, including, but not limited to, the registration
requirements of section 5 of the Securities Act and any
other applicable state or federal law requiring registration
and/or prospectus delivery or qualification prior to the
offering, issuance, distribution, or sale of securities, and,
pursuant to section 2(b) of the Investment Company Act of
1940, as amended (the “Investment Company Act”), such
custodial trusts, securities and interests shall be exempt
from the provisions of the Investment Company Act.

38. Acceleration of Insured Bonds. Notwithstanding

any other provision of the Plan or this Confirmation Order:

(a) Assured Insured Bonds: To the extent there are

no outstanding payment defaults by Assured
with respect to Assured Insured Bonds up to and
including the Effective Date, the payment of the
principal of the Assured Insured Bonds shall be
accelerated from and after the Effective Date,
and such Assured Insured Bonds shall be due
 297a

Appendix D

and payable from and after the Effective Date at

the Assured Acceleration Price of one hundred
percent (100%) of the principal amount thereof
plus accrued interest thereon (or, in the case of
any capital appreciation bonds, the compounded
amount thereof) to the date of payment.

(b) National Insured Bonds: To the extent there

are no outstanding payment defaults by National
with respect to National Insured Bonds up to
and including the Effective Date, the payment
of the principal of the National Insured Bonds
shall be accelerated as of the Effective Date,
and the National Insured Bonds shall be due
and payable from and after the Effective Date
at an “acceleration price” of one hundred percent
(100%) of the principal amount thereof plus
interest accrued thereon (or, in the case of capital
appreciation bonds, the compounded amount
thereof) to the date of payment.

(c) Syncora Insured Bonds: To the extent pursuant

to applicable definitive documents and not
inconsistent with the respective rights provided
in accordance with the applicable Syncora
Insurance Policy, the payment of the principal
of the Syncora Insured Bonds shall be deemed
accelerated as of the Effective Date, and
the Syncora Insured Bonds shall be deemed
payable from and after the Effective Date at an
acceleration price equal to the principal amount
thereof as of the Effective Date plus accrued
interest to the date of payment.
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Appendix D

(d) FGIC Insured Bonds: Notwithstanding the terms

and conditions of the FGIC Insured Bonds, the
payment of the principal of the FGIC Insured
Bonds shall be accelerated as of the Effective
Date, and the FGIC Insured Bonds shall be due
and payable from and after the Effective Date at
an “acceleration price” of one hundred percent
(100%) of the principal amount thereof, plus
interest accrued thereon (or, in the case of capital
appreciation bonds, the compounded amount
thereof) to the date of payment; provided,
however, that for the avoidance of doubt,
notwithstanding such acceleration, there shall
be no acceleration of any payment required
to be made by FGIC under a FGIC Insurance
Policy, unless FGIC elects, in its sole and
absolute discretion, to make such payment(s) on
an accelerated basis and FGIC has the express
right to accelerate any such payment under the
applicable FGIC Insurance Policy or the related
agreements relating to the applicable FGIC
Insured Bonds.

(e) Ambac Insured Bonds: To the extent that there

are no outstanding payment defaults by Ambac
with respect to Ambac Insured Bonds up to
and including the Effective Date, the principal
amount (or compounded amount in the case
of capital appreciation bonds) of the Ambac
Insured Bonds shall be deemed accelerated and
immediately due and payable as of the Effective
Date. Ambac shall have the right to pay such
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Appendix D

accelerated amounts and unpaid interest accrued

to the date of payment at any time, regardless
of which Ambac Non-Commutation Treatment
(sections 75.5(b)(i)-(iv) of the Plan) applies to a
particular holder of Ambac Insured Bonds, and
the holder of the Ambac Insured Bonds and the
trustee or fiscal agent (as applicable) shall be
required to accept the same in satisfaction of
Ambac’s obligations under the applicable Ambac
Insurance Policy with respect to such bonds, and,
upon such payment, Ambac’s obligations under the
applicable Ambac Insurance Policy shall be fully
satisfied and extinguished, notwithstanding any
provision of the Ambac Insurance Policy or other
documents related to the Ambac Insured Bonds.
For the avoidance of doubt, notwithstanding such
acceleration, there shall be no acceleration of any
payment required to be made under any Ambac
Insurance Policy unless Ambac elects, in its sole
and absolute discretion to make such payment(s)
on an accelerated basis.

39. Disputed Claims Reconciliation. In accordance

with the terms and provisions of section 82.1(b) of the Plan
and the Committee Agreement:

(a) The two (2) Creditors Committee appointees to

the Avoidance Actions Trust Board (collectively,
the “Creditor Appointees”) shall (i) receive
monthly updates to the claims reconciliation
process, which process shall continue to be
administered by the Oversight Board, with the
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Appendix D

assistance of AAFAF, (ii) have the right to (A)

review the claims objections and reconciliation
process, including the ADR Procedures, as
it relates to CW General Unsecured Claims,
ERS General Unsecured Claims, Convenience
Claims, and, in the event that the Oversight
Board appeals the Title III Court’s ruling
that Eminent Domain/Inverse Condemnation
Claims are non-dischargeable and must be paid
in full, Eminent Domain/Inverse Condemnation
Claims regardless of the size of the asserted
Claim amount, (B) ensure compliance with the
exclusions from CW General Unsecured Claims
as provided in the Plan, and (C) in the event that
such appointees disagree with any settlement
of a CW General Unsecured Claim, an ERS
General Unsecured Claim, or, in the event
that the Oversight Board appeals the Title III
Court’s ruling that Eminent Domain/Inverse
Condemnation Claims are non-dischargeable and
must be paid in full, an Eminent Domain/Inverse
Condemnation Claim (by the Oversight Board or
AAFAF, as the case may be) for an allowed amount
in excess of Five Hundred Thousand Dollars
($500,000.00), such appointees may seek relief
from the Title III Court to cause (upon a showing
that such settlement is not in the best interest
of, as applicable, the Commonwealth, ERS, and
their respective creditors) the Oversight Board
or AAFAF, as the case may be, to obtain approval
of the Title III Court for any such settlement in
accordance with the standard for approval under
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Appendix D

Bankruptcy Rule 9019. To facilitate the exercise

of the settlement review process, the Oversight
Board or AAFAF, as the case may be, shall
inform the Creditor Appointees, in writing, five
(5) days prior to making or accepting a settlement
proposal for the resolution of a CW General
Unsecured Claim, an ERS General Unsecured
Claim, or an Eminent Domain Claim where the
proposed allowed amount exceeds Five Hundred
Thousand Dollars ($500,000.00). 8

(b) With respect to the obligations and responsibilities

set forth in this decretal paragraph 39, the
Creditor Appointees and their advisors shall
be entitled to be compensated, subject to an
annual aggregate cap of Three Million Dollars
($3,000,000.00), inclusive of reimbursement
of their reasonable out-of-pocket expenses
incurred in furtherance of discharging such
obligations and responsibilities, which amounts
shall be funded from the GUC Reserve. All such
compensation and reimbursements shall be paid
by the Entity selected pursuant to section 1.285
of the Plan to hold the GUC Reserve within thirty
(30) days of such Entity’s receipt of a request for
such payment. To the extent the Oversight Board
or, in the event the Oversight Board terminates,
AAFAF, disputes the validity or amount of any

8.  Notwithstanding any reference to Eminent Domain Claims

in this subparagraph or any report rendered pursuant thereto, the
treatment of such Claims is governed by sections 58.1 and 77.1(e)
of the Plan.
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Appendix D

reimbursement request, it shall inform such

Entity and, in the event the parties are unable
to resolve such dispute, the Title III Court shall
retain jurisdiction to resolve any such dispute.

(c) Without limiting the foregoing, (i) within sixty

(60) days after the Effective Date, the Oversight
Board or AAFAF, as the case may be, through its
advisors, shall provide the Creditor Appointees
with a report (the “Initial Claims Report”)
containing (1) a register setting forth all CW
General Unsecured Claims, Eminent Domain
Claims, ERS General Unsecured Claims, and
Convenience Claims that have not been reconciled
and which are being evaluated for possible
objection, (2) the status of any pending objections
to CW General Unsecured Claims, Eminent
Domain Claims, ERS General Unsecured Claims,
and Convenience Claims, and (3) information
illustrating which Claims are subject to the ACR
Procedures and are to be excluded from CW
General Unsecured Claims pursuant to section
82.7 of the Plan, and (ii) within ten (10) days of
the end of each month (the “Monthly Claims
Report”), the Oversight Board or AAFAF, as the
case may be, through its advisors, shall provide a
report containing material updates to information
contained in the Initial Claims Report or a
previous Monthly Claims Report, as applicable,
as well as any material information omitted from
such prior reports. In addition, the Oversight
Board or AAFAF, as the case may be, through
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Appendix D

its advisors, shall, upon reasonable request,

periodically supply the Creditor Appointees with
any other information the Creditor Appointees
may reasonably request related to the claims
reconciliation process.9

(d) In connection with the foregoing, the Creditor

Appointees, together with their counsel and
advisors in such capacity, shall not be liable to any
Person for actions taken or omitted in connection
with the exercise of their rights hereunder
except those acts arising out of their own willful
misconduct or gross negligence, and each shall
be entitled to indemnification and reimbursement
from the GUC Reserve for fees and expenses in
defending any and all actions or inaction in their
capacity as Creditor Appointees, except for any
actions or inactions involving willful misconduct
or gross negligence. The foregoing indemnity in
respect of any Creditor Appointee shall survive
and termination of such Creditor Appointee from
the capacity for which they are indemnified.

40. Disputed Claims Holdback. From and after the

Effective Date, and until such time as each Disputed Claim
has been compromised and settled, estimated by the Title
III Court in an amount constituting the allowed amount,
or Allowed or Disallowed by Final Order of the Title III

9.  Notwithstanding any reference to Eminent Domain Claims

in this subparagraph or any report rendered pursuant thereto, the
treatment of such Claims is governed by sections 58.1 and 77.1(e)
of the Plan.
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Appendix D

Court, Reorganized Debtors or the Disbursing Agent, as

applicable, shall retain, for the benefit of each holder of a
Disputed Claim, the distributions that would have been
made to such holder if it were an Allowed Claim in an
amount equal to the lesser of (i) the liquidated amount set
forth in the filed proof of Claim relating to such Disputed
Claim, (ii) the amount in which the Disputed Claims have
been estimated by the Title III Court pursuant to section
502 of the Bankruptcy Code constitutes and represents
the maximum amount in which such Claim may ultimately
become an Allowed Claim, and (iii) such other amount
as may be agreed upon by the holder of such Disputed
Claim and Reorganized Debtors; provided, however, that
the recovery by any holder of a Disputed Claim shall not
exceed the lesser of (i), (ii), and (iii) above. To the extent
the Disbursing Agent or any of the Reorganized Debtors,
as the case may be, retains any New GO Bonds or CVIs
on behalf of Disputed Claims holders, until such New GO
Bonds or CVIs are distributed, the Disbursing Agent
or such Reorganized Debtors, as the case may be, shall
exercise voting or consent rights with respect to such
obligations.

41. National Action Claims. Notw ithstanding

anything contained herein, in the GO/PBA Plan Support
Agreement, or the HTA/CCDA Plan Support Agreement
to the contrary, National may continue to litigate to final
judgment or settlement all claims and causes of action
asserted in the National Action; provided, however, that,
in the event that notwithstanding the application and
effectiveness of the Bar Date Orders, the Plan, and the
Confirmation Order, the defendants and, to the extent
 305a

Appendix D

named, third-party defendants in the National Action

assert against the Debtors, the Reorganized Debtors,
PREPA, HTA or any other agency or instrumentality
of the Commonwealth (collectively, the “CW Entities”)
claims or counterclaims for indemnification, contribution,
reimbursement, setoff or similar theories of recovery
based on, arising from or related to the National Action
(collectively, the “CW Entities’ Claims”), (i) the CW
Entities agree (A) to vigorously defend against any
such CW Entities’ Claims, including, without limitation,
invoking the Bar Date Orders and discharge provisions
set forth in article XCII of the Plan and this Confirmation
Order, objecting to any proof of claim, and prosecuting
available appeals, based upon, arising from, or related to
the National Action, (B) to allow National, at its option,
to participate in or undertake such defense to such
action in its sole discretion, and (C) not to settle any
CW Entities’ Claims without National’s written consent,
which consent shall not be unreasonably withheld, and (ii)
National agrees to (A) indemnify and hold the CW Entities
harmless to the extent of the CW Entities’ liability for the
payment of monies or the delivery of property, pursuant
to a Final Order or settlement as a result of the National
Action, and (B) reimburse the relevant CW Entities for all
documented fees and expenses incurred in connection with
the defense against such CW Entities’ Claims, including,
without limitation, attorneys’ fees and expenses incurred
(amounts pursuant to clauses (ii)(A) and (B) collectively,
the “Total Reimbursement”), but in no event may the Total
Reimbursement exceed any recovery realized by National
in connection with the National Action; provided, however,
that National shall have no obligation pursuant to this
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Appendix D

Confirmation Order, the Plan or otherwise to indemnify

and hold the CW Entities harmless for any claims based
upon, arising from or related to the Underwriter Actions
that are not based upon, arising from, or related to the
National Action or in which National is not involved. For
the avoidance of doubt, CW Entities’ Claims shall not
constitute CW General Unsecured Claims.

42. No Amendments to Proofs of Claim/Objections

to Claims. As of the commencement of the Confirmation
Hearing, a proof of Claim may not be amended without
the approval of the Title III Court. With the exception
of proofs of Claim timely filed hereafter in respect of
executory contracts and unexpired leases rejected
pursuant to this Confirmation Order, any proof of Claim
filed on or after the commencement of the Confirmation
Hearing is hereby barred, and the Clerk of the Court
and the Debtors’ Claims Agent are authorized to
remove such proofs of Claims from the claims registry
in the Title III Cases. Notwithstanding the provisions
of section 82.1 of the Plan, in the event that (a) a Claim
that has been transferred pursuant to the terms and
provisions of either the ACR Order or the ADR Order
is subsequently transferred back to the claims registry
for determination by the Title III Court, the period in
which the Reorganized Debtors shall file and serve any
objections to the Claim, by and through the Oversight
Board, or AAFAF, as the case may be, shall be extended
up to and including one hundred eighty (180) days from
and after the date of such notice transferring any such
Claim back to the claims registry, and (b) within thirty
(30) days of the date hereof, in accordance with section
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Appendix D

204 of PROMESA, the Government of the Commonwealth

of Puerto Rico shall deliver, or cause applicable agencies,
instrumentalities, or Commonwealth of Puerto Rico public
corporations to deliver, to the Oversight Board a copy
of all files, documents, instruments and, to the extent
applicable, pleadings requested by the Oversight Board
in connection with the reconciliation of Claims, including,
without limitation, Disputed Claims. Without in any way
limiting the foregoing or the terms and provisions of the
Plan or the ACR Order, to the extent a Claim subject to the
terms and provisions of the ACR Order, including, without
limitation, “grievance claims” subject to the provisions of
collective bargaining agreements, remain subject to the
ACR Order, upon resolution thereof, such Claims shall be
satisfied by the Debtors in the ordinary course.

43. Conditions to Effective Date. The Plan shall not

become effective unless and until the conditions set forth
in section 86.1 of the Plan have been satisfied or waived
in accordance with the provisions set forth in section 86.2
of the Plan.

44. Administrative Claim Bar Date. The last day

to file proof of Administrative Expense Claims shall be
ninety (90) days after the Effective Date, after which
date, any Administrative Expense Claim, proof of which
has not been filed, shall be deemed forever barred,
and the Debtors and Reorganized Debtors shall have
no obligation with respect thereto; provided, however,
that no proof of Administrative Expense Claim shall
be required to be filed if such Administrative Expense
Claim (a) shall have been incurred (i) in accordance with
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Appendix D

an order of the Court or (ii) with the written consent of

the applicable Government Parties expressly granting
such Administrative Expense Claim, (b) is a Professional
Claim, (c) is an intergovernmental Claim, (d) is an
Administrative Expense Claim of the IRS for the payment
of taxes incurred by any of the Debtors during the period
from and after the Commonwealth Petition Date, the ERS
Petition Date, or the PBA Petition Date, as applicable, (e)
relates to actions occurring in the ordinary course during
the period from and after the respective Debtor’s petition
date up to and including the Effective Date, (f) relates to a
Claim that is subject to the provisions of the ACR Order,
including, without limitation, “grievance claims” relating
to any of the Debtor’s collective bargaining agreements,
or (g) is the subject of a pending motion seeking allowance
of an administrative expense pursuant to section 503(b) of
the Bankruptcy Code as of the entry of this Confirmation
Order; and, provided, further, that any such proof of
Administrative Expense Claim by a governmental unit
shall remain subject to the rights and interests of the
Debtors and Reorganized Debtors, as the case may be,
and any other party in interest to interpose an objection
or other defense to the allowance or payment thereof.

45. Professional Compensation and Reimbursement

Claims. All Entities awarded compensation, including,
without limitation, to the fullest extent provided in
respective letters of engagement or similar instruments or
agreements, or reimbursement of expenses by the Title III
Court shall be paid in full, in Cash, in the amounts allowed
by the Title III Court, including, without limitation,
all amounts previously awarded subject to holdbacks
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Appendix D

pursuant to orders of the Title III Court, (a) no later than

the tenth (10th) calendar day (or the first Business Day to
occur thereafter) after the later to occur of (i) the Effective
Date and (ii) the date upon which the Title III Court order
allowing such Claims is deemed to be a Final Order, or (b)
upon such other terms no more favorable to the claimant
as may be mutually agreed upon between such claimant
and the Government Parties; provided, however, that,
except as provided herein or in the Plan, each Professional
must file its application for final allowance of compensation
for professional services rendered and reimbursement of
expenses on or prior to the date that is one hundred twenty
(120) days following the Effective Date. The Reorganized
Debtors shall pay compensation for professional services
extended and reimbursement of expenses incurred by
their respective Professionals from and after the Effective
Date in the ordinary course and without the need for Title
III Court approval.

46. GO/PBA Consummation Costs. Notwithstanding

anything contained in the Plan or this Confirmation
Order to the contrary, to compensate certain parties for
the cost of negotiation, confirmation and consummation
of the GO/PBA Plan Support Agreement and the Plan,
and in consideration of (a) the negotiation, execution and
delivery of the GO/PBA Plan Support Agreement by each
Initial GO/PBA PSA Creditor and (b) the obligations
and covenants contained in the GO/PBA Plan Support
Agreement, each Initial GO/PBA PSA Creditor shall
be entitled to receive on the Effective Date, or as soon
thereafter as is practicable, but in no event later than ten
(10) Business Days following the Effective Date, a pro rata
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Appendix D

share of Cash, in the form of an Allowed Administrative

Expense Claim, in an amount equal to one and five tenths
percent (1.50%), truncated to two decimal points, of the
aggregate amount of PBA Bond Claims, CW Bond Claims
and CW Guarantee Bond Claims (insured or otherwise
and, with respect to each of Assured, Syncora, and
National, including positions that it holds or has insured),
without duplication, held and/or insured by such Initial
GO/PBA PSA Creditor as of 5:00 p.m. (Eastern Standard
Time) on February 22, 2021.

47. AFSCME Professional Fees. Notwithstanding

anything contained in the Plan or this Confirmation
Order to the contrary, on the Effective Date, AFSCME
shall be reimbursed its reasonable professional fees and
expenses incurred to compensate AFSCME for the cost
of negotiation, confirmation, and consummation of the
AFSCME Term Sheet and the Plan, and the resolution
of issues pertaining to pensions.

48. GO/PBA PSA Restriction Fee. Notwithstanding

anything contained in the Plan or this Confirmation
Order to the contrary, in exchange for (a) executing and
delivering the GO/PBA Plan Support Agreement or (b) if
applicable, tendering and exchanging GO Bonds or PBA
Bonds in accordance with the terms and conditions of the
GO/PBA Plan Support Agreement and notices posted on
EMMA, and agreeing to all of its terms and conditions,
including support of the Plan and the “lock-up” of GO
Bonds and PBA Bonds in accordance with the terms of the
GO/PBA Plan Support Agreement, each of the GO/PBA
PSA Creditors (including (i) a holder of a Monoline-insured
 311a

Appendix D

GO Bond or PBA Bond, (other than a Monoline-insured GO

Bond or PBA Bond insured by Ambac, Assured, Syncora,
or National, as the case may be) to the extent that such
GO/PBA PSA Restriction Fee Creditor is authorized to
vote the Claim with respect to such Monoline-insured
GO Bond or PBA Bond in accordance with section 301(c)
(3) of PROMESA, definitive insurance documents and
applicable law, and (ii) Ambac, Assured, FGIC, Syncora,
and National, to the extent Ambac, Assured, FGIC,
Syncora, or National, as the case may be, is authorized
to vote such Claims in accordance with section 301(c)(3) of
PROMESA definitive insurance documents and applicable
law) shall be entitled to receive on the Effective Date, or as
soon thereafter as is practicable, but in no event later than
ten (10) Business Days following the Effective Date, the
GO/PBA PSA Restriction Fee, in the form of an Allowed
Administrative Expense Claim, payable in Cash, at the
time of consummation of the Plan equal to the GO/PBA
Restriction Fee Percentage multiplied by the aggregate
amount of PBA Bond Claims, CW Bond Claims, and
CW Guarantee Bond Claims (without duplication and,
to the extent such Claims are Monoline-insured, solely
to the extent a GO/PBA PSA Creditor is authorized to
vote any such Claim in accordance with section 301(c)
(3) of PROMESA, definitive insurance documents and
applicable law) held or, in the case of Ambac, Assured,
FGIC, Syncora, or National, held or insured by such GO/
PBA PSA Creditor as of the Effective Date; provided,
however, that, if a GO/PBA PSA Creditor sold any PBA
Bond Claims, CW Bond Claims, or PRIFA BANs (without
duplication, and to the extent such Claims are Monoline-
insured, solely to the extent a GO/PBA PSA Creditor is
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Appendix D

authorized to vote any such Claim in accordance with

section 301(c)(3) of PROMESA, the definitive insurance
documents and applicable law) for which it would have been
entitled to receive the GO/PBA PSA Restriction Fee, the
purchasing party, and not the selling party, shall be entitled
to receive on the Effective Date, or as soon thereafter as
is practicable, but in no event later than ten (10) Business
Days following the Effective Date, the GO/PBA PSA
Restriction Fee on account thereof; and, provided,
further, that, in the event the GO/PBA Plan Support
Agreement has been terminated pursuant to the terms
of sections 7.1(b)(iii) (subject to the extension provided
for in section 7.1(b) thereof), (c)(i), or (c)(ii) thereof, or the
Oversight Board terminated the GO/PBA Plan Support
Agreement for any reason other than a breach of the
GO/PBA Plan Support Agreement by a non-Government
Party, the aggregate GO/PBA PSA Restriction Fee and
Consummation Costs in the amount of One Hundred
Million Dollars ($100,000,000.00) shall be paid, ratably, in
Cash, as an allowed administrative expense claim under
a plan of adjustment for the Commonwealth to the Initial
GO/PBA PSA Creditors as of the date of termination; and,
provided, further, that, in all other circumstances, upon
termination of the GO/PBA Plan Support Agreement,
no GO/PBA Consummation Costs or GO/PBA PSA
Restriction Fee shall be due and payable to the party to
the GO/PBA Plan Support Agreement terminating the
GO/PBA Plan Support Agreement or against the party
to the GO/PBA Plan Support Agreement as to which the
GO/PBA Plan Support Agreement is terminated.

49. ERS Restriction Fee. Notwithstanding anything

 313a

Appendix D

contained in the Plan or this Confirmation Order to the

contrary, (a) in exchange for executing and delivering
the ERS Stipulation, and agreeing to all of its terms and
conditions, including to “lock-up” ERS Bonds in accordance
with the terms of the ERS Stipulation, each of the ERS
bondholders party to the ERS Stipulation (or their
designee), shall be entitled to receive, and, on the Effective
Date, ERS shall pay to such parties, without setoff or
deduction for taxes, their Pro Rata Share (based upon such
parties’ Net Allowed ERS Bond Claims as of April 2, 2021)
of Seventy-Five Million Dollars ($75,000,000.00), and (b) in
accordance with the terms and conditions of the GO/PBA
Plan Support Agreement, the Commonwealth shall pay to
First Ballantyne, LLC, Monarch Alternative Capital LP,
Moore Global Investments, LLC, Two Seas Capital LP,
and Verition Multi-Strategy Master Fund, Ltd. their Pro
Rata Share of Two Million Two Hundred Fifty Thousand
Dollars ($2,250,000.00), as agreed to among such parties.

50. CCDA Consummation Costs. Notwithstanding

anything contained in the Plan or this Confirmation Order
to the contrary, in order to compensate certain parties for
the cost of negotiation, confirmation and consummation of
the HTA/CCDA Plan Support Agreement and the Plan,
each Initial HTA/CCDA PSA Creditor, to the extent a
holder or insurer of CCDA Bonds, shall be entitled to
receive on the Effective Date, or as soon thereafter as is
practicable, but in no event later than ten (10) Business
Days following the Effective Date, an amount equal to
one percent (1.00%), truncated to two decimal points,
of such Initial HTA/CCDA PSA Creditor’s CCDA Bond
Claims, payable as an administrative expense claim, in
 314a

Appendix D

an aggregate amount not greater than Fifteen Million

Dollars ($15,000,000.00).

51. CCDA Restriction Fee. Notwithstanding anything

contained in the Plan or this Confirmation Order to the
contrary, in exchange for executing the HTA/CCDA Plan
Support Agreement, and agreeing to all of its terms
and conditions, including the agreement to “lock-up” its
bonds in accordance with the terms of the HTA/CCDA
Plan Support Agreement, subject to the entry of the
Confirmation Order, each CCDA Restriction Fee Creditor
holding or insuring CCDA Bonds (including (i) a holder of
a Monoline-insured CCDA Bond, (other than a Monoline-
insured CCDA Bond insured by Ambac, Assured, or FGIC,
as the case may be) to the extent such CCDA Restriction
Fee Creditor is authorized to vote the claim with respect
to such Monoline-insured CCDA Bond in accordance
with section 301(c)(3) of PROMESA, definitive insurance
documents and applicable law, and (ii) Ambac, Assured,
and FGIC, to the extent Ambac, Assured, or FGIC, as
applicable, is authorized to vote such Insured CCDA Bond
Claims in accordance with section 301(c)(3) of PROMESA,
definitive insurance documents and applicable law) shall
be entitled to receive the CCDA Restriction Fee in the
form of an allowed administrative expense claim, payable
in Cash, at the time of consummation of the Plan in an
amount equal to the CCDA Restriction Fee Percentage
multiplied by the aggregate amount of CCDA Bond
Claims, (without duplication and, to the extent any such
claims are Monoline-insured, solely to the extent a CCDA
Restriction Fee Creditor is authorized to vote any such
claim in accordance with section 301(c)(3) of PROMESA,
 315a

Appendix D

the definitive insurance documents and applicable law)

held or, in the case of Assured held or insured, by such
CCDA Restriction Fee Creditor as of the expiration of
the applicable HTA/CCDA PSA Restriction Fee Period;
provided, however, that each CCDA Restriction Fee
Creditor who acquires any CCDA Bonds after the Joinder
Deadline (including (i) a holder of a Monoline-insured
CCDA Bond (other than a Monoline-insured CCDA Bond
insured by Ambac, Assured, FGIC, or National, as the
case may be), to the extent such CCDA Restriction Fee
Creditor is authorized to vote the claim with respect to
such Monoline-insured CCDA Bond in accordance with
section 301(c)(3) of PROMESA, definitive insurance
documents and applicable law, and (ii) Ambac, Assured,
FGIC, and National, to the extent Ambac, Assured or
National, as applicable, is authorized to vote such Insured
CCDA Bond Claims in accordance with section 301(c)
(3) of PROMESA, definitive insurance documents and
applicable law) shall be entitled to receive such CCDA
Restriction Fee equal to the CCDA Restriction Fee
Percentage multiplied by the aggregate amount of CCDA
Bond Claims, (without duplication and, to the extent any
such claims are Monoline-insured, solely to the extent an
HTA/CCDA PSA Creditor is authorized to vote any such
claim in accordance with section 301(c)(3) of PROMESA,
the definitive insurance documents and applicable law)
held by such CCDA Restriction Fee Creditor as of the
earlier to occur of the HTA/CCDA Threshold Attainment
and the entry of the Confirmation Order; and, provided,
further, that, if a CCDA Restriction Fee Creditor sells
any CCDA Bonds for which it would have been entitled to
receive the CCDA Restriction Fee, the purchasing party
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shall not be entitled to receive the CCDA Restriction

Fee on account thereof and such entitlement shall remain
with the selling party; and, provided, further, that,
in all circumstances, the sum of the aggregate CCDA
Restriction Fees plus the CCDA Consummation Costs
attributable to a holder’s CCDA Bond Claims shall not
exceed Fifteen Million Dollars ($15,000,000.00); and,
provided, further, that, in the event the HTA/CCDA Plan
Support Agreement is terminated pursuant to the terms
of section 7.1 thereof, no CCDA Consummation Costs or
CCDA Restriction Fees shall be due and payable to a
holder of CCDA Bonds, Ambac or Assured with respect
to CCDA Bond Claims.

52. HTA Bond Claims. In consideration for the

agreements set forth in the HTA/CCDA Plan Support
Agreement, and within ten (10) Business Days following
satisfaction of the HTA Distribution Conditions, HTA shall
make an interim distribution to holders of HTA 68 Bond
Claims and HTA 98 Senior Bond Claims in the amounts
of One Hundred Eighty-Four Million Eight Hundred
Thousand Dollars ($184,800,000.00) and Seventy-Nine
Million Two Hundred Thousand Dollars ($79,200,000.00),
respectively, in Cash, which distributions shall reduce
the principal amount of such HTA 68 Bonds and HTA 98
Senior Bonds, respectively, and the corresponding HTA
Bond Claims; provided, however, that, for purposes of
this decretal paragraph 52, the applicable Monolines shall
constitute the holders of the HTA 68 Bond Claims and
the HTA 98 Senior Bond Claims arising from the HTA
Bonds insured by any such Monoline, if any, in accordance
with section 301(c)(3) of PROMESA, applicable law and
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governing insurance and other documents applicable

to such HTA Bonds; and, provided, further, that,
notwithstanding the foregoing, (a) with respect to any
HTA 98 Senior Bonds owned by FGIC, HTA shall make
such interim distribution to FGIC, and (b) with respect
to any HTA 98 Senior Bonds insured by FGIC, but not
owned by FGIC, HTA shall make such interim distribution
to the owners of such HTA 98 Senior Bonds.

53. System 2000 Obligations. Pursuant to the

terms and provisions of section 55.10 of the Plan, the
Commonwealth shall satisfy all obligations associated
with Allowed System 2000 Participant Claims in the
timeframes set forth therein.

54. HTA/CCDA Clawback Structuring Fees. In

consideration for the structuring of payments to be made
to holders of CW/HTA Claims, CW/Convention Center
Claims, CW/PRIFA Tax Claims and CW/MBA Claims,
upon satisfaction of the HTA Distribution Conditions, and
in accordance with the terms and provisions of section
6.1(d) of the HTA/CCDA Plan Support Agreement, on the
HTA Effective Date, or as soon as practicable thereafter
in accordance with the terms of the HTA Plan, but in
no event later than ten (10) Business Days following
such date, the Commonwealth shall make payments to
Assured and National in the amounts of Thirty-Nine
Million Three Hundred Thousand Dollars ($39,300,000.00)
and Nineteen Million Three Hundred Thousand Dollars
($19,300,000.00), respectively.

55. Active JRS Par ticipants and Active TRS

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Participants. In connection with the treatment of Active

JRS Participant Claims and Active TRS Participant
Claims pursuant to sections 55.8 and 55.9 of the Plan:

(a) Act 106 Def ined Contr ibution Acco unts.

Notwithstanding any provision of Act 106 to the contrary
(including, without limitation, sections 1.4, 1.6, 2.1, 2.6,
and 3.1 thereof), on or prior to the Effective Date, the
Commonwealth shall establish defined contribution
accounts (the “Defined Contribution Accounts”) pursuant
to chapter 3 of Act 106 for all holders of such Active
JRS Participant Claims and Active TRS Participant
Claims who do not have such accounts as the Effective
Date and who, prior to the Effective Date, were making
contributions to JRS in accordance with the provisions of
Act No. 12 of October 19, 1954, as amended, known as the
“Judiciary Retirement Act,” or to TRS in accordance with
the provisions of Act No. 91-2004, as amended, known as
the “Commonwealth of Puerto Rico Teachers’ Retirement
System Act,” as applicable. Without in any way limiting
the foregoing, in connection with the modification of the
Commonwealth’s obligations under any laws establishing
or enabling TRS or JRS, the Commonwealth shall enroll
teachers, judges, and all other employees that would have
otherwise been enrolled in TRS, hired from and after the
Effective Date in the Act 106 Defined Contribution Plan
and establish Defined Contribution Accounts for such
individuals.

(b) Eligibility for and Enrollment in Federal

Social Security. From and after the Effective Date, and
notwithstanding any provision of Act 106 to the contrary
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(including, without limitation, section 3.4 thereof), every

(i) Active JRS Participant, (ii) teacher who is an Active
TRS Participant, and (iii) teacher and judge hired from
and after the Effective Date shall mandatorily make
contributions to his or her Defined Contribution Account
at a minimum rate of two and three-tenths percent
(2.3%) of his or her monthly compensation, up to the limit
established in section 1081.01(d)(7) of Act 1-2011; provided,
however, that each teacher and judge who is forty-five
(45) years of age or older as of the Effective Date shall
contribute to his or her Defined Contribution Account
at a minimum rate of eight and one-half percent (8.5%)
of his or her monthly compensation, up to the limited
established in section 1081.01(d)(7) of Act No. 1-2011,
as amended, known as the “Internal Revenue Code for
a New Puerto Rico,” or any successor law thereof, and,
therefore, fail to be eligible to contribute to the Federal
Social Security system, unless any such teacher or judge
shall have irrevocably elected within sixty (60) days of the
Effective Date to reduce their contributions to a minimum
of two and three-tenths percent (2.3%) and be enrolled
in the Federal Social Security system. For teachers who
are Active TRS Participants, Active JRS Participants,
and teachers and judges first hired after the Effective
Date who contribute two and three-tenths percent
(2.3%) of their monthly compensation as set forth above,
including those aged 45 and older who have elected to do
so, the Employer, in coordination with the Retirement
Board and/or Secretary of Treasury, shall withhold the
minimum amount of six and two-tenths percent (6.2%)
of their applicable monthly compensation and remit such
amount to the appropriate authority as required by the
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applicable provisions of the Federal Social Security Act

and other applicable Federal law to enable the inclusion
of the Participant in the Federal Social Security system.
Teachers who are Active TRS Participants, Active JRS
Participants, and teachers and judges first hired after
the Effective Date may voluntarily contribute to their
Defined Contribution Accounts additional amounts
to those established as allowed under section 1081.01
of Act No. 1-2011, provided, however, that in no case
may those increased contribution rates and additional
amounts exceed the applicable limits to be eligible, and
affect the eligibility of these Participants, for coverage
under the Federal Social Security system, unless such
Participants are aged 45 and older and do not participate
in the Federal Social Security system. In accordance with
the foregoing, the Government of the Commonwealth of
Puerto Rico, including, without limitation, any Entity or
Person acting for or on behalf thereof, shall implement all
reasonably necessary or advisable policies, procedures,
or mechanisms to provide for all payroll deduction or
transmittal required by federal law to ensure eligibility
for and enrollment of Participants in the Federal Social
Security system and effectuating the Federal Insurance
Contributions Act remittances.

56. Discharge and Release of Claims and Causes of

Action.

(a) Except as expressly provided in the Plan or herein,

all distributions and rights afforded under the Plan shall
be, and shall be deemed to be, in exchange for, and in
complete satisfaction, settlement, discharge, and release
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of, all Claims or Causes of Action against the Debtors and

Reorganized Debtors that arose, in whole or in part, prior
to the Effective Date, relating to the Title III Cases, the
Debtors or Reorganized Debtors or any of their respective
Assets, property, or interests of any nature whatsoever,
including any interest accrued on such Claims from and
after the Petition Date, and regardless of whether any
property will have been distributed or retained pursuant
to the Plan on account of each of the Claims or Causes
of Action; provided, however, that, without prejudice to
the exculpation rights set forth in section 92.7 of the Plan
and decretal paragraph 61 hereof, nothing contained in
the Plan or this Confirmation Order is intended, nor shall
it be construed, to be a grant of a non-consensual third-
party release of the PSA Creditors, AFSCME, and each
of their respective Related Persons by any Creditors of
the Debtors. Upon the Effective Date and independent
of the distributions provided for under the Plan, the
Debtors and Reorganized Debtors shall be discharged
and released from any and all Claims, Causes of Action,
and any other debts that arose, in whole or in part, prior
to the Effective Date (including prior to the Petition
Date), and Claims of the kind specified in sections 502(g),
502(h), or 502(i) of the Bankruptcy Code and section 407
of PROMESA, whether or not (a) a proof of claim based
upon such Claim is filed or deemed filed under section
501 of the Bankruptcy Code, (b) such Claim is allowed
under section 502 of the Bankruptcy Code and section
407 of PROMESA (or is otherwise resolved), or (c) the
holder of a Claim based upon such debt voted to accept
the Plan. For the avoidance of doubt, nothing contained in
the Plan or herein shall release, discharge, or enjoin any
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claims or causes of action against PREPA arising from

or related to PREPA-issued bonds, including, without
limitation, Monoline-issued insurance pertaining thereto,
and PREPA is not releasing any claims or causes of action
against any non-Debtor Entity. Claims and causes of
action against PREPA arising from or related to PREPA-
issued bonds, and releases against PREPA and its assets
shall be addressed in PREPA’s Title III case, including,
without limitation, any plan of adjustment therein.

(b) Except as expressly provided in the Plan or

herein, all Entities shall be precluded from asserting
any and all Claims against the Debtors and Reorganized
Debtors, and each of their respective employees, officials,
Assets, property, rights, remedies, Claims, or Causes of
Action of any nature whatsoever, relating to the Title
III Cases, the Debtors or Reorganized Debtors or any
of their respective Assets and property, including any
and all interest accrued on such Claims, and regardless
of whether any property will have been distributed or
retained pursuant to the Plan on account of each of the
Claims or other obligations, suits, judgments, damages,
debts, rights, remedies, causes of action, or liabilities.
In accordance with the foregoing, except as expressly
provided in the Plan or herein, this Confirmation Order
shall constitute a judicial determination, as of the Effective
Date, of the discharge and release of all such Claims,
Causes of Action or debt of or against the Debtors and
the Reorganized Debtors pursuant to sections 524 and
944 of the Bankruptcy Code, applicable to the Title III
Case pursuant to section 301 of PROMESA, and such
discharge shall void and extinguish any judgment obtained
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against the Debtors or Reorganized Debtors and their

respective Assets, and property at any time, to the extent
such judgment is related to a discharged Claim, debt, or
liability. As of the Effective Date, and in consideration for
the distributions or other value provided pursuant to the
Plan, each holder of a Claim in any Class under the Plan
shall be and hereby is deemed to release and forever waive
and discharge as against the Debtors and Reorganized
Debtors, and their respective Assets and property, all
such Claims.

(c) Notwithstanding any other provisions of decretal

paragraph 56 of this Confirmation Order or section 92.2
of the Plan, in accordance with the provisions of the GO/
PBA Plan Support Agreement, each of the GO/PBA PSA
Creditors and their respective Related Persons, solely
in their capacity as Creditors of the Debtors, shall (i) be
deemed to have released and covenanted not to sue or
otherwise pursue or seek to recover damages or to seek
any other type of relief against any of the Government
Releasees based upon, arising from or relating to the
Government Released Claims or any of the Claims or
Causes of Action asserted or which could have been
asserted, including, without limitation, in the Clawback
Actions and the Lift Stay Motions, and (ii) not directly or
indirectly aid any person in taking any action with respect
to the Government Released Claims that is prohibited by
decretal paragraph 56 of this Confirmation Order and
section 92.2 of the Plan.

(d) SEC Limitation. Notwithstanding anything

contained herein or in the Plan to the contrary, no
provision shall (i) preclude the SEC from enforcing its
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Appendix D

police or regulatory powers, or (ii) enjoin, limit, impair or

delay the SEC from commencing or continuing any claims,
causes of action, proceedings or investigations against
any non-debtor person or non-debtor entity in any forum.

(e) United States Limitation. Notwithstanding

anything contained herein or in the Plan to the contrary,
no provision shall (i) impair the United States, its agencies,
departments, or agents, or in any manner relieve the
Debtors or the Reorganized Debtors, as the case may
be, from compliance with federal laws or territorial laws
and requirements implementing a federally authorized
or federally delegated program protecting the health,
safety, and environment of persons in such territory, (ii)
expand the scope of any discharge, release, or injunction
to which the Debtors or the Reorganized Debtors are
entitled under Title III, and (iii) discharge, release,
enjoin, or otherwise bar (A) any liability of the Debtors
or the Reorganized Debtors to the United States arising
from and after the Effective Date, (B) any liability to the
United States that is not a Claim, (C) any affirmative
defense or any right of setoff or recoupment of the United
States, the Debtors or the Reorganized Debtors, as the
case may be, and such rights of setoff and recoupment of
such parties are expressly preserved, (D) the continued
validity of the obligations of the United States, the
Debtors, or the Reorganized Debtors, as the case may be,
under any United States grant or cooperative assistance
agreement, (E) the Debtors’ or the Reorganized Debtors’
obligations arising under federal police or regulatory
laws, including, but not limited to, laws relating to the
environment, public health or safety, or territorial laws
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implementing such federal legal provisions, including,

but not limited to, compliance obligations, requirements
under consent decrees or judicial orders, and obligations
to pay associated administrative, civil, or other penalties,
and (F) any liability to the United States on the part of
any non-debtor. Without limiting the foregoing, nothing
contained herein or in the Plan shall be deemed (i) to
determine the tax liability of any Entity, including, but not
limited to, the Debtors and the Reorganized Debtors and
any obligation of the Debtors to pay post-petition interest
on any such tax liability, (ii) to be binding on the IRS with
regard to the federal tax liabilities, tax status, or tax filing
and withholding obligations of any Entity, including, but
not limited to, the Debtors and the Reorganized Debtors,
(iii) to release, satisfy, discharge, or enjoin the collection
of any claim of the IRS against any Entity other than the
Debtors and the Reorganized Debtors, and (iv) to grant
any relief to any Entity that the Court is prohibited from
granting by the Declaratory Judgment Act, 28 U.S.C. §
2201(a), or the Tax Anti-Injunction Act, 26 U.S.C. § 7421(a).

(f) Underwriter Actions. Notwithstanding anything

contained herein or in the Plan to the contrary, including,
without limitation, sections 92.2, 92.3, and 92.11 of
the Plan, except as may be precluded pursuant to the
provisions of PROMESA, nothing in the Plan, the
Confirmation Order, or any Plan-related document set
forth in the Plan Supplement is intended, nor shall it be
construed, to impair, alter, modify, diminish, prohibit, bar,
restrain, enjoin, release, reduce, eliminate, or limit the
rights of the plaintiffs and defendants, including, without
limitation, the parties to the Underwriter Actions, from
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Appendix D

asserting their respective rights, claims, causes of action

and defenses in the Underwriter Actions, including, but
not limited to, any Claims, defenses, Causes of Action, and
rights of setoff or recoupment (to the extent available), or
any rights to allocate responsibility or liability or any other
basis for the reduction of (or credit against) any judgment
in connection with the Underwriter Actions (collectively,
the “Defensive Rights”); provided, however, that, for the
avoidance of doubt, in no event shall any Defensive Rights
be used to obtain or result in the affirmative payment
of money or the affirmative delivery of property to any
plaintiff, defendant and, to the extent named, third-party
defendant by any of the CW Entities in connection with
an Underwriter Action; and, provided, further, that, no
party in the Underwriter Actions, including, without
limitation, plaintiffs, defendants, and, to the extent named,
third-party defendants, shall be permitted to assert: (i)
against the Debtors or the Reorganized Debtors any
Claim or Cause of Action for purposes of obtaining an
affirmative monetary recovery that otherwise is barred
or discharged pursuant to the Bar Date Orders, the Plan,
and/or this Confirmation Order; and/or (ii) against any of
the CW Entities any Claims or counterclaims for purposes
of obtaining an affirmative monetary recovery, including,
without limitation, for indemnification, contribution,
reimbursement, setoff, or similar theories to the extent
asserted for purposes of obtaining an affirmative
monetary recovery, which Claims or counterclaims shall
be deemed disallowed, barred, released, and discharged
in accordance with the terms and provisions of the Plan
and the Confirmation Order; and provided, further,
that, for the avoidance of doubt, nothing in this decretal
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Appendix D

paragraph 56(f) is intended, nor shall it be construed,

to prohibit, preclude, bar, modify, or limit in any way
the ability of any defendant in any Underwriter Action
to assert Defensive Rights for the purpose of reducing,
eliminating, or limiting the amount of any liability or
judgment in any Underwriter Action. The parties in
the Underwriter Actions shall be permanently barred,
enjoined, and restrained from commencing, prosecuting,
or asserting against any of the CW Entities any Claims
or counterclaims for purposes of obtaining an affirmative
monetary recovery, including, w ithout limitation,
indemnification, contribution, reimbursement, setoff or
similar theories, to the extent asserted for purposes of
obtaining an affirmative monetary recovery, based upon,
arising from, or related to the Underwriter Actions,
whether or not such Claim or counterclaim is or can be
asserted in a court, an arbitration, an administrative
agency or forum, or in any other manner.

(g) Quest Litigation. Notwithstanding anything

contained herein or in the Plan to the contrary, nothing
in the Plan, the Confirmation Order or any Plan-related
document set forth in the Plan Supplement is intended,
nor shall it be construed, to impair, alter, modify, diminish,
prohibit, bar, restrain, enjoin, release, reduce, eliminate
or limit the right of the Quest Diagnostics of Puerto Rico,
Inc. (“Quest”) (1) from asserting its respective rights,
claims, causes of action and defenses in the avoidance
action brought against it, including, but not limited to, any
Claims, defenses, Causes of Action, and rights of setoff
or recoupment, or any rights to allocate responsibility or
liability or any other basis for the reduction of (or credit
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Appendix D

against) any judgment (the “Quest Rights”); provided,

however, that, for the avoidance of doubt, in no event
shall any Quest Rights be used to obtain or result in the
affirmative payment of money or the affirmative delivery
of property by any of the Debtors to Quest in connection
with the merits of its avoidance action, and (2) to file and
receive payment on any Claim it has pursuant to section
502(h) of the Bankruptcy Code and Bankruptcy Rule
3002(c)(3); provided, however, that any such Claims would
constitute a CW General Unsecured Claim and be treated
in accordance with the terms and provisions of article
LXII of the Plan.

57. Releases by the Debtors and Reorganized Debtors.

Except as otherwise expressly provided in the Plan or
this Confirmation Order, on the Effective Date, and for
good and valuable consideration, each of the Debtors and
Reorganized Debtors, the Disbursing Agent and each of
the Debtors’ and Reorganized Debtors’ Related Persons
shall be deemed to have and hereby does irrevocably and
unconditionally, fully, finally, and forever waive, release,
acquit, and discharge the Released Parties from any
and all Claims or Causes of Action that the Debtors,
Reorganized Debtors, and the Disbursing Agent, or any
of them, or anyone claiming through them, on their behalf
or for their benefit, have or may have or claim to have,
now or in the future, against any Released Party that are
Released Claims.

58. Release and Exculpation Provisions. Except as

otherwise provided in this Confirmation Order, all release
and exculpation provisions, including, but not limited to,
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Appendix D

those contained in article XCII of the Plan, are approved

and shall be effective and binding on all Entities, to the
extent provided therein.

59. Injunction on Claims. Except as otherwise

expressly provided in section 92.11 of the Plan, this
Confirmation Order, or such other Final Order of the
Title III Court that is applicable, all Entities who have
held, hold, or in the future hold Claims or any other
debt or liability that is discharged or released pursuant
to section 92.2 of the Plan or who have held, hold, or
in the future hold Claims or any other debt or liability
discharged or released pursuant to section 92.2 of the
Plan are permanently enjoined, from and after the
Effective Date, from (a) commencing or continuing,
directly or indirectly, in any manner, any action or
other proceeding (including, without limitation, any
judicial, arbitral, administrative, or other proceeding)
of any kind on any such Claim or other debt or
liability discharged pursuant to the Plan against
any of the Released Parties or any of their respective
assets or property, (b) the enforcement, attachment,
collection or recovery by any manner or means of any
judgment, award, decree, or order against any of the
Released Parties or any of their respective assets or
property on account of any Claim or other debt or
liability discharged pursuant to the Plan, (c) creating,
perfecting, or enforcing any encumbrance of any kind
against any of the Released Parties or any of their
respective assets or property on account of any Claim
or other debt or liability discharged pursuant to the
Plan, and (d) except to the extent provided, permitted
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Appendix D

or preserved by sections 553, 555, 556, 559, or 560 of

the Bankruptcy Code or pursuant to the common law
right of recoupment, asserting any right of setoff,
subrogation, or recoupment of any kind against any
obligation due from any of the Released Parties or any
of their respective assets or property, with respect to
any such Claim or other debt or liability discharged
pursuant to the Plan. Such injunction shall extend to
all successors and assigns of the Released Parties and
their respective assets and property. Notwithstanding
the foregoing, without prejudice to the exculpation
rights set forth in section 92.7 of the Plan and decretal
paragraph 61 hereof, nothing contained in the Plan
or this Confirmation Order is intended, nor shall it be
construed, to be a non-consensual third-party release
of the PSA Creditors, AFSCME, and of their respective
Related Persons by Creditors of the Debtors.

60. Injunction Related to Releases. As of the

Effective Date, all Entities that hold, have held, or in
the future hold a Released Claim released pursuant to
section 92.5 of the Plan, are, and shall be, permanently,
forever and completely stayed, restrained, prohibited,
barred, and enjoined from taking any of the following
actions, whether directly or indirectly, derivatively or
otherwise, on account of or based on the subject matter
of such discharged Released Claims: (i) commencing,
conducting or continuing in any manner, directly
or indirectly, any suit, action, or other proceeding
(including, without limitation, any judicial, arbitral,
administrative or other proceeding) in any forum; (ii)
enforcing, attaching (including, without limitation
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Appendix D

any prejudgment attachment), collecting, or in any

way seeking to recover any judgment, award, decree,
or other order; (iii) creating, perfecting or in any way
enforcing in any matter, directly or indirectly, any Lien;
(iv) setting off, seeking reimbursement or contributions
from, or subrogation against, or otherwise recouping in
any manner, directly or indirectly, any amount against
any liability or obligation owed to any Entity released
under decretal paragraph 57 of this Confirmation Order
and section 92.5 of the Plan; and (v) commencing or
continuing in any manner, in any place or any judicial,
arbitration, or administrative proceeding in any forum,
that does not comply with or is inconsistent with the
provisions of the Plan or this Confirmation Order.
For the avoidance of doubt, the following stipulations
will terminate upon the entry of this Confirmation
Order: the Fourth Amended Stipulation Between the
Commonwealth of Puerto Rico and the Puerto Rico
Highways and Transportation Authority Regarding
the Tolling of Statute of Limitations and Consent Order
(Docket Entry No. 15854), as amended; and the Fourth
Amended Stipulation and Consent Order Between Title
III Debtors (Other Than COFINA) and the Puerto
Rico Fiscal Agency and Financial Advisory Authority
Acting on Behalf of the Governmental Entities Listed
on Exhibit “B” Regarding the Tolling of Statute of
Limitations (Docket Entry No. 17394), as amended.

61. Exculpation.

(a) Government Parties: The Oversight Board,

AAFAF, the Debtors, and each of their respective Related
Persons, solely acting in its capacity as such at any time
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Appendix D

up to and including the Effective Date, shall not have or

incur through the Effective Date any liability to any Entity
for any act taken or omitted to be taken in connection
with the Title III Cases, the formulation, preparation,
dissemination, implementation, confirmation or approval
of the Plan or any compromises or settlements contained
therein, the Disclosure Statement, or any contract,
instrument, release or other agreement or document
provided for or contemplated in connection with the
consummation of the transactions set forth in the Plan;
provided, however, that the foregoing provisions of this
subparagraph (a) or section 92.7 of the Plan shall not
affect the liability of any Entity that otherwise would
result from any such act or omission to the extent that
such act or omission is determined in a Final Order to
have constituted intentional fraud or willful misconduct.
Nothing in this subparagraph (a) or section 92.7(a) of the
Plan shall prejudice the right of any of the Government
Parties, and the Government Parties’ officers and
directors serving at any time up to and including the
Effective Date, and each of their respective professionals
to assert reliance upon advice of counsel as a defense with
respect to their duties and responsibilities under the Plan.

(b) PSA Creditors: Each of the PSA Creditors solely

in its capacity as a party to the GO/PBA Plan Support
Agreement, the PRIFA Plan Support Agreement, and/
or the HTA /CCDA Plan Support Agreement and a
Creditor and/or insurer, as applicable, from the relevant
Petition Date up to and including the Effective Date and
each of their respective Related Persons shall not have
or incur any liability to any Entity for any act taken or
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omitted to be taken in connection with the Title III Cases,

or the mediation, negotiation, formation, preparation,
dissemination, implementation, acceptance, confirmation
or approval of the Plan or any compromises or settlements
contained therein, the Disclosure Statement, the GO/
PBA Plan Support Agreement, the PRIFA Plan Support
Agreement, the HTA/CCDA Plan Support Agreement, the
Definitive Documents, or any other contract, instrument,
release or other agreement or document provided for or
contemplated in connection with the consummation of
the transactions set forth in the Plan; provided, however,
that the foregoing provisions of this subparagraph (b) and
section 92.7(b) of the Plan shall not affect the liability of
any Entity that otherwise would result from any such
act or omission to the extent that such act or omission
is determined in a Final Order to have constituted
intentional fraud or willful misconduct.

(c) Retiree Committee: Each of the members of the

Retiree Committee, solely in its capacity as a member
of the Retiree Committee and a Creditor, as applicable,
from the relevant Petition Date up to and including the
Effective Date and each of the Retiree Committee’s
Related Persons shall not have or incur through the
Effective Date any liability to any Entity for any act
taken or omitted to be taken in connection with the Title
III Cases, the formation, preparation, dissemination,
implementation, confirmation, or approval of the Plan
or any compromises or settlements contained therein,
the Disclosure Statement, the Retiree Committee
Plan Support Agreement, or any contract, instrument,
release or other agreement or document provided for
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or contemplated in connection with the consummation

of the transactions set forth in the Plan and the Retiree
Committee Plan Support Agreement; provided, however,
that, notwithstanding the foregoing exculpation, in the
event that litigation is commenced against a member of
the Retiree Committee with respect to the aforementioned
actions, such member shall be reimbursed for reasonable
attorneys’ fees and expenses incurred in defense thereof
and indemnified for any damages awarded, in each case,
by the Commonwealth, pursuant to a Final Order; and,
provided, however, that, the foregoing provisions of this
subparagraph (c) and section 92.7(c) of the Plan shall not
affect the liability of any Entity that otherwise would
result from any such act or omission to the extent that
such act or omission is determined in a Final Order to
have constituted intentional fraud or willful misconduct.

(d) Creditors’ Committee: Each of the members

of the Creditors’ Committee, solely in its capacity
as a member of the Creditors’ Committee, and the
Creditors’ Committee, from the relevant Petition Date
up to and including the Effective Date and each of the
Creditors’ Committee’s Related Persons shall not have
or incur any liability to any Entity for any act taken
or omitted to be taken in connection with the Title
III Cases, the formation, preparation, dissemination,
implementation, confirmation, or approval of the Plan
or any compromises or settlements contained therein,
the Disclosure Statement, or any contract, instrument,
release, or other agreement or document provided for or
contemplated in connection with the consummation of the
transactions set forth in the Plan; provided, however, that,
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notwithstanding the foregoing exculpation, in the event

that litigation is commenced against a member of the
Creditors Committee with respect to the aforementioned
actions, such member shall be reimbursed for reasonable
attorneys’ fees and expenses incurred in defense thereof
and indemnified for any damages awarded, in each case,
by the Commonwealth, pursuant to a Final Order; and,
provided, however, that, the foregoing provisions of this
subparagraph (d) and section 92.7(d) of the Plan shall not
affect the liability of any Entity that would otherwise
result from any such act or omission to the extent such
act or omission is determined in a Final Order to have
constituted intentional fraud or willful misconduct.

(e) AFSCME: AFSCME, solely in its capacity as a

party to the AFSCME Plan Support Agreement and a
Creditor, as applicable, from the relevant Petition Date
up to and including the Effective Date, and each of its
respective Related Persons shall not have or incur through
the Effective Date any liability to any Entity for any act
taken or omitted to be taken in connection with the Title
III Cases, the formation, preparation, dissemination,
implementation, confirmation, or approval of the Plan
or any compromises or settlements contained therein,
the Disclosure Statement, the AFSCME Plan Support
Agreement, or any contract, instrument, release or other
agreement or document provided for or contemplated
in connection with the consummation of the transaction
set forth in the Plan and the AFSCME Plan Support
Agreement; provided, however, that, the foregoing
provisions of this subparagraph (e) and section 92.7(e) of
the Plan shall not affect the liability of any Entity that
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otherwise would result from any such act or omission to

the extent that such act or omission is determined in a
Final Order to have constituted intentional fraud or willful
misconduct.

(f) Monoline Insurers: Ambac, Assured, FGIC,

National, Syncora, and their Related Persons shall not
have or incur any liability to any Entity for any act
taken or omitted to be taken consistent with the Plan
or in connection with the formulation, preparation,
dissemination, implementation, acceptance, confirmation,
or approval of the Plan, including, without limitation, in
connection with the treatment of Ambac Insured Bond
Claims, Assured Insured Bond Claims, FGIC Insured
Bond Claims, National Insured Bond Claims, or Syncora
Insured Bond Claims, the voting procedures, the election
procedures, and any release of obligations under the
applicable Ambac Insurance Policies, Assured Insurance
Policies, FGIC Insurance Policies, National Insurance
Policies, or Syncora Insurance Policies: provided,
however, that, notwithstanding anything contained in
this Confirmation Order or the Plan to the contrary, the
terms and provisions of the Plan and this Confirmation
Order shall not, and shall not be construed to, release or
exculpate, with respect to any beneficial holder of Ambac
Insured Bonds, Assured Insured Bonds, FGIC Insured
Bonds, National Insured Bonds, or Syncora Insured
Bonds any payment obligation under the applicable
Ambac Insurance Policy, Assured Insurance Policy, FGIC
Insurance Policy, National Insurance Policy, or Syncora
Insurance Policy in accordance with its terms solely to the
extent of any failure of such holder to receive the Ambac
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Commutation Treatment, Assured Treatment, FGIC

Treatment, National Treatment, or Syncora Treatment,
as applicable (or any claims that Ambac, Assured, FGIC,
National, or Syncora may have against a beneficial holder
of respective insured bonds with respect to Ambac’s,
Assured’s, FGIC’s, National’s or Syncora’s applicable
obligations under the Ambac Insurance Policies, Assured
Insurance Policies, National Insurance Policies, or Syncora
Insurance Policies, as applicable); provided, however, that
the foregoing provisions of this subparagraph (f) and
section 92.7(f) of the Plan shall not affect the liability of
any Entity that otherwise would result from any such
act or omission to the extent that such act or omission is
determined, pursuant to a Final Order, to have constituted
intentional fraud or willful misconduct.

(g) The DRA Parties: Each of the GDB Debt Recovery

Authority (“DRA”), AmeriNational Community Services
LLC (the “Servicer”), as servicer for the DRA, and
Cantor-Katz Collateral Monitor LLC (the “Collateral
Monitor”), as collateral monitor for Wilmington Trust
N.A. (collectively, the “DRA Parties”), from the Petition
Date up to and including the Effective Date and each of
the DRA Parties, respective predecessors, successors
and assigns (whether by operation of law or otherwise),
and their respective financial advisors, attorneys,
accountants, consultants, agents, and professionals, or
other representatives, each acting in such capacity, and
any Entity acting for or on behalf of any of them, in each
case, solely to the extent acting in such capacity, shall not
have or incur any liability to any Entity for any act taken
or omitted to be taken in connection with the Title III
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Cases, mediation, the negotiation, formation, preparation,

dissemination, implementation, confirmation or approval
of the Plan or any compromises or settlements contained
therein, the Disclosure Statement, the Stipulation in
Connection with DRA Related Disputes, dated as of
November 5, 2021, by and among the Oversight Board, as
representative of the Debtors and HTA, the Servicer, and
the Collateral Monitor (Docket Entry No. 19100 Ex. A),
or any contract, instrument, release or other agreement
or document provided for or contemplated in connection
with the consummation of the transactions set forth in the
Plan; provided, however , that, the foregoing provisions of
this subparagraph (g) shall not affect the liability of any
Entity that would otherwise result from any such act or
omission to the extent such act or omission is determined
in a Final Order to have constituted intentional fraud or
willful misconduct.

62. Maintenance of Pension System. Before the tenth

(10th) anniversary of the Effective Date, the Government
of the Commonwealth of Puerto Rico, including, without
limitation, by any Entity or Person acting for or on behalf
thereof, shall not (a) implement existing legislation or
enact new legislation to create or increase any defined
benefit pension payment or obligation to current or
future retirees from or related to any defined benefit
plans over the benefits provided by the Plan, regardless
of funding source, or (b) undo (in whole or part) the Plan’s
eliminations of defined benefit plan accruals and cost of
living adjustments for government employees; provided,
however, that the Governor and Legislature, subsequent
to termination of the Oversight Board, may apply to the
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Title III Court for relief from this provision upon showing
(i) the need therefor, (ii) the affordability of the requested
changes, (iii) the reasons why the requested changes will
not create a risk of the financial distress caused by the
Commonwealth’s prior defined benefit plans under which
the Commonwealth and other governmental employers
accrued nearly $55 billion of unfunded pension obligations,
(iv) the means of funding the requested changes and
reasons why there is little risk of such funding not being
carried out, (v) the reasons why the requested changes
will not create a material risk of defaults on any of the
then outstanding obligations pursuant to the Plan, and
(vi) the reasons why the defined contribution plans are
insufficient and defined benefit plans are both prudent
and required; and, provided, however, that, prior to the
termination of the Oversight Board, the Oversight Board
shall not reduce any defined benefit pension payment or
obligation to current or future retirees from the benefits
provided by the Plan.

63. Appointments Related Litigation/Uniformity

Litigation. Notwithstanding anything contained herein or
the Plan to the contrary, in the event that a Final Order
is entered in connection with the Appointments Related
Litigation or the Uniformity Litigation subsequent to
entry of this Confirmation Order, in consideration of the
distributions made, to be made, or deemed to be made
in accordance with the terms and provisions of the Plan
and documents and instruments related hereto, and all
Creditors or such other Entities receiving, or deemed to
have received, distributions pursuant to or as a result of
the Plan or this Confirmation Order having consented and
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agreed, such Final Order shall not in any way or manner

reverse, affect or otherwise modify the transactions
contemplated in the Plan and this Confirmation Order,
including, without limitation, the releases, exculpations
and injunctions provided pursuant to article XCII of the
Plan and herein; provided, however, that, to the extent
that a plaintiff in the Appointments Related Litigation
or the Uniformity Litigation is a party to any of the GO/
PBA Plan Support Agreement, the HTA/CCDA Plan
Support Agreement, the PRIFA Plan Support Agreement,
or the ERS Stipulation, within five (5) Business Days of
the Effective Date, such plaintiff shall take any and all
actions to dismiss, with prejudice or, in the event other
plaintiffs are party to such litigations, withdraw from,
with prejudice, such Appointments Related Litigation
or Uniformity Litigation, as the case may be, including,
without limitation, filing notices with the clerk of the court
having jurisdiction thereof.

64. Bar Order. To the limited extent provided in the

Plan, each and every Entity is permanently enjoined,
barred and restrained from instituting, prosecuting,
pursuing, or litigating in any manner any and all
Claims, demands, rights, liabilities, or causes of action
of any and every kind, character or nature whatsoever,
in law or in equity, known or unknown, direct or
derivative, whether asserted or unasserted, against
any of the Released Parties, based upon, related to, or
arising out of or in connection with any of the Released
Claims, confirmation and consummation of the Plan,
the negotiation and consummation of the GO/PBA
Plan Support Agreement, HTA/CCDA Plan Support
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Agreement, PRIFA Plan Support Agreement, AFSCME

Plan Support Agreement, the Retiree Committee Plan
Support Agreement, or any claim, act, fact, transaction,
occurrence, statement, or omission in connection with
or alleged or that could have been alleged in the Title
III Cases, including, without limitation, any such
claim, demand, right, liability, or cause of action for
indemnification, contribution, or any other basis in law
or equity for damages, costs, or fees incurred arising
directly or indirectly from or otherwise relating to
the Title III Cases, either directly or indirectly by
any Person for the direct or indirect benefit of any
Released Party arising from or related to the claims,
acts, facts, transactions, occurrences, statements, or
omissions that are, could have been or may be alleged in
the related actions or any other action brought or that
might be brought by, through, on behalf of, or for the
benefit of any of the Released Parties (whether arising
under federal, state, or foreign law, and regardless
of where asserted); provided, however, that, without
prejudice to the exculpation rights set forth in section
92.7 of the Plan and decretal paragraph 61 hereof,
nothing contained in the Plan or this Confirmation
Order is intended, nor shall it be construed, to be a non-
consensual third-party release of the PSA Creditors,
AFSCME, and of their respective Related Persons by
Creditors of the Debtors.

65. Supplemental Injunction. Notwithstanding

anything contained herein or in the Plan to the
contrary, except to the limited extent provided in
the Plan, all Entities, including Entities acting on
their behalf, who currently hold or assert, have held
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or asserted, or may hold or assert, or may control by

enacting legislation, any Released Claims against any
of the Released Parties based upon, attributable to,
arising out of or relating to the Title III Cases or any
Claim against the Debtors, whenever and wherever
arising or asserted, whether in the United States or
anywhere else in the world, whether sounding in tort,
contract, warranty, statute, or any other theory of
law, equity, or otherwise, shall be, and shall be deemed
to be, permanently stayed, restrained, and enjoined
from taking any action including enacting legislation
against any of the Released Parties for the purpose of
directly or indirectly collecting, recovering, or receiving
any payment or recovery with respect to any Released
Claims for themselves or other entities, arising prior
to the Effective Date (including prior to the Petition
Date), including, but not limited to:

(a) Commencing or continuing in any manner

any action or other proceeding of any kind with respect
to any such Released Claim against any of the Released
Parties or the assets or property of any Released Party;

(b) Enforcing, attaching, collecting, or recovering,

by any manner or means, any judgment, award, decree,
or order against any of the Released Parties or the
assets or property of any Released Party with respect
to any such Released Claim;

(c) Creating, perfecting, or enforcing any Lien

of any kind against any of the Released Parties or the
assets or property of any Released Party with respect
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to any such Released Claim;

(d) Except as otherwise expressly provided

in the Plan or this Confirmation Order, asserting,
implementing, or effectuating any setoff, right of
subrogation, indemnity, contribution, or recoupment
of any kind against any obligation due to any of
the Released Parties or against the property of any
Released Party with respect to any such Released
Claim;

(e) Enacting or adopting any statute, law, rule,

resolution, or policy to cause, directly or indirectly,
any Released Party to have liability for any Released
Claims; and

(f) Taking any act, in any manner, in any place

whatsoever, that does not conform to, or comply with,
the provisions of the Plan or this Confirmation Order;
provided, however, that the Debtors’ compliance with
the formal requirements of Bankruptcy Rule 3016 shall
not constitute an admission that the Plan provides
for any injunction against conduct not otherwise
enjoined under the Bankruptcy Code; provided,
however, that, without prejudice to the exculpation
rights set forth in section 92.7 of the Plan and decretal
paragraph 61 hereof, nothing contained in the Plan
or this Confirmation Order is intended, nor shall it be
construed, to be a non-consensual third-party release
of the PSA Creditors, AFSCME, and of their respective
Related Persons by Creditors of the Debtors.
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66. Term of Existing Injunctions or Stays. Unless

otherwise provided in the Plan or this Confirmation Order,
all injunctions or stays in effect in the Title III Cases
(pursuant to sections 105, 362, or 922 of the Bankruptcy
Code or any order of the Title III Court) and existing on
the Confirmation Date (excluding any injunctions or stays
contained in the Plan or this Confirmation Order) shall
remain in full force and effect through the Effective Date,
except that each injunction imposed by a Court order shall
remain in effect permanently unless the order specifies a
termination date or event, in which case, the specification
set forth in such order shall govern. All injunctions or
stays contained in the Plan or this Confirmation Order
shall remain in full force and effect in accordance with
their terms.

67. Prosecution of Claims. Except as settled and

released herein, from and after the Effective Date, the
Avoidance Actions Trustee shall have the exclusive right
and power to (a) litigate any and all of the Avoidance Actions
and (b) compromise and settle such Avoidance Actions,
upon approval of the Title III Court. The net proceeds
of any such litigation or settlement (after satisfaction of
all costs and expenses incurred in connection therewith)
shall be transferred to the Avoidance Actions Trust for
distribution in accordance with the Plan and the Avoidance
Actions Trust Agreement.

68. Indemnification and Reimbursement Obligations.

For purposes of the Plan, (i) to the extent executory in
nature, the obligations of the Debtors, including, without
limitation, directors and officers insurance policies, to
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Appendix D

indemnify and reimburse its directors or officers that

were directors or officers, respectively, on or prior to the
Commonwealth Petition Date, the ERS Petition Date, or
the PBA Petition Date, as applicable, shall be deemed
assumed as of the Effective Date and (ii) indemnification
obligations of the Debtors arising from conduct of
officers and directors during the period from and after
the Commonwealth Petition Date, the ERS Petition
Date, or the PBA Petition Date, as applicable, shall be
Administrative Expense Claims.

69. Compliance with Tax Requirements. Any party

issuing any instrument or making any distribution under
the Plan shall comply with all applicable withholding and
reporting requirements imposed by any United States
federal, state, or local tax law or Tax Authority, and
all distributions under the Plan shall be subject to any
such withholding or reporting requirements; provided,
however, that payments or redemptions made with respect
to the CVIs shall not be subject to any Commonwealth tax
or withholding obligation imposed by the Commonwealth
now or in the future regardless of whether such payments
or redemptions with respect to the CVIs may be exempt
from the payment of federal or state taxes, including,
without limitation, the twenty-nine percent (29%) Puerto
Rico income tax withholding at source that may otherwise
be applicable to such payments or redemptions. Except
as provided above, each holder of an Allowed Claim that
is to receive a distribution under the Plan shall have the
sole and exclusive responsibility for the satisfaction and
payment of any Taxes imposed on such holder by any
governmental unit, including income, withholding and
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Appendix D

other tax obligations, on account of such distribution. Any

party issuing any instrument or making any distribution
under the Plan has the right, but not the obligation,
to not make a distribution until such holder has made
arrangements satisfactory to such issuing or disbursing
party for payment of any such withholding tax obligations
and, if any party issuing any instrument or making any
distribution under the Plan fails to withhold with respect
to any such holder’s distribution, and is later held liable for
the amount of such withholding, the holder shall reimburse
such party. The Disbursing Agent or the trustee of
the applicable trust may require, as a condition to the
receipt of a distribution (including the applicable trust
certificates), that the holder complete the appropriate
Form W-8 or Form W-9, as applicable to each holder. If
the holder fails to comply with such a request within one
year, such distribution shall be deemed an Unclaimed
Distribution.

70. Documents and Instruments. Each federal, state,

commonwealth, local, foreign, or other governmental
agency is hereby authorized to accept any and all
documents and instruments necessary or appropriate to
effectuate, implement or consummate the transactions
contemplated by the Plan and this Confirmation Order.

71. Fiscal Plan. For so long as the Oversight Board

is in existence, the Oversight Board shall cause the
Fiscal Plan in effect on the Effective Date, and any post-
Effective Date Fiscal Plan certified by the Oversight
Board to include provisions requiring the certified budget
to provide for the payment in each FY of (a) principal
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Appendix D

and interest payable on the New GO Bonds, including,

without limitation, sinking fund payments due in such FY,
and (b) to the extent that the Outperformance Condition
is satisfied in the prior FY, any amounts due and owing
on the CVIs in accordance with the terms of the CVI
Indenture.

72. Claims Against the Commonwealth Based on

Debt Issued by HTA, CCDA, PRIFA, and MBA. The
Claims asserted against the Debtors or the Reorganized
Debtors based on any bonds issued or guaranteed by or
loans made to or guaranteed by HTA, CCDA, PRIFA,
or MBA shall, to the extent allowed, be allowed as a
Claim arising prior to the Petition Date and classified in
Classes 59 through 62 (except Allowed ERS Bond Claims
to the extent secured) and are hereby discharged and the
Debtors and the Reorganized Debtors have no further
liability on account of such Claims.

73. GUC Reserve. On and after the Effective Date,

the Debtors’ and Reorganized Debtors’ liability to
holders of Allowed CW General Unsecured Claims shall
be limited to funding the GUC Reserve in accordance
with section 62.3 of the Plan as follows: subject to the
reductions provided therein, (a) Two Hundred Million
Dollars ($200,000,000.00) on the Effective Date; (b) One
Hundred Million Dollars ($100,000,000.00) on or prior
to December 31, 2022; (c) One Hundred Million Dollars
($100,000,000,00) on or prior to December 31, 2023; (d) One
Hundred Million Dollars ($100,000,000.00) on or prior to
December 31, 2024; and (e) Seventy-Five Million Dollars
($75,000,000.00) on or prior to December 31, 2025. Upon
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the GUC Reserve being funded by the Commonwealth in

accordance with section 62.3 of the Plan, the Debtors and
Reorganized Debtors shall have no further liability on
account of such Allowed CW General Unsecured Claims.

74. PROMESA 407 Claims. All Claims reserved by

holders of bonds issued by HTA, CCDA, PRIFA, or MBA
under that certain Findings of Fact, Conclusions of Law,
and Order Approving the Qualifying Modification for
the Government Development Bank for Puerto Rico
Pursuant to Section 601(m)(1)(D) of the Puerto Rico
Oversight, Management, and Economic Stability Act,
including, without limitation, any claim under section
407 of PROMESA, shall be automatically released on the
Effective Date with no further notice or action.

75. Dairy Producer Claims. Notw ithstanding

anything contained in the Plan or this Confirmation Order
to the contrary, (a) nothing contained herein shall adjust,
enlarge, compromise discharge or otherwise affect the
respective parties’ rights or obligations pursuant to the
Dairy Producer Settlement except with respect to the
Commonwealth’s payment obligation under the Dairy
Producer Settlement, (b) the Commonwealth’s obligation
for the regulatory approval accrual set forth decretal
paragraph 14 of the Dairy Producer Settlement shall be
treated and discharged in accordance with the Plan and
shall not be recouped by a holder of a Dairy Producer
Claim from any other source, and (c) the Plan shall not
affect the regulatory accrual charge being assessed on
and paid from the cost of milk pursuant to the Dairy
Producer Settlement.
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Appendix D

76. Eminent Domain/Inverse Condemnation Claims.

Notwithstanding anything contained in the Plan or
this Confirmation Order to the contrary, (a) nothing
contained in the Plan or this Confirmation Order shall
impair or otherwise affect the treatment provided in
Class 54 to holders of Allowed Eminent Domain/Inverse
Condemnation Claims, (b) as of the Effective Date, and
upon the effective date of a Final Order of a court of
competent jurisdiction determining the validity of and
amount of just compensation attributable to an Allowed
Eminent Domain Claim or Allowed Inverse Condemnation
Claim, the holder of such a Claim shall be entitled to
receive, in full consideration, satisfaction, release, and
exchange of such holder’s unpaid balance of its Allowed
Eminent Domain/Inverse Condemnation Claim, in Cash,
one hundred percent (100%) of such Allowed Eminent
Domain/Inverse Condemnation Claim, and (c) Allowed
Eminent Domain/Inverse Condemnation Claims shall not
be treated in any way as CW General Unsecured Claims
for purposes of distribution. Nothing in the Plan or this
Confirmation Order shall be construed to prevent any
determination of just compensation from including, if and
to the extent the tribunal deems appropriate, interest
on an Allowed Eminent Domain/Inverse Condemnation
Claim. Notwithstanding the foregoing, in the event that
(x) the Oversight Board appeals from the Confirmation
Order and the Findings of Fact and Conclusions of Law
regarding the Title III Court’s ruling that Allowed
Eminent Domain/Inverse Condemnation Claims must be
paid in full or otherwise be rendered unimpaired pursuant
to the Plan, (y) such appeal is successful, and (z) a Final
Order is entered holding that Allowed Eminent Domain/
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Appendix D

Inverse Condemnation Claims may be impaired, subject

to the terms and provisions of Articles LXXVII and
LXXXII of the Plan, each holder of an Allowed Eminent
Domain/Inverse Condemnation Claim shall be entitled
to receive, in full consideration, satisfaction, release, and
exchange of such holder’s unpaid balance of its Allowed
Eminent Domain/Inverse Condemnation Claim, and the
Reorganized Commonwealth shall make, payments, in
Cash, in an amount equal to the pro rata payments to
be made to holders of Allowed CW General Unsecured
Claims up to the GUC Recovery Cap.

77. Oversight Board Ter mination and Post-

Confir mation Powers. Neither the Plan nor this
Confirmation Order shall change the duration of the
Oversight Board’s existence set forth in section 209 of
PROMESA, and neither the Plan nor this Confirmation
Order shall alter any of the Oversight Board’s powers and
duties under each title of PROMESA. Until termination
of the Oversight Board pursuant to section 209 of
PROMESA, the Oversight Board may enforce the Plan.
At all times, each party in interest may enforce Plan
provisions directly affecting the party in interest.

78. Post-Confirmation Fiscal Plans and Budgets

Remain Subject to Oversight Board’s Sole Discretion.
Nothing in the Plan and nothing in this Confirmation
Order (a) alters the powers of the Oversight Board granted
by Titles I and II of PROMESA, including its rights in
its sole discretion, to amend the certified Fiscal Plan and
budget in effect on the Effective Date and to develop and
certify new fiscal plans and budgets at any times, (b)
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Appendix D

grants the government of Puerto Rico any entitlement to

any provisions in certified fiscal plans and budgets, and
(c) grants the government of Puerto Rico any rights and
powers barred by section 108(a) of PROMESA.

79. Government Post-Confirmation Powers and

Duties. Upon termination of the Oversight Board pursuant
to section 209 of PROMESA, the Governor shall enforce
the Plan. If the Governor fails to enforce a Plan provision
directly or indirectly impacting a party in interest after
being requested to do so by a party in interest, each party
in interest that would reasonably be prejudiced or injured
by lack of enforcement may enforce the Plan provision.
At no time prior or subsequent to the termination of the
Oversight Board shall the Governor or Legislature enact,
implement, or enforce any statute, resolution, policy, or
rule reasonably likely, directly or indirectly, to impair the
carrying out of the Plan’s payment provisions, covenants,
and other obligations. Pursuant to section 1142(b) of the
Bankruptcy Code, the Governor shall cause the executive
branch of the Commonwealth government to take all acts
necessary for the consummation of the Plan.

80. Legislation Authorizing Plan Debt Shall Not

Be Repealed, Changed, Or Negated. The Government
of Puerto Rico, including without limitation, any Entity
or Person acting for or on behalf thereof, shall not
enact any statute, resolution, policy, or rule that would
repeal, change, or negate any law currently existing that
authorizes debt issued pursuant to the Plan or any law
pledging the full faith, credit, and taxing power of the
Commonwealth to secure debt issued pursuant to the Plan.
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Appendix D

81. Non-Impair ment of C VIs , SUT. Until all

obligations with respect to the CVIs have been paid or
otherwise satisfied in accordance with their terms, the
Commonwealth, or any Entity or Person acting for or on
behalf thereof, shall take no action that would: (a) limit or
alter the rights vested in the Commonwealth in accordance
with the Plan and this Confirmation Order to fulfill the
terms of any agreements with the holders of CVIs; (b)
impair the rights and remedies of the holders of the CVIs;
or (c) impair the ability of the holders of the CVIs to track
performance of the Measured SUT and the Commonwealth
Rum Tax Revenues available for the payment of the CVIs
in accordance with the terms and provisions of the Plan
and as set forth in the CVI Indenture; provided, however,
that the foregoing shall not preclude the Commonwealth
from exercising its power, through a valid change in law,
to eliminate the Measured SUT, or replace the Measured
SUT with a Substitute Measured Tax, each in accordance
with the CVI Indenture.

82. Reversal/Stay/Modification/Vacatur of Order.

Except as otherwise provided in this Confirmation
Order or a subsequent order issued by this Court or a
higher court having jurisdiction over an appeal of this
Confirmation Order or over a certiorari proceeding in
respect of this Confirmation Order, if any or all of the
provisions of this Confirmation Order are hereafter
reversed, modified, vacated, or stayed by subsequent
order of this Court, or any other court, such reversal,
stay, modification, or vacatur shall not affect the validity
or enforceability of any act, obligation, indebtedness,
liability, priority, or lien incurred or undertaken by the
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Debtors or the Reorganized Debtors, as applicable, prior

to the effective date of such reversal, stay, modification,
or vacatur. Notwithstanding any such reversal, stay,
modification, or vacatur of this Confirmation Order, any
such act or obligation incurred or undertaken pursuant
to, or in reliance on, this Confirmation Order prior to
the effective date of such reversal, stay, modification, or
vacatur shall be governed in all respect by the provisions
of this Confirmation Order and the Plan. To the extent
not specifically reversed, modified, vacated, or stayed by
an order of this Court or an appellate court, all existing
orders entered in the Title III Cases remain in full force
and effect.

83. Retention of Jurisdiction. Notwithstanding the

entry of this Confirmation Order or the occurrence of
the Effective Date, subject to the terms and provisions of
article XCI of the Plan, and except as otherwise provided
in the Plan or herein, pursuant to sections 105, 945(a), and
1142(b) of the Bankruptcy Code, for the time necessary for
the successful implementation of the Plan, this Court shall
retain exclusive jurisdiction to the extent it has exclusive
subject matter jurisdiction, and concurrent jurisdiction to
the extent it has concurrent subject matter jurisdiction,
over all matters arising under PROMESA, arising out
of, and related to, the Title III Cases to the fullest extent
legally permissible, including, but not limited to, subject
matter jurisdiction over the matters set forth in article
XCI of the Plan.

84. Conflicts Among Documents. The provisions of

the Plan and this Confirmation Order shall be construed
 354a

Appendix D

in a manner consistent with each other so as to effect the

purpose of each; provided, however, that, in the event of
any inconsistency between (a) the Plan or this Confirmation
Order and (b) the New GO Bond Legislation, the CVI
Legislation, or any other legislation implementing the Plan
or otherwise in any manner, the terms and provisions of
the Plan or this Confirmation Order, as applicable, shall
prevail; and, provided, further, that, in the event of any
irreconcilable inconsistency between the Plan and this
Confirmation Order, the documents shall control in the
following order of priority: (i) this Confirmation Order, and
(ii) the Plan; and, provided, further, that, in the event of
any inconsistency between this Confirmation Order and
any other order in the Commonwealth Title III Case, the
ERS Title III Case, the PBA Title III Case, the terms
and provisions of this Confirmation Order shall control;
and, provided, further, that nothing contained herein is
intended, nor shall be construed, to modify the economic
terms of the Plan.

85. PBA Leases. Notwithstanding anything contained

herein or in the Plan to the contrary, each of the Unexpired
Leases to which PBA is a party (collectively, the “PBA
Leases”) shall be deemed rejected effective upon the
earliest to occur of (a) June 30, 2022, (b) the date upon
which such PBA Lease expires in accordance with its
terms, (c) the date upon which PBA enters into a new or
amended lease with respect to the leased property subject
to such PBA Lease, (d) such other date of which PBA,
as lessor, provides written notice to the counterparty
to a PBA Lease, and (e) the date upon which AAFAF,
on behalf of the Commonwealth or any Commonwealth
 355a

Appendix D

agency, public corporation or instrumentality, that is a

counterparty, as lessee, with respect to a PBA Lease,
provides written notice to PBA that such PBA Lease
is rejected (in each case, the earliest of (a) through (e),
the “PBA Rejection Date”); provided, however, that,
during the period from the Effective Date up to, but
not including, the applicable PBA Rejection Date, with
respect to any PBA Lease between PBA, as lessor, and
the Commonwealth or any Commonwealth agency, public
corporation or instrumentality, as lessee, monthly lease
payments shall be limited to the lower of (y) the amount
budgeted and approved pursuant to a certified Fiscal
Plan and (z) the monthly costs and expenses associated
with the applicable leased property; and, provided,
further, that any accruals on the books of PBA or any of
the Commonwealth or an agency, public corporation, or
instrumentality of the Commonwealth as counterparty to
a PBA Lease for the unpaid debt service component of rent
under any PBA Lease shall be deemed released, settled,
and discharged as of the PBA Rejection Date.

86. Modifications. The modifications to the Seventh

Amended Plan, as set forth in the Plan, do not adversely
change the treatment of the Claim of any Creditor that
accepted the Seventh Amended Plan and all such Creditors
shall be deemed to have accepted the Plan. Before
substantial consummation of the Plan, the Oversight
Board may modify the Plan at any time after entry of this
Confirmation Order, subject to any limitations set forth
in the Plan (including consent rights) and any stipulation
approved by this Court in connection with the Plan;
provided, however, that the circumstances warrant such
 356a

Appendix D

modification and the Court, after notice and a hearing,

confirms such modified plan under the applicable legal
requirements. For the avoidance of doubt, the Plan shall
not be modified except in accordance with Bankruptcy
Code section 942 and the terms of this Confirmation
Order.

87. Asser ted Surety Claims. Notw ithstanding

anything contained in the Plan to the contrary, to the
extent that the Claim of a surety against any of the
Debtors is determined to be a secured claim and allowed in
whole or in part, by Final Order, or by operation of section
502(a) of the Bankruptcy Code following the expiration
of the period to object to any such Claim in accordance
with the provisions of section 82.1 of the Plan, such Claim
shall be paid in full, in Cash; provided, however, that, in
the event some or all of any such Claim is determined to
be an unsecured claim and allowed in whole or in part, by
Final Order, such Claim shall be treated in accordance
with the provisions of section 17.1, 62.1 or 70.1 of the Plan,
as the case may be.

88. Identification of Additional Retail Investors /

Retail Support Fee. Within five (5) Business Days of the
date hereof, the Oversight Board shall cause the Balloting
Agent to distribute, by mail, electronic mail, or such
other means customary, the form of Certification Notice
annexed hereto as Exhibit E (the “Certification Notice”)
to all known holders, by and through their respective
Nominee(s), of (a) Vintage PBA Bond Claims, (b) 2011
PBA Bond Claims, (c) 2012 PBA Bond Claims, (d) Vintage
CW Bond Claims, (e) 2011 CW Bond Claims, (f) 2011 CW
 357a

Appendix D

Series D/E/PIB Bond Claims, (g) 2012 CW Bond Claims,

and (h) 2014 CW Bond Claims (collectively, the “Bonds”)
who did not submit a vote that was not otherwise revoked
by such holder pursuant to the procedures set forth in
the Disclosure Statement Order on or before 6:00 p.m.
(Atlantic Standard Time) on October 18, 2021.

a. The record date to determine which beneficial

owners of the Bonds (collectively, the “Beneficial
Owners”) are entitled to receive the Certification
Notice and make the Certification (as defined
below) shall be 6:00 p.m. (Atlantic Standard Time)
on October 18, 2021 (the “Certification Record
Date”).

b. Promptly upon receipt of a Certification Notice,

each Nominee (or such Nominee’s agent) shall
distribute such Certification Notice to the
Beneficial Owners eligible as of the Certification
Record Date pursuant to such Nominee’s (or
such Nominee’s agent’s) customary practices for
conveying such information.

c. If it is a Nominee’s (or such Nominee’s agent’s)

customary and accepted business practice
to forward the Certification Notice to (and
collect Certifications from) Beneficial Owners
by information form, email, telephone, or
other customary means of communications, as
applicable, the Nominee (or such Nominee’s agent)
shall employ such method of communication in
lieu of sending a paper copy of the Certification
 358a

Appendix D

Notice to Beneficial Owners; provided, however,

that if the Nominee’s (or such Nominee’s agent’s)
customary internal practice is to provide to
Beneficial Owners an electronic link to the
Certification Notice, the Nominee (or such
Nominee’s agent) may follow such customary
practice in lieu of forwarding paper copies of the
Certification Notice to Beneficial Owners.

d. The Oversight Board shall cause the Balloting

Agent to provide Beneficial Owners of the Bonds
as of the Certification Record Date a frozen
“user CUSIP” (or similarly appropriate non-
tradeable identifier) for the purpose of making
the Certification.

e. Each Beneficial Owner of the Bonds who certifies

that it is an individual who held the Bonds as of
the Certification Record Date in the aggregate
outstanding principal amount of One Million
Dollars ($1,000,000.00) or less in one or more
brokerage account(s), trust account(s), custodial
account(s), or separately managed account(s)
(the “Certification”) pursuant to the procedures
set forth in this decretal paragraph 88 hereof
shall be deemed a Retail Investor for purposes
of distributions to be made pursuant to the Plan,
and shall receive a distribution of the Retail
Support Fee through the “user CUSIP” in
accordance with the terms and provisions of the
Plan.
 359a

Appendix D

f. Beneficial Owners of the Bonds must deliver

their certification instructions to (or otherwise
coordinate with) their Nominee according to
the instructions in the Certification Notice in
sufficient time for the Nominee to effectuate
the Beneficial Owner’s Certification through
The Depository Trust Company’s (“DTC”)
Automated Tender Offer Program (“ATOP”)
in accordance with the procedures of DTC and
be received on ATOP by 6:00 p.m. (Atlantic
Standard Time) on the first Business Day thirty
(30) days from and after the date hereof (the
“Certification Deadline”);10 provided, however,
that any holder who has executed, completed,
and delivered through ATOP in accordance
with the procedures of DTC its Certification
may revoke such Certification and withdraw any
securities that have been tendered with respect
to a Certification through ATOP in accordance
with the procedures of DTC on or before the
Certification Deadline.

g. All securities that are tendered with respect to

a Certification shall be restricted from further
trading or transfer through the Effective Date
of the Plan.

89. Provisions of Plan and Order Nonseverable and

Mutually Dependent. The provisions of the Plan and
this Confirmation Order, including the findings of fact

10.  6:00 PM (Atlantic Standard Time) is equivalent to 5:00 PM

(Eastern Standard Time).
 360a

Appendix D

and conclusions of law set forth in the Findings of Fact

and Conclusions of Law, are nonseverable and mutually
dependent.

90. Governing Law. Except to the extent that other

federal law is applicable, or to the extent that an exhibit to
the Plan or any document to be entered into in connection
with the Plan provides otherwise, the rights, duties, and
obligations arising under the Plan shall be governed
by, and construed and enforced in accordance with,
PROMESA (including the provisions of the Bankruptcy
Code made applicable under section 301 of PROMESA)
and, to the extent not inconsistent therewith, the laws
of the Commonwealth of Puerto Rico giving effect to
principles of conflicts of laws.

91. PFC Reservation. Neither the Plan nor this

Confirmation Order determine, affect, or limit any claims
or rights U.S. Bank Trust National Association and U.S.
Bank National Association, as Trustee for bonds issued
by PFC, may have against GDB, DRA, or the GDB/PET,
including, without limitation, claims and rights in respect
of letters of credit.

92. Applicable Nonbankruptcy Law. Pursuant to

section 1123(a) of the Bankruptcy Code, as applicable
to the Title III Cases pursuant to section 301(a) of
PROMESA, the provisions of this Confirmation Order and
the Plan shall apply and be enforceable notwithstanding
any other wise applicable nonbankruptcy law. The
documents contained in the Plan Supplement and such
other documents necessary or convenient to implement
the provisions of this Confirmation Order and the Plan (as
such documents may be further, amended, supplemented,
 361a

Appendix D

or modified and filed with the Court on or prior to the

Effective Date), including, without limitation, the New GO
Bonds, the New GO Bonds Indenture, the GO CVIs, the
GO CVI Indenture, the Clawback CVIs, the Clawback CVI
Indenture, and the Avoidance Actions Trust Agreement,
provide adequate means for implementation of the Plan
pursuant to section 1123(a)(5) of the Bankruptcy Code
and, as of the occurrence of the Effective Date, shall
constitute legal, valid, and binding obligations of the
Debtors, as applicable, and valid provisions to pay and to
secure payment of the New GO Bonds, the GO CVIs, and
the Clawback CVIs, as applicable, pursuant to section
944(b)(3) of the Bankruptcy Code, and be enforceable in
accordance with their terms.

93. Waiver of Filings. Any requirement pursuant to

Bankruptcy Rule 1007 obligating the Debtors to file any
list, schedule, or statement with the Court or the Office
of the U.S. Trustee is hereby waived as to any such list,
schedule, or statement not filed as of the Effective Date.

94. Notice of Order. In accordance with Bankruptcy

Rules 2002 and 3020(c), as soon as reasonably practicable
after the Effective Date, the Debtors shall serve notice of
the entry of this Confirmation Order and the occurrence
of the Effective Date, substantially in the form attached
as Exhibit B hereto, to all parties who hold a Claim in
the Commonwealth Title III Case, the ERS Title III
Case, the HTA Title III Case, and the PBA Title III
Case, as well as the Creditors’ Committee, the Retiree
Committee, the U.S. Trustee, any party filing a notice
pursuant to Bankruptcy Rule 2002, the Securities and
Exchange Commission, the Internal Revenue Service,
and the United States Attorney for the District of Puerto
 362a

Appendix D

Rico. Such notice is hereby approved in all respects and

shall be deemed good and sufficient notice of entry of this
Confirmation Order.

95. No Waiver. The failure to specifically include any

particular provision of the Plan in this Confirmation Order
shall not diminish the effectiveness of such provision nor
constitute a waiver thereof, it being the intent of this Court
that the Plan is confirmed in its entirety and incorporated
herein by this reference.

SO ORDERED.

Dated: January 18, 2022

/s/ Laura Taylor Swain

LAURA TAYLOR SWAIN
United States District Judge
 363a

APPENDIX E —Appendix E THE UNITED

ORDER OF
STATES DISTRICT COURT FOR THE DISTRICT
OF PUERTO RICO, FILED DECEMBER 14, 2021

UNITED STATES DISTRICT COURT FOR THE

DISTRICT OF PUERTO RICO

In re:

THE FINANCIAL OVERSIGHT AND

MANAGEMENT BOARD FOR PUERTO RICO,

as representative of

THE COMMONWEALTH OF PUERTO RICO et al.,

Debtors.1

1.  The Debtors in these Title III Cases, along with each Debtor’s
respective Title III case number and the last four (4) digits of each
Debtor’s federal tax identification number, as applicable, are the (i)
Commonwealth of Puerto Rico (the “Commonwealth”) (Bankruptcy
Case No. 17-BK-3283-LTS) (Last Four Digits of Federal Tax ID:
3481); (ii) Puerto Rico Sales Tax Financing Corporation (“COFINA”)
(Bankruptcy Case No. 17-BK-3284-LTS) (Last Four Digits of Federal
Tax ID: 8474); (iii) Puerto Rico Highways and Transportation
Authority (“HTA”) (Bankruptcy Case No. 17-BK-3567-LTS) (Last
Four Digits of Federal Tax ID: 3808); (iv) Employees Retirement
System of the Government of the Commonwealth of Puerto Rico
(“ERS”) (Bankruptcy Case No. 17-BK-3566-LTS) (Last Four Digits
of Federal Tax ID: 9686); (v) Puerto Rico Electric Power Authority
(“PREPA”) (Bankruptcy Case No. 17-BK-4780-LTS) (Last Four
Digits of Federal Tax ID: 3747); and (vi) Puerto Rico Public Buildings
Authority (“PBA”) (Bankruptcy Case No. 19-BK-5523-LTS) (Last
Four Digits of Federal Tax ID: 3801) (Title III case numbers are
 364a

Appendix E

PROMESA

Title III

No. 17 BK 3283-LTS

(Jointly Administered)

ORDER REGARDING CERTAIN ASPECTS OF

MOTION FOR CONFIRMATION OF MODIFIED
EIGHTH AMENDED TITLE III JOINT PLAN OF
ADJUSTMENT OF THE COMMONWEALTH OF
PUERTO RICO, ET AL.

The Court, having presided over the November

2021 hearing on the Debtors’ motion for confirmation
of the Modified Eighth Amended Title III Joint Plan
of Adjustment of the Commonwealth of Puerto Rico,
et al. (Docket Entry No. 19365 in Case No. 17-3283, as
modified pursuant to any revisions made at or subsequent
to the Confirmation Hearing as set forth in the Proposed
Confirmation Order, including the Plan Supplement, and
as may be modified pursuant to section 313 of PROMESA,
the “Proposed Plan”), 2 and having reviewed carefully the
parties’ submissions and all of the evidence submitted
in connection therewith, including the Notice of Filing
of Revised Proposed Order and Judgment Confirming
Modified Eighth Amended Title III Joint Plan of

listed as Bankruptcy Case numbers due to software limitations).

2.  All docket references are to entries in Case No. 17-3283

unless otherwise indicated.
 365a

Appendix E

Adjustment of the Commonwealth of Puerto Rico, et al.

(Docket Entry No. 19368, the “Proposed Confirmation
Order”) and the Notice of Filing Revised Proposed
Findings of Fact and Conclusions of Law in Connection
with Confirmation of the Modified Eighth Amended
Title III Joint Plan of Adjustment of the Commonwealth
of Puerto Rico, et al. (Docket Entry No. 19427, the
“Proposed FFCL” and, together with the Proposed Plan
and the Proposed Confirmation Order, the “Proposed Plan
Materials”), has identified certain materially problematic
aspects of the Debtors’ Proposed Plan Materials. This
Memorandum Order identif ies the relevant issues, sets
forth the Court’s views, and invites the Debtors’ proposal
of modifications consistent with this Memorandum Order
or a showing of cause as to why the motion for confirmation
should not be denied in the absence of such modifications.

I. S C O P E O F P R O P O S E D P R E E M P T I O N
PROVISIONS

Paragraphs 145 and 146 of the Proposed FFCL

include certain proposed findings and conclusions
concerning preemption of Commonwealth law, including
provisions that quote, mirror, or repeat provisions of the
Proposed Plan and the Proposed Confirmation Order.3 The
Court views the formulation of these preemption issues
as problematic for several reasons.

3.  For efficiency, in this section the Court will cite and quote
the provisions of the Proposed FFCL, with the understanding that
equivalent language in the other Proposed Plan Materials raises the
same concerns and should be addressed accordingly.
 366a

Appendix E

In general, the preemption provisions in the Proposed

Plan Materials are overly vague and/or broad and
thus appear to be inconsistent with section 314(b)(3) of
PROMESA. To the extent that the preemption language
in the Proposed Plan Materials simply reiterates the effect
of section 4 of PROMESA (see, e.g., Proposed FFCL ¶ 145
(“all laws (or such portions thereof ) of the Commonwealth
of Puerto Rico . . . inconsistent with PROMESA, are held
preempted”), it is too vague because it is not clear what,
if any, independent effect or purpose it serves. It also
appears too broad to the extent it purports to declare
preempted the entirety of statutes that may not be focused
solely on financial obligations, the application of funds, or
other economic structures or measures.

Accordingly, to the extent that the Proposed Plan

Materials need to include one or more provisions
recognizing the preemption Commonwealth statutes, it
appears to the Court that a preemption provision should be
directed to specified legislation and should include language
specifically addressing the scope of such preemption. For
example, based upon the Declaration of Natalie Jaresko
in Respect of Confirmation of Seventh Amended Title
III Joint Plan of Adjustment for the Commonwealth
of Puerto Rico, et al. (Docket Entry No. 19054-4, the
“Jaresko Declaration”), it appears that the intention of
the Oversight Board is that laws must be preempted if
they (i) require the Commonwealth to spend its money
to repay its current general obligation and guaranteed
debt in full without regard to the fiscal plans and budgets
certified by the Oversight Board, (ii) authorize the
Commonwealth to issue debt without obtaining Oversight
 367a

Appendix E

Board approval, (iii) require the Governor to approve any

debt the Commonwealth issues, regardless of whether
that debt issuance is authorized under PROMESA or the
Plan, (iv) require the Commonwealth to transfer money
to numerous other entities to spend on various purposes,
outside the Oversight Board’s certified budget, fiscal
plan and Plan, and/or (v) require the Commonwealth to
provide pension and other benefits or payments to various
retirees at specified rates without regard to whether such
pensions and other benefits are provided for in a certified
budget or fiscal plan or Title III plan of adjustment.
(Jaresko Decl. ¶¶ 230-35.) Express language clarifying
the intended scope of preemption, together with record
supported findings as to projected costs and inconsistency
with the certified budget, fiscal plan and/or assumptions
underlying the Proposed Plan, would appear to serve the,
would appear to serve the goals of the Oversight Board
(i.e., ensuring that Commonwealth legislation does not
impede the implementation and effectuation of the Plan)
while providing adequate information to the Court and
parties and ensuring that the Proposed Plan is consistent
with section 314(b)(3) of PROMESA.

Second, to the extent that any preemption provision

of the Proposed Plan Materials would effectively nullify a
law or portion of a law due to inconsistency with a certified
budget or fiscal plan, it is not clear whether or how any
rights that may have accrued during the postpetition
period would be affected or can be affected. While non-
inclusion of a particular obligation in a certified budget or
fiscal plan may preempt the Commonwealth’s appropriation
of governmental resources to pay that obligation, the
 368a

Appendix E

Debtors have not shown that there is any clear basis in

law or fact to conclude that such preemption invalidates
the law creating such obligation in the first place, or that it
invalidates the obligation to pay where a creditor provides
beneficial postpetition consideration to a debtor pursuant
to a postpetition transaction with a debtor. See Woburn
Assocs. v. Kahn (In re Hemingway Transp., Inc.), 954
F.2d 1, 5 (1st Cir. 1992) (“As a general rule, a request for
priority payment of an administrative expense pursuant
to Bankruptcy Code § 503(a) may qualify if (1) the right
to payment arose from a postpetition transaction with the
debtor estate, rather than from a prepetition transaction
with the debtor, and (2) the consideration supporting
the right to payment was beneficial to the estate of the
debtor.”).

Third, the Oversight Board’s addition of Act 80-

2020, Act 81-2020, and Act 82-2020 to the amended list
of preempted statutes in the Proposed Plan Materials
occurred after the close of evidence at the Confirmation
Hearing, and thus the Court finds little factual basis in
the record4 for inclusion of those statutes in any list of
preempted statutes.

4.  The Supplemental Declaration of Gaurav Malhotra of Ernst

& Young LLP in Respect of Confirmation of Eighth Amended Title
III Joint Plan of Adjustment for the Commonwealth of Puerto Rico,
et al. (Docket Entry No. 19057) does briefly discuss the cost of
“several pension-related laws,” including Act 81-2020, but it does
not specifically reference Act 80 or Act 82. (Malhotra Supp. Decl.
¶ 20.)
 369a

Appendix E

Fourth, the Proposed FFCL contemplates the

preemption of all “laws enacted prior to June 30, 2016,
that provide for . . . transfers from . . . one of [the
Commonwealth’s] instrumentalities to any agency or
instrumentality,” but the Debtors have not apparently
provided a basis in law or fact for the preemption of
laws that impose obligations on non-debtor entities. The
Proposed Plan Materials should clarify the temporal
scope of preemption as to laws that predate the enactment
PROMESA. The Proposed Plan Materials should clarify
that the Proposed Plan only contemplates preemption as
to the obligations of the Debtors, and only to the extent
that such laws provided for obligations existing on or after
June 30, 2016.

Fifth, the Proposed FFCL provides that “each of the

preempted laws is preempted permanently” (Proposed
FFCL ¶ 145), but the scope of the proscription must be
clarified substantially. It is not clear to the Court whether
this language simply means that preempted statutory
provisions, as codified, will not come back into effect,
or whether this provision is intended to prohibit the
enactment of new laws (that have not yet been formulated
by the Legislative Assembly) that re-create old laws. If
the latter meaning is intended, the Oversight Board must
address how the government or a court would be able
to determine whether enactment of a post-confirmation
statute would (impermissibly) re-create a preempted law
as opposed to (permissibly) creating a new law, and why
the Title I and Title II mechanisms for challenging future
legislation would not suffice as means of addressing such
action by the Commonwealth.
 370a

Appendix E

II. TREATMENT OF “UNSECURED” PORTIONS OF

ALLOWED EMINENT DOMAIN CLAIMS AND
TREATMENT OF INVERSE CONDEMNATION
CLAIMS

The Court also finds that the Proposed Plan’s

treatment of “unsecured” portions of allowed eminent
domain claims (some of which form a part of Class 54),
and the absence of any appropriate treatment for allowed
inverse condemnation claims (which do not currently form
a part of Class 54) (together, the “Per Se Creditors”), is
materially defective because the Proposed Plan does not
provide for full payment of the “unsecured” portion of those
claims and the Takings Clause of the Constitution of the
United States prohibits the Debtors from impairing and
discharging any obligation to provide “just compensation”
for the physical taking of private property for public
use. U.S. Const. am. V. As such, the Proposed Plan is in
contravention of section 314(b)(3) of PROMESA. 48 U.S.C.
§ 2174. Although these claims differ in their procedural
postures, each seeks just compensation for an alleged
physical taking of property by the Commonwealth prior
to the filing of the Commonwealth’s bankruptcy petition.

Allowed eminent domain Claims are separately

classified in Class 54 of the Proposed Plan. The holders
of such Claims assert they hold prepetition constitutional
Claims based on seizures of property pursuant to the
Commonwealth’s eminent domain power. Under applicable
Puerto Rico law, upon commencement of a condemnation
proceeding, title to a subject property is transferred to the
Commonwealth and funds are deposited “for the benefit
 371a

Appendix E

and use of the natural or artificial person or persons

entitled thereto, of the amount estimated as compensation
and specified” for the value of the property interest or
right of the former title holder. 32 L.P.R.A. § 2907. The
Debtors assert that eminent domain claims are properly
classified in Class 54 on the theory that they are partially
secured by funds deposited by the Commonwealth with
the Clerk of the Court of First Instance in connection
with condemnation proceedings underlying such Claims.
(Proposed Plan § 58.1.) Claims within Class 54 are
currently treated as secured Claims to the extent the
Claims are allowable and there is cash on deposit for them
with the Clerk of the Court of First Instance. (Proposed
Plan § 58.1.) To the extent an allowed Class 54 Claim
exceeds the cash on deposit with the Clerk of the Court
of First Instance, the Proposed Plan currently treats
the Claims as Class 58 CW General Unsecured Claims
entitled to the same treatment as other holders of CW
General Unsecured Claims. (Id.; Jaresko Decl. ¶ 54.)
Allowed inverse condemnation Claims are not separately
classified in the Proposed Plan. Such claims are treated
as Class 58 CW General Unsecured Claims subject to the
same treatment as CW General Unsecured Claims. (See
Nov. 22, 2021, Hr’g Tr. 11:12-20.)

The Per Se Creditors contend that their interests in

just compensation are fully secured and, even if they are
not secured, that they are nevertheless entitled to payment
in full of their allowable unsecured Claims because the
Claims are based on the Fifth Amendment of the U.S.
Constitution. The issue presented by the claimants is
whether they are entitled to have the unsecured portions
 372a

Appendix E

of their Claims designated as nondischargeable or

otherwise required to be paid in full. It is undisputed
that the Proposed Plan does not currently except the
eminent domain and inverse condemnation Claims from
discharge. The Debtors and Per Se Creditors disagree
as to whether the Court can and should except them
from discharge. Because the Fifth Amendment of the
U.S. Constitution provides “private property [shall not]
be taken for public use, without just compensation,” the
claimants assert Congress lacks power to legislate the
discharge of eminent domain or inverse condemnation
claims for less than payment in full of just compensation.
Conversely, the Debtors contend that article I, section 8,
clause 4 of the Constitution of the United States grants
Congress the power to pass uniform laws on the subject of
bankruptcies, and empowers Congress to provide for the
discharge of eminent domain claims for less than payment
in full as the Debtors purport to do in the Proposed Plan.

For the following reasons, the Court concludes,

as to such “unsecured” eminent domain and inverse
condemnation claims that are ultimately allowed, that the
Proposed Plan as currently written is materially defective
because the treatment of such claims would violate the
Takings Clause of the Constitution of the United States.

The Per Se Creditors rely on Supreme Court decisions

for the propositions that a physical invasion of property
constitutes a per se taking (Cedar Point Nursery v.
Hassid, 141 S. Ct. 2063, 2071 (2021)), for which an
irreducible entitlement to just compensation immediately
ripens under the Takings Clause (Knick v. Twp. of Scott,
 373a

Appendix E

139 S. Ct. 2162, 2171 (2019); Blanchette v. Conn. Gen.

Ins. Corp., 419 U.S. 102, 155 (1974) (“[A]ny deficiency of
constitutional magnitude in the compensation [of seized
property] . . . will indeed be a taking of private property
for public use.”)), and that the bankruptcy code is subject
to the Takings Clause (see Louisville Joint Stock Land
Bank v. Radford, 295 U.S. 555, 589, 601-02 (1935); United
States v. Sec. Indus. Bank, 459 U.S. 70, 75, 78, 80, 82
(1982)). See also In re City of Detroit, 524 B.R. 147, 304-07
(Bankr. E.D. Mich. 2014).

The Debtors respond that, to the extent portions of

these Takings Clause claims are not secured by deposits
of funds with courts, they are simply unsecured claims
that are subject to impairment and discharge under the
bankruptcy code and that, while Supreme Court decisions
have recognized that the Fifth Amendment restricts
the bankruptcy code, it does so only to the extent that
property interests are secured. See Sec. Indus. Bank,
459 U.S. at 75-76, 78; Wright v. Union Cent. Life Ins. Co.,
311 U.S. 273, 278 (1940) (the constitution protects “the
rights of secured creditors, throughout the proceedings,
to the extent of the value” of the creditors’ collateral).
See also Cobb v. City of Stockton (In re City of Stockton),
909 F.3d 1256 (2018); Poinsett Lumber Mfg. v. Drainage
Dist. No. 7, 119 F.2d 270 (8th Cir. 1941). The Debtors
also argue that claims for just compensation under the
Takings Clause are not meaningfully distinguishable
from other constitutional claims resulting in relief, which
are commonly dischargeable in bankruptcy. (See, e.g.,
Docket Entry No. 18874 ¶¶ 86, 88 (quoting In re City
of Stockton, 909 F.3d at 1268 (“[C]onstitutionally based
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lawsuits seeking money damages, such as § 1983 claims,

are routinely adjusted in bankruptcy.”)).)

Federal statutes, such as the bankruptcy code and

PROMESA, are subject to the strictures of the Constitution,
including the Fifth Amendment prohibition of government
takings of property without just compensation. Indeed,
the bankruptcy power conferred by article I, section 8 of
the Constitution of the United States is itself subject to
the Fifth Amendment. See Radford, 295 U.S. at 589 (“The
bankruptcy power, like the other great substantive powers
of Congress, is subject to the Fifth Amendment.”). This
principle was reaffirmed and extended by the Supreme
Court in Security Industrial Bank, where the Court
cautioned that, “however ‘rational’ the exercise of the
bankruptcy power may be, that inquiry is quite separate
from the question whether the enactment takes property
within the prohibition of the Fifth Amendment.” 459 U.S.
at 75. In keeping with traditional takings jurisprudence,
the predicate inquiry must concern the nature of the
property at issue and whether a taking occurred. See
also id. at 76-77 (classifying secured interests in contract
rights as properly analyzed under the factors set forth in
Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104,
124 (1978), as distinguished from jurisprudence governing
fee simple interest in real property).

The Debtors’ application of the distinction between

secured and unsecured interests under the bankruptcy
code to determine whether a Takings Clause-related
obligation can be impaired is inconsistent with the Fifth
Amendment, which requires first assessing the origin
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of the payment obligation: whether it arises from a

government taking of private property for public use.
While a security interest is a type of property that can
be protected by both the Fifth Amendment and the
bankruptcy code, a physical invasion (in this case, of
real property) falls squarely within the ambit of Fifth
Amendment protection, whether or not the government
entity has provided any security for its obligation to pay
just compensation.

The Supreme Court’s takings jurisprudence requires

evaluating whether the real property was subject to a
physical invasion (implicating per se takings analysis) or
whether, for example, it was subjected to a use restriction
(in which case the Penn Central factors are applied to
determine whether a regulatory taking occurred). Cedar
Point Nursery, 141 S. Ct. at 2071-72. The Per Se Creditors
assert, and the Debtors do not dispute, that their claims
concern the physical invasion by the Commonwealth
of privately owned real property (giving rise to either
eminent domain or inverse condemnation claims); the
Court therefore confines its examination to a per se
takings analysis. “These sorts of physical appropriations
constitute the ‘clearest sort of taking,’ and we assess them
using a simple, per se rule: The government must pay for
what it takes.” Id. at 2071 (emphasis in original) (internal
citation omitted).

The Cour t now turns to the question of just

compensation and whether valid claims for just
compensation can be impaired in bankruptcy. Unlike
other constitutional prohibitions of government conduct,
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for violations of which Congress has created causes

of action, the Takings Clause of the constitution itself
mandates a remedy of “just compensation” in the event
that “private property [is] taken for public use.” U.S.
Const. am. V. In Knick, the Supreme Court stated that
“[t]he Fifth Amendment right to full compensation arises
at the time of the taking, regardless of post-taking
remedies that may be available to the property owner,” a
principle derived from Jacobs v. United States, 290 U.S.
13, 17 (1933), in which the Court stressed that the owner
of a “valid takings claim is entitled to compensation as if it
had been ‘paid contemporaneously with the taking’—that
is, the compensation must generally consist of the total
value of the property when taken, plus interest from that
time.” Knick, 139 S. Ct. at 2170. Thus, unlike judgment
creditors whose statutory remedies for violations of other
constitutional provisions are dischargeable, holders of
takings claims have a constitutional right (rather than a
statutory remedy) to just compensation that is not subject
to impairment or discharge under a plan of adjustment.
See Blanchette, 419 U.S. at 155 (“[A]ny deficiency of
constitutional magnitude in the compensation [of seized
property] . . . will indeed be a taking of private property
for public use.”); see also In re City of Detroit, 524 B.R.
at 268-70. Put differently, “just compensation” is not a
statutory remedy for a constitutionally identified wrong
but is instead a necessary condition to the exercise of
government power to take private property for public use.

The federal appellate cases cited by the Debtors

are inapposite, both because they are materially
distinguishable and because they do not support an
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alternative interpretation of the Supreme Court’s

jurisprudence. The case of Poinsett Lumber is inapposite
because, unlike the instant matter where claimants have
timely filed proofs of claim and objected to the treatment
of their claims under the Plan, the claimant in that case
had failed to timely preserve its right to object to the
readjustment until after the plan had been confirmed.
Poinsett Lumber Mfg., 119 F.2d at 274 (“Appellant could
not remain silent until the proceedings had advanced to
the stage of a final decree and then, in a collateral attack,
make the claim successfully that its cause of action is not
included in the plan of composition, nor affected by it,
nor dealt with therein.”). Moreover, although the Eighth
Circuit did reject the creditor’s argument that the Takings
Clause protected its claim from discharge, the debtor
had previously been found to not be a public entity. Id. at
272-73; Luehrmann v. Drainage Dist. No. 7 of Poinsett
Cnty., 104 F.2d 696, 698 (8th Cir. 1939) (“[Elsewhere,]
this court held that an Arkansas Drainage District is
not a governmental agency as respects the question of
whether the district is subject to equity jurisdiction. This
ruling is based upon the decisions of the Supreme Court of
Arkansas holding that drainage districts are quasi-public
corporations which are not political or civil divisions of the
state like counties and municipal corporations created to
aid in the general administration of the government.”).
Accordingly, Poinsett Lumber does not support the
Debtors’ theory that a government debtor may impair
and discharge a valid Takings Clause claim for just
compensation, let alone for the reason that the claim for
just compensation is unsecured rather than secured.
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The Debtors’ reliance on In re City of Stockton is

likewise unavailing. First, the creditor in that Ninth
Circuit case had slept on his rights to oppose the
discharge of his claim under the plan of adjustment. The
majority determined that Mr. Cobb had not sought any
stay relief, that the plan had already been substantially
consummated, that reversal of the confirmation order
would have threatened the settlements underlying the
plan to the prejudice of settlement participants, and that
the relief sought required dismantling the plan, and so his
claim was deemed equitably moot. In re City of Stockton,
909 F.3d at 1263-65. Such questions of equitable mootness
are simply not present at this pre-confirmation stage in
the instant proceeding. Second, and more importantly,
the Debtors’ reliance on the Ninth Circuit’s alternate
finding that Mr. Cobb’s claim was dischargeable because
his interest was unsecured rather than secured, not only
lacks any clear basis in Supreme Court jurisprudence, but
it appears to derive from a conflation of the constitutional
guarantee of just compensation under the Takings Clause
with statutory remedies for other constitutional violations.
See id. at 1268 (“[O]ther constitutionally based lawsuits
seeking money damages, such as § 1983 claims, are
routinely adjusted in bankruptcy[.]”). See also id. at 1278
(Friedland, J. dissenting) (“[T]he Constitution’s mandate
that takings claims be excepted from discharge does not
depend on whether those claims were initially classified in
any bankruptcy proceeding as secured or unsecured; the
whole point of nondischargeability is that nondischargeable
claims pass through bankruptcy unaffected[.]”). The Court
declines any invitation to overlook the unique nature
of the Takings Clause here by conditioning the Fifth
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Amendment requirement of just compensation on the

existence of security for the obligation. To hold otherwise
would be to make the Takings Clause subject to federal
bankruptcy law, which is precisely the opposite of what
the Supreme Court has required. 5

5.  The Oversight Board also contended, for the first time, at
oral argument that the Court should allow the impairment and
discharge of per se takings claims because (i) Congress can otherwise
bar Takings Clause claims through the operation of statutes of
limitations, just like any other claim (see, e.g., Nov. 22, 2021, Hr’g Tr.
60:10-25 (discussing Block v. North Dakota, 461 U.S. 273, 292 (1983))),
and (ii) “the bankruptcy power is not always subject to the Fifth
Amendment when it comes to discharge and avoidance of property
interests,” such that “if you can avoid a property interest under
bankruptcy code section 544, surely you can discharge an unsecured
claim to just compensation under section 944.” (Nov. 23, 2021, Hr’g
Tr. 26:20-27:5.) The first argument fails because (a) the cases cited by
the Oversight Board are distinguishable (including Block), because
none of them concerned any limitation periods for raising Takings
Clause claims, nor do any of them provide an analytical basis for
determining that Congress can statutorily limit a constitutional
claim to which sovereign immunity is not a barrier; (b) statutes of
limitations concern litigation decisions over which claimants have
control, such as the timing of filing a claim, and therefore they do not
support by analogy the Oversight Board’s argument that PROMESA
or the bankruptcy code can affect Takings Clause claims in a
manner beyond the control of the claimants; and (c) whereas statutes
of limitations serve as a procedural bar to claims, the Oversight
Board’s theory would affect the substance of Takings Clause claims,
regardless of when they are brought. The Oversight Board’s second
argument fares no better: 11 U.S.C. § 544(b)(1) only allows for the
avoidance of transfers that would be voidable under applicable law.
Section 544(b)(1) is thus already restricted to transfers that are
“voidable under applicable law,” which accommodates restrictions
imposed by non-bankruptcy law, including the Takings Clause. 11
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Appendix E

Accordingly, the Court has concluded that the per se

claims asserted by the Per Se Creditors, to the extent
they are ultimately allowed as such, are not subject to
impairment or discharge, and that the Per Se Creditors’
objections to confirmation should be sustained. The
Proposed Plan’s treatment of eminent domain and inverse
condemnation claims is therefore in violation of the
Takings Clause of the Constitution of the United States.6
Thus, the Court will not confirm the Proposed Plan as

U.S.C. § 544(b)(1). Further, the Takings Clause serves only as a

narrow boundary to the Debtors’ avoidance powers. In situations
where regulatory takings are at issue, the authority under section
544(b)(1) to avoid transfers may still be exercised in cases where the
Penn Central analysis permits. See also 11 U.S.C. §§ 547(b), 548(a). It
is only in the limited situations, like those discussed above, in which it
appears that the Supreme Court’s jurisprudence on Takings Clause
claims would impose a limit a debtor’s avoidance powers. The Court
need not, and does not, express any opinion here as to the application
of statutes of limitation to Takings Clause claims.

6.  The Court’s analysis should not be construed to prejudge

whether all Per Se Creditors must receive “full” compensation
for their Takings Clause claims. The Fifth Amendment mandates
that a meritorious takings claimant receive just compensation,
as determined by the court. See In re City of Stockton, 909 F.3d
at 1279 (Friedland, J. dissenting). The Court does not decide or
prejudge today the meaning or quantum of just compensation for
any particular claimant. For some claimants, that amount has
already been adjudicated. For others, that determination has not
yet been made. Rather, the Court’s limited determination here is
that any treatment in the Proposed Plan that provides less than just
compensation for allowed eminent domain and inverse condemnation
claims by way of impairment and discharge in bankruptcy does not
comply with the Fifth Amendment.
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Appendix E

written because Class 54 relegates to partial payment

the portion of Allowed Eminent Domain Claims that
is not on deposit with the Court of First Instance, and
makes no provision for full payment of allowed inverse
condemnation claims.

III. MISCELLANEOUS OTHER PROVISIONS

The Court has also identif ied other provisions of the

Proposed Confirmation Order, the Proposed FFCL, and
the Proposed Plan that warrant revision in any subsequent
filing.

First, the Rejection or Assumption of Remaining

Executory Contracts and Unexpired Leases provision
(paragraph 29) of the Proposed Confirmation Order
provides that “all Executory Contracts and Unexpired
Leases that exist between the Debtors and any Entity,
and which have not expired by their own terms on or prior
to the Confirmation Date, shall be deemed rejected by
the Debtors as of the Effective Date . . .”, except in very
limited instances delineated in that provision. However,
the Rejection Damages Claim provision (paragraph 31)
provides inter alia that claims arising from rejected
contracts are barred if they are not asserted by the later
of thirty days after “(i) the Confirmation Date or (ii) entry
of an order authorizing rejection.” As a practical matter,
the rejection of a contract needs to precede the period of
time for a counterparty to file a claim arising from the
rejected contract. As currently written, the Rejection
Damages Claim provision could limit a counterparties’
ability to object to the rejection of a contract that is
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Appendix E

“added” to the Debtors’ rejection list beyond (i) 30

days after the Confirmation Date, or (ii) after an order
authorizing rejection of a contract has been entered. Thus,
the timeline for the Debtors’ authority to reject contracts,
the Effective Date, could extend beyond the period of time
for counterparties to file claims arising from rejected
contracts. Accordingly, these provisions warrant revision.

Second, the Appointments Related Litigation/

Uniformity Litigation provision (paragraph 63) of the
Proposed Confirmation Order includes “the compromise
and settlement of the Commonwealth-COFINA Dispute
and the releases, exculpations and injunctions provided
pursuant to Article XCII of the Plan and herein.” However,
section 92.8 of the Proposed Plan does not include a
reference to the Commonwealth-COFINA Dispute. Thus,
this provision warrants revision.

Third, section 76.4 of the Proposed Plan provides

“[t]he parties to such Executory Contracts and Unexpired
Leases will have twenty (20) days from the date of service
of such notice to file and serve any objection to the cure
amounts listed by the Debtors. If there are any objections
filed, the Title III Court shall hold a hearing on a date
to be set by the Title III Court.” On November 23, 2021,
the Debtors filed a Notice of Executory Contracts and
Unexpired Leases to be Assumed Pursuant to Title III
Plan of Adjustment (Docket Entry No. 19353 in Case No.
17-3283). To the extent this filing is intended to satisf y
in part or in whole section 76.4 of the Plan, this provision
warrants revision.
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Appendix E

Fourth, paragraph 39 of the Proposed FFCL provides

“[o]n July 12, 2021, the Oversight Board certified the
modification of the Fourth Amended Plan and the
submission of the Fifth Amended Title III Joint Plan of
Adjustment of the Commonwealth of Puerto Rico, et al.
(Docket Entry No. 17306) (the “Fifth Amended Plan”).
(Debtors Exhibit 127).” While the Debtors reference
Exhibit 127 as the resolution certif ying the modification to
the Fourth Amended Plan of Adjustment, Debtors Exhibit
127 is in fact a resolution titled “Approving Execution of
Amended and Restated Plan Support Agreement for the
Commonwealth, PBA, and ERS.” Thus, this paragraph
warrants revision.

Fifth, paragraph 40 of the Proposed FFCL provides

“[o]n July 26, 2021, the Oversight Board certified the
modification of the Fifth Amended Plan and the submission
of the Sixth Amended Title III Joint Plan of Adjustment
of the Commonwealth of Puerto Rico, et al. (Docket
Entry No. 17516) (the “Sixth Amended Plan”). (Debtors
Exhibit 128).” While the Debtors reference Exhibit 128
as the resolution certif ying the modification to the Fifth
Amended Plan of Adjustment, Debtors Exhibit 128 is in
fact a resolution titled “Approving Execution of PRIFA
Related Plan Support Agreement.” Thus, this paragraph
warrants revision.

Sixth, paragraph 46 of the Proposed FFCL provides

“[o]n November 28, 2021, the Oversight Board certified
the modification of the Third Modified Eighth Amended
Plan and the submission of the Plan upon a determination,
in the Oversight Board’s sole discretion, that the Plan
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Appendix E

was consistent with the Fiscal Plan. (Debtors Exhibit

[ ]).” Thus, this paragraph warrants revision insofar as
the sentence is incomplete as it does not include a Docket
Entry No.

Seventh, paragraph 86 of the Proposed Confirmation

Order provides that any secured claim of a surety will
be paid in full “to the extent that the Claim of a surety
against any of the Debtors is determined to be a secured
claim and allowed in whole or in part, by Final Order . . . .”
The requirement of a final order appears inconsistent
with section 502(a) of the Bankruptcy Code. The Court
suggests inserting “. . . or by operation of section 502(a)
following the expiration of the Debtors’ time to object
to such claim.” Accordingly, this paragraph warrants
revision.

Finally, the term “bankruptcy court” is widely used

throughout the Proposed Plan Materials to refer to the
Court. Thus, revisions to make uniform reference to the
Title III Court are warranted.

IV. CONCLUSION

For the reasons set forth above, the Debtors are hereby
ordered to submit either (i) a proposal of modifications
consistent with this Memorandum Order or (ii) a showing
of cause as to why the motion for confirmation should not
be denied in the absence of such modifications.

Prior to such submission, the Oversight Board is

directed to meet and confer with relevant parties in
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Appendix E

interest, including AAFAF, concerning these issues,

and the Oversight Board’s submission should include
a statement as to whether and what extent changes to
the Proposed Plan Materials are being made with those
parties’ consent. The Oversight Board is directed to file
its submission by December 20, 2021. Parties in interest,
including AAFAF, may submit responses by December
23, 2021.

SO ORDERED.

Dated: December 14, 2021

/s/ Laura Taylor Swain

LAURA TAYLOR SWAIN
United States District Judge