Sunday, December 5, 2021

A New Strategy with GDB Creditors

By on August 25, 2016

A new negotiation strategy will be sought by Government Development Bank (GDB) President & Chairman Alberto Bacó Bagué, GDB in the institution’s efforts to reach a restructuring deal with its creditors, which have more than $4 billion in GDB debt.

“Promesa and its fiscal control board encourage you to advance [debt-restructuring] negotiations if you could do so. There is work already done,” Bacó told Caribbean Business, in reference to the Puerto Rico Oversight, Management & Economic Stability Act.

By the end of the month, he expects to meet with the GDB’s legal advisers, namely New York-based Cleary Gottlieb and local law firm Pietrantoni Méndez & Álvarez. Bacó, who said he would not resume creditor talks until he catches up, will ask the advisers for a new game plan in restructuring negotiations.

“I would want to add to this negotiation an element of future, of growth—that there could be a win-win formula for all involved,” Bacó said. “I’m sure that during these negotiations, no such ideas have been brought up: that the institution could be better capitalized, there could be participation from the private sector, and if we restructure the governance, there could be more faith [in the GDB’s future].”

Talks between the GDB and its main creditor groups stopped for a few months, following the lawsuit placed against the bank by a group of hedge funds that own GDB debt. Puerto Rico’s federal district court has yet to rule on the matter amid Promesa’s legal stay.

Alberto Bacó Bagué, Economic Development & Commerce secretary and GDB president & chairman, makes his case for keeping and reviving the government bank. (CB Photo | Jaime Rivera)

Alberto Bacó Bagué, Economic Development & Commerce secretary and GDB president & chairman, makes his case for keeping and reviving the government bank. (CB Photo | Jaime Rivera)

“We have to reach different agreements. If we sit down in good faith and we accept cuts—that is already on the table. But the cuts do not have to be final,” the new GDB chief commented. “We have already put aside all these ideas of having an entry point [restructuring strategy], etc.—things we cannot do. Having done so, it is more doable to sit down and present [creditors] with my ideas to capitalize the bank.”

Bacó assured there are ways in which creditors could have a say on the matter, such as granting them representation on the bank’s board. Creditors could elect to take a cut to their principal and exit, or “choose to participate on the upside, but with real things,” he went on to say.

Then there are local credit unions, or cooperativas, which also own a large chunk of the GDB’s outstanding debt. After the bank reached deals with some of them earlier this summer, interest payments on the GDB debt were not made on Aug. 1. Gov. Alejandro García Padilla halted the $28 million payment, despite previously receiving the go-ahead from the bank’s board.

“That is a very important sector. We have to work with [credit unions]. I already had a first meeting with them. They have a long-term vision and are fundamental for small and midsize businesses in Puerto Rico,” Bacó said, adding that “the time of crisis will pass” and his priority is to pay all GDB creditors.

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