COFINA Senior Bondholders Say Fiscal Board Draft is a Positive Step
By Caribbean Business on March 30, 2016
The senior creditors of the Puerto Rico Sales Tax Financing Corporation (“COFINA”) issued the following statement Wednesday, with respect to the release of a discussion draft of the Puerto Rico Oversight, Management, and Economic Stability Act, legislation that aims to address the Commonwealth’s economic crisis:
“The House Committee on Natural Resources has laid the groundwork for a pragmatic, workable policy solution in its discussion draft legislation aimed at addressing Puerto Rico’s economic crisis. Lawmakers’ application of the Constitution’s Territorial Clause and their reliance on a century of bankruptcy jurisprudence establishes the framework for a measured – and hopefully expedited – legislative process.
Although this draft is by no means perfect, we appreciate the efforts of Chairman Bishop and Committee staff to constructively shape an urgently needed solution. It is particularly encouraging to see that they have incorporated battle-tested restructuring precedents that balance the needs of the Puerto Rican people, defend against litigious hold-outs, and provide for the ‘fair and equitable treatment’ of creditors.
As senior creditors with property rights that are protected under both the U.S. and Puerto Rican constitutions, the COFINA Senior Ad Hoc Group applauds lawmakers’ insistence that all bondholders be brought to the table. We also believe the creation of a fiscal oversight board that respects local laws and on-island needs is an essential element of any eventual bill. It is our hope that the legislation formally introduced next month maintains these key components and incorporates clearer language with respect to insolvency requirements.
Moving forward, policymakers should know that this Group – which includes significant investors of the roughly $17 Billion COFINA structure – believes the ingredients of this draft are a positive first step. It is clear that the direction under the Territories Clause in no way threatens municipal bond markets and is premised on a long history of federal legislation that has set Puerto Rico’s public debt limits.
If Puerto Rico is given tools to bind all creditors and vendors based on their respective legal rights, all parties should reach outcomes that properly satisfy private and public interests. This belief helped inform the debt relief proposal that we proactively shared with the Commonwealth’s advisors and then the general public in February.”