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Assured Joins in Supporting Proposal to Restructure Puerto Rico GOs

By on April 11, 2016

SAN JUAN – The Ad Hoc Group of Puerto Rico’s General Obligation Bondholders and aligned mutual funds have reached a framework agreement with Assured Guaranty on insurer-specific modifications under which Assured supports the creditor-led restructuring proposal for commonwealth general obligation bonds (GOs) and “would agree to the deferral of principal repayment on terms economically consistent with the previously released term sheet,” a statement Monday reads.

The group has offered to defer repayment of nearly $2 billion in principal for the next five years to help the island avoid a default in July. They also offered $750 million in liquidity through another GO sale. The Puerto Rico government rejected the deal, saying it would only incur more debt and lead to cash shortfalls.

Assured Guaranty screenshot

A framegrab from Assured Guaranty’s website

According to the announcement, the restructuring proposal now has support of investors and insurers holding or controlling nearly $6.5 billion of Puerto Rico GO bonds. “Other than the insurer-specific modifications, the Ad Hoc Group of GO Bondholders term sheet is the same in that it still provides for nearly $2 billion in principal deferment and new liquidity. Assured will not invest in the new money component, but that will not affect the ability to raise such new money component,” the release says.

Andrew Rosenberg of Paul, Weiss, Rifkind, Wharton and Garrison LLP, an adviser to the Ad Hoc Group of Puerto Rico GO holders, said, “We are pleased to have growing support for the joint restructuring proposal. As the term sheet shows, the group agrees to defer principal repayment in order to give the Commonwealth sufficient time to deal with its current financial situation. We welcome the government of Puerto Rico’s response to these terms.”  

 

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