Monday, June 26, 2017

GOs ad hoc answers Puerto Rico government’s offer

By on April 29, 2017

A group of general obligations (GOs) bondholders stated Saturday that the debt-restructuring offer recently presented by the Puerto Rico government “is not credible,” while calling on the administration of Gov. Ricardo Rosselló to work with creditors and avoid a “freefall Title III” case.

“The commonwealth’s proposal is not a credible starting point for negotiations.  Among its many flaws, the proposal is based entirely on the March 13 fiscal plan, which violates Promesa,” stated Andrew Rosenberg, a spokesman for the ad hoc group of GO bondholders.

Meanwhile, Financial Advisory & Fiscal Agency Director Gerardo Portela stated Saturday that the government remains committed to striking good faith deals with creditors, while stressing that negotiations would continue “over the coming weeks.”

Puerto Rico gov’t releases offer to creditors

Nevertheless, he emphasized that this would be conducted within the parameters of the commonwealth’s fiscal plan.

On the government’s offer, Portela said it seeks to “maximize returns to its creditors in a manner consistent with Puerto Rico’s goals for economic growth equitably.”

The government’s offer—dated April 24 and named “GO/Cofina Project Estado“—would include haircuts that could range from a minimum of 48 cents per dollar for GOs, up to a maximum of 70 cents per dollar for weaker credits.

The group of GOs bondholders —whose credit receives the best treatment under the offer —added that they urge the Rosselló administration to seek a consensual solution “based on a credible financial forecast” and to avoid a “freefall” debt restructuring process under Title III of Promesa. The latter, according to Rosenberg, seems to be the intent of Puerto Rico’s fiscal control board.

“The government has had, and continues to have, discussions with its creditors including, but not limited to, in connection with mediation with [retired] judge Allan Gropper,” said Portela in a written statement.

Fiscal board opens door to Promesa’s Title III

Meanwhile, the group of GOs reiterated their critics to the fiscal plan upon which the government’s financial projections are based.

The government’s offer—which was published Friday just before midnight—comes about only days before Promesa’s stay on litigation ends on May 1. Meanwhile, it remains unclear whether the fiscal board will decide to file cases under Title III of the federal law to maintain a stay.

However, the governing body has already opened the door to approve the initiation of cases under Title III without having to convene a public meeting. Similarly, it recently hinted in a letter to two congressmen that Title III would be inevitable since it is the only way to maintain a stay, as well as to restructure non-financial obligations, such as pensions.

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