Bondholder Group: Default Reinforces Importance of Passing PROMESA
SAN JUAN – A group of Puerto Rico Sales Tax Financing Corp. (Cofina by its Spanish acronym) creditors reacted Monday on Gov. Alejandro García Padilla’s executive order to suspend debt payments owed by the Government Development Bank (GDB).
The COFINA Senior Bondholders Ad Hoc Group is a coalition of individual investors, as well as asset managers GoldenTree Asset Management LP, Merced Capital LP, Tilden Park Capital Management, Whitebox Advisors LLC, and others.
The group has come out in support of many of the components of the draft legislation released by the U.S. House Natural Resources Committee. It says the framework ensures that creditors are treated “fairly and equitably based on their legal standing and provides a strong foundation for federal legislation to address the Commonwealth’s economic crisis.” It believes efforts to reach “consensual debtor-creditor agreements should be encouraged, but will ultimately require PROMESA to implement and bind holdouts.”
“Without the legal framework and restructuring tools required to address this debt crisis, Puerto Rico’s leaders will continue making decisions out of desperation. Governor [García] Padilla’s executive order to default on nearly $370 million in bond payments should underscore for Congress that the cost of political inaction is rising and reinvigorate members’ efforts to pass the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). Although the suspension of payments by the GDB does not impact COFINA’s creditors, our group wants to reiterate its support for pragmatic legislation that helps overhaul the Commonwealth’s obligations, reignite on-island growth and shield U.S. taxpayers from funding a bailout,” said former Sen. Judd Gregg (R-NH), an adviser to the COFINA Senior Bondholders Ad Hoc Group.
Gregg served as a senator from 1993 to 2011. He was chairman and ranking member of both the Senate Budget Committee and the Health, Education, Labor and Pension Committee. He was also a senior member of the Senate Banking Committee and chaired the Appropriations’ subcommittees on Foreign Operations; Homeland Security; and Commerce, State and Justice. He also served on President Obama’s National Commission on Fiscal Responsibility and Reform (Simpson-Bowles). Before to his tenure in the Senate, Gregg served as governor of New Hampshire and as a U.S. representative.
“Input from solutions-oriented creditor groups and conservative policy experts is helping the House Natural Resources Committee improve its initial version of PROMESA. We ask all external stakeholders to join us in helping the Committee finalize a bill that treats bondholders equitably and fairly based on their legal rights. Now is the time for responsible action—otherwise U.S. taxpayers as well as the Puerto Rican people will be at risk.”