\t\t\t\tA battle of hedge funds, and their competing interests, has erupted in Puerto Rico over the last few weeks.\u00a0 This week, hedge funds Tilden Park Capital Management LP, Whitebox Advisors LLC, Merced Capital LP, and GoldenTree Asset Management LP filed a motion asking a court to impose a legal stay that would delay the lawsuit filed by general obligation bondholders that\u00a0want Puerto Rico to stop directing sales-tax revenue away from the general fund. These hedge funds that submitted the motion collectively hold about $2 billion of tax revenue bonds, which are called COFINA bonds, locally.<\/p>\n
Meantime, the general obligation bondholders that filed the lawsuit are also hedge funds. They include entities under the management of Aurelius Capital Management, FCO Advisors, Autonomy Capital, Covalent Partners, Monarch Alternative Capital, and Stone Lion Capital Partners.\u00a0<\/span>Earlier this month, they asked a court to stop the island from using sales-tax revenue to pay back COFINA debt. Those funds believe that the sales tax revenue should pay back the general obligation bonds first because Puerto Rico\u2019s constitution states that general obligation should be repaid before other debt. However, the hedge funds holding the COFINAs that are requesting the legal stay are arguing that COFINA\u2019s share of the sales-and-use-tax should not be \u201csubject to clawback\u201d in the event of a payment shortfall of the general obligation bonds.\u00a0<\/span><\/p>\n