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Fiscal board certifies amended Cofina adjustment plan

By on November 28, 2018

SAN JUAN – Puerto Rico’s Financial Oversight and Management Board has certified for a second time the plan of adjustment for the Puerto Rico Sales Tax Financing Corp., known as Cofina for its Spanish acronym, which is slated to go to court in January.

The plan of adjustment was recertified to take into account the recent court approval of Cofina’s disclosure statement, the board said in a document issued late Tuesday. Bondholders of Cofina–which was put under bankruptcy in September 2016 under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act  (Promesa)–reached an agreement earlier this year to restructure its $17 billion debt.

The agreement consists of two parts. The first entails Cofina holders and holders of Commonwealth bonds dividing the sales and use tax. However, under the agreement, the holders of Cofina senior and junior bonds will exchange their current notes for new senior lien bonds backed by 54% of a 5.5% sales tax law.

Senior bondholders will get 93 cents on the dollar, with an additional 2 cents for being in the negotiation groups. Junior bondholders will get 56.4 cents on the dollar. After 2044, the bonds will change to capital appreciation bonds that grow on value.

The amended certification this week of the plan of adjustment for Cofina, took into account the disclosure statement filed with the district court and additional modifications needed for the amended plan.

“After substantial deliberations, the Board has determined to certify for submission a second amended plan of adjustment for Cofina, which is consistent with the certified fiscal plan,” the fiscal panel said in a document.

The deal, however, has had its share of objectors. At a recent court hearing, Lawrence Dvores, a Cofina junior bondholder, complained that junior bondholders were not given adequate representation in the negotiations and that while senior bondholders will get 93% of what they invested, junior bondholders will only get half of the value of their bonds.

“We also learned that the agreement will allow senior bondholders to get the shared collateral. What happens to the junior bondholders?” he questioned.

Mediation parties who agreed to negotiate and sign the restructuring support agreement would receive consideration for their efforts based on their holdings as of Aug. 7. That consideration is 2% to be set aside in the form of bonds or cash.

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