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Puerto Rico gov introduces bill to pave way for Cofina restructuring

By on October 11, 2018

SAN JUAN – Gov. Ricardo Rosselló Nevares introduced Thursday a bill that would put in effect the debt restructuring deal with creditors of the Puerto Rico Sales Tax Financing Corp. (Cofina by its Spanish acronym).

“I have always been firm in that the debt of Puerto Rico has to be reduced in terms that allow its repayment without affecting the services we offer the people. With this agreement, as we did with the debt of the Government Development Bank, we can regain the credibility that the last administration lost and resulted in the government bankruptcy, in addition to the imposition of the Financial Oversight Board,” the governor said.

Once enacted, the legislation will make possible the restructuring of Cofina’s debt under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa), which will reduce the government-owned corporation’s debt by 32 percent and result in savings of $17.5 billion in debt service payments.

“Puerto Rico will have access to an average of an additional $425 million per year for the next 40 years,” Rosselló Nevares stressed.

Under the deal, Cofina bondholders will exchange their bonds for new ones. Cofina senior bondholders are expected to recuperate 93 percent of the value invested and junior bondholders about 50 percent.

Puerto Rico has been in bankruptcy court since May 2017, trying to restructure about $120 billion in debt and pension obligations. Other parties in the Cofina deal, which would be Puerto Rico’s first debt-adjustment plan under the bankruptcy to seek court approval, include bond insurance companies, municipal bond funds and individual Puerto Rican bondholders.

This week, Puerto Rico bankruptcy Judge Laura Taylor Swain scheduled a hearing for Nov. 20 on the adequacy of Cofina-related information. The agreement is slated for approval in January.

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