Tuesday, April 7, 2020

Puerto Rico Fiscal Board: Plan Support Agreement With Bondholders Increased to $10 Billion

By on February 23, 2020

SAN JUAN — The Financial Oversight and Management Board (FOMB) for Puerto Rico announced Friday that support for the amended plan support agreement (PSA) with general obligation (GO) and Public Buildings Authority (PBA) bondholders announced earlier this month increased from holders of $8 billion in bonds to holders of $10 billion in bonds, including Puerto Rican credit unions and traditional municipal investors.

The inclusion of additional bondholders in the amended PSA increases the proportion of GO and PBA bonds that are party to the deal to 54 percent, the FOMB said in a statement. The deal, which requires court approval, is part of the amended plan of adjustment the board must file in court by Feb. 28.

The PSA is the culmination of a mediation process ordered by U.S. District Judge Laura Taylor Swain, who is overseeing debt restructuring cases under the Puerto Rico Oversight, Management and Economic Stability Act (Promesa).

The amended PSA, which replaces the one filed with the plan of adjustment in September, reduces $35 billion in commonwealth debt and other liabilities by 70 percent to less than $11 billion. The new debt deal does not have an impact on other agreements in place, such as the one with the Committee of Retirees and the Puerto Rico Sales Tax Financing Corp. (Cofina by its Spanish acronym) debt deal, the latter of which restructured $17 billion.

The oversight board contends that the amended PSA backing increases its ability to be approved in court and pave the way for the commonwealth to exit bankruptcy by the end of this year. This would allow Puerto Rico to return to the municipal bond markets.

The “Notice of Support for Plan Support Agreement” issued by the FOMB Friday states the following:

“All entities holding GO Bonds, PBA Bonds, and/or PRIFA [Puerto Rico Infrastructure Financing Authority] BANs [bond anticipation notes] (each defined in the PSA) having a face amount, in each case, in excess of One Million Dollars ($1,000,000.00) may execute and deliver to counsel to the Oversight Board the form of Joinder Agreement or Annex Agreement (each as defined in the PSA), and become a party to the PSA in accordance with the and conditions set forth in the Joinder Agreement of Annex Agreement, as applicable. Only entities who purchase GO Bonds, PBA Bonds, or PRIFA BANs from existing parties to the Plan Support Agreement must execute a Joinder Agreement.

“Subject to the terms and conditions of the PSA and the joint plan of adjustment of the Commonwealth, PBA, and ERS [Employees Retirement System], in exchange for executing the Joinder Agreement or Annex Agreement, parties to the PSA may be entitled to receive a pro rata share of the PSA Restriction Fee (as defined in the PSA), which, in the aggregate, shall not exceed Three Hundred Fifty Million Dollars ($350,000,000.00).

“To be entitled to receive the PSA Restriction Fee, the Joinder Agreement or Annex Agreement must be executed and returned to counsel to the Oversight Board at the address below on or before the earlier to occur of (a) February 28, 2020; and (b) the date and time at which the PSA Restriction Fee Creditors (as defined in the PSA) own or have due investment management responsibility and authority for funds or accounts which own seventy percent (70%) of the aggregate GO Bond Claims, PBA Bond Claims, and CW Guarantee Bond Claims (without duplication and, to the extent any such claims are Insured GO Bond Claims or Insured PBA Bond Claims, to the extent a PSA Creditor is authorized to vote any such claim in accordance with the definitive insurance documents and applicable law).”

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