Monday, October 14, 2019

Judge Swain approves Cofina plan of adjustment

By on February 4, 2019

SAN JUAN – In a joint statement Monday, the executive director of the Puerto Rico Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym), Christian Sobrino Vega, and the Puerto Rico Sales Tax Financing Corp. (Cofina by its Spanish acronym) announced that the U.S. District Court approved the “Third Amended Title III Plan of Adjustment” between Cofina bondholders and monoline insurers.

The confirmation comes after several months of mediation and efforts by the board and the government with the government-owned corporation’s creditors. 

The Jan. 9 plan of adjustment is the first under Title III of the Puerto Rico Oversight, Management and Economic Stability Act (Promesa) and follows the recent restructuring of the Government Development Bank for Puerto Rico under the law’s Title VI.

The release by the island’s fiscal agency said the agreement represents a “significant achievement in advancing Puerto Rico’s public policy objective to attain fiscal responsibility and access to the capital markets.”

The agency also said Cofina’s adjustment plan “garnered the overwhelming support from its creditors,” adding that “[a]udited voting results show that creditors holding more than $14.5 billion of bond claims voted to accept or were deemed to accept COFINA’s Plan of Adjustment. The acceptances far exceeded the votes necessary to confirm the Plan of Adjustment under Title III of PROMESA, and the overwhelming bondholder acceptances—extending well beyond bondholders and insurers who are party to COFINA’s plan support agreement—show widespread unity and support among various stakeholders in settling COFINA’s litigation with the Commonwealth as well as contentious intercreditor issues.”

Aafaf also believes the plan “provides clear economic benefits to Puerto Rico,” saying that once effective, it “will restructure nearly 24% of Puerto Rico’s funded debt and provide COFINA with more than $17 billion in debt service savings. Settlements incorporated in the Plan of Adjustment will provide the Government of Puerto Rico with access to $425 million annually, on average, for the next 40 years—money that was used in the past to pay the COFINA debt.”

In a separate statement, the island’s Financial Management and Oversight Board welcomed the ruling by Judge Laura Taylor Swain.

The board said the plan “is a critical component of the Commonwealth’s debt restructuring and when combined with the GO [general obligation] debt, accounts for approximately 55%” of the commonwealth’s bonded debt to be restructured.

The agreement, as the board put it, “reduced the annual cash flow to COFINA from a maximum of $1.85 billion (original maximum COFINA debt service per year) to $992 million (new maximum COFINA debt service) and provides average annual savings on COFINA debt service through 2057 of $456 million.”

Both the government and the board said the court’s confirmation reflects their commitment to seeking consensual agreements with creditors.

The “Legislative Assembly passed, and the governor signed legislation that paved the way for the Plan of Adjustment and settlements to become reality,” the government said. It also echoed the board’s statement reiterating they intend to continue working with creditors in Puerto Rico’s debt restructuring.

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