Sunday, April 21, 2019

Puerto Rico fiscal agency enters into support agreement to restructure infrastructure entity, port bonds

By on April 10, 2019

(File Photo)

New bonds to be issued

SAN JUAN – Puerto Rico Gov. Ricardo Rosselló Nevares announced Wednesday that the Puerto Rico Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym), on behalf the Infrastructure Financing Authority (Prifa) and the Ports Authority entered into a restructuring support agreement (RSA) with the Ad Hoc Group of holders of bonds issued in 2011.

The restructuring contemplated by the RSA has two principal components.

First, the Ad Hoc Group, which holds more than 90% of the outstanding Prifa-Ports bonds, will tender all of their related holdings for their proportional share of the distribution made to Prifa under the third amended plan of adjustment of the Puerto Rico Sales Tax Financing Corp. (Cofina by its Spanish acronym)–under Title III of the Puerto Rico Oversight, Management and Economic Stability Act (Promesa)–on account of $91.5 million of junior Cofina bond claims held by Prifa and a $40 million promissory note.

Second, the Puerto Nuevo cargo and logistics operation in the San Juan Bay will be renewed through the Ad Hoc Group’s contribution of at least $11 million, a promissory note, to a newly formed subsidiary of the Ports Authority, and up to 10% of gross rental income generated from the property.

In exchange, the Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control Facilities Financing Authority, known as Afica, an entity created in 1977 to issue revenue bonds to finance projects for economic development, will issue new bonds to the Ad Hoc Group in a face amount equal to the projected cash flows of the property.

The deal still needs to get the green light from Puerto Rico’s Financial Oversight and Management Board. If approved and implemented, the proposed restructuring will reduce debt service requirements and allow the Ports Authority to focus on public-private partnerships (P3s) and other long-term capital improvements.

“The agreement represents what we can achieve when parties employ creativity and good faith to reach solutions amenable to the needs of the parties. It joins the agreements that we have already reached with the bondholders of Cofina and the Government Development Bank for Puerto Rico. Moreover, these agreements are an important step to recover access to capital markets,” Aafaf Executive Director Christian Sobrino said.

Ports Director Anthony Maceira Zayas welcomed the agreement because it will help his agency restructure a large part of its debt.

“The work led by Aafaf to reach this agreement forms part of the overall restructuring of the Ports Authority that we have been implementing at Ports since March of last year. It is important to mention that the P3 projects for the cruise terminals and the regional airports are underway, and we have monetized assets in disuse,” Maceira said in the release.

Aafaf was assisted in the negotiations by O’Melveny & Myers LLP and Pietrantoni Méndez & Álvarez LLC, as legal advisers, and Ankura as financial adviser. The Ad Hoc Group was represented by Morrison Foerster LLP and Reichard & Escalera LLC.

See the RSA filing here.

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