Fiscal board certifies Cofina Title III Filing
SAN JUAN – The Financial Oversight and Management Board announced Friday that it approved and certified the filing in San Juan’s U.S. District Court of a voluntary petition under Title III of Promesa for the Puerto Rico Sales Tax Financing Corp., or Cofina.
Chairman José Carrión explained that further to a request from the Government of Puerto Rico, the board “determined it is necessary and appropriate for COFINA to file a voluntary petition under Title III of PROMESA to protect the residents of Puerto Rico, COFINA and the interests of its creditors, in view of the expiration Monday night of the stay against litigation provided under PROMESA,” according to the press release.
Carrión says that, as was the case with the Commonwealth Title III filing Wednesday, this new filing “should not preclude efforts to continue voluntary” debt restructuring negotiations.
“The Oversight Board continues to believe that consensual negotiations are preferable to the extent possible and will pursue them with all creditor groups willing to do so,” said Carrión.
The release says the chairman believes the certified fiscal plan has “structural reforms aimed at increasing labor force participation and fostering economic growth,” as well as “substantial expenditure cuts and revenue increases in an effort to structurally balance the budget and maximize funds available for debt service. But the Government’s liquidity and solvency problems are massive and Title III has now become necessary to protect the people of Puerto Rico and avoid further negative impact on the economy from a flurry of litigation and continued uncertainty.”
Under Promesa, the release adds, the government, “with the Oversight Board’s support, has pursued voluntary negotiations and mediation in an effort to arrive at consensual agreements with its creditors. But the expiration Monday night of the stay against litigation provided by PROMESA makes COFINA vulnerable to lawsuits by its creditors.”
The voluntary filing under Title III would preclude those lawsuits while allowing the possibility of negotiations to continue.
“In its resolution approving and certifying the COFINA Title III filing, the Oversight Board specifies how it complies with the PROMESA requirements for such filing, including the Oversight Board’s determination that COFINA had made good-faith efforts to reach a consensual restructuring with creditors, had adopted procedures necessary to deliver timely audited financial statements and made public draft financial statements and other information sufficient for any interested person to make an informed decision with respect to a possible restructuring, among other determinations,” the statement explains.