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Alternative Market Briefing

Hedge funds ask court to freeze bank assets of Puerto Rico

Tuesday, April 05, 2016

Komfie Manalo, Opalesque Asia:

A group of hedge funds have asked the United States District court in San Juan to stop Puerto Rico’s Government Development Bank (GDB) from transferring cash, arguing that the bank is insolvent and is incapable of meeting its debt obligations, reported the New York Times.

The hedge funds filed the lawsuit as the GDB has a pending debt payment of nearly $422m due on May 1, with insiders claiming that the bank has insufficient cash to meet the maturing obligation. The hedge funds told the court that GDB is spending what cash it has left to prop up the ailing Puerto Rican economy.

However, the hedge funds told the court they are not against cash transfers by GDP to cover essential spending of the island for the safety and well-being of its residents.

The hedge funds said in their lawsuit, "Once GDB spends its last remaining funds — and it is only a matter of time — many essential services in Puerto Rico may come to a halt." They added that allowing GDB to spend most of its cash would result creditors to suffer substantial losses.

But GDB president Melba Acosta Febo dismissed the accusation of the hedge funds and described their lawsuit as "erroneous." Febo defended the bank’s actions as within the bounds of law.

She told the New York Times, "The central claim of GDB’s creditors, th......................

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