Thursday, August 13, 2020

Puerto Rico gov’t: Confidentiality agreements signed with certain creditor groups

By on April 3, 2017

FAFAA Director Gerardo Portela and Fiscal Oversight & Management Board Chairman José Carrión III. (Juan J. Rodríguez/CB)

Fafaa Director Gerardo Portela and Fiscal Oversight & Management Board Chairman José Carrión III. (Juan J. Rodríguez/CB)

SAN JUAN – The Puerto Rico government and some of its creditor groups have signed confidentiality agreements—a first step toward negotiations that could begin as soon as this week—the island’s Financial Advisory & Fiscal Agency Authority (FAFAA) confirmed Monday to Caribbean Business.

“FAFAA has signed confidentiality agreements with certain creditor groups and their respective advisers. That is why we can confirm that we are moving along the process of communication and negotiation with these bondholders,” the written statement reads.

The identity of creditor groups was not revealed by FAFAA, which calls for the confidential nature of the process and vows it will respect the agreements that have been struck.

According to a letter sent last week to creditor groups—a copy of which was obtained by Caribbean Business—advisers for the commonwealth government and Promesa’s fiscal control board would kick off mediation talks as soon as next week in New York City.

As of this writing, a request for comment on last week’s letter, which includes details on the logistics for the mediation process, had yet to be given by the board’s spokespeople.

What’s more, two sources said a second letter would be sent out early this week, which could push back for a few days the April 10 beginning date set forth in the joint letter to creditors last week.

Moreover, as early as this week and also in the Big Apple, the government seeks to begin preliminary discussions with certain creditor groups before the mediation process, according to sources close to the negotiations.

Last week’s letter to creditors establishes that the first round of mediation meetings would extend through Thursday, April 13. Former Judge Allan Gropper is listed as mediator in the process, which would initially take place at the offices of Proskauer Rose, lead legal adviser to the board.

While the goal is to solve the controversy between general obligation (GOs) and Sales Tax Financing Corp. (Cofina by its Spanish acronym) bondholders, the letter states that the private mediation process will not prevent “other mediations/negotiations between the same parties or others regarding these or other disputes.”

The letter outlines other rules of the game, which include making public any government offer made to creditors during mediation 48 hours after it ends, or April 21—whichever occurs first. Subsequent proposals from the government would need to be disclosed no later than each Friday after April 21.

See also: Oversight Board starts mediation structure to deal with lawsuits next week

Following his participation during the board’s meeting in San Juan last Friday, Gov. Ricardo Rosselló said “a calendar for conversations is established,” and that his administration will actively seek for “alternatives to sit at the table and renegotiate those terms.”

FAFAA Director Gerardo Portela told the press on Friday that “with or without mediation, we have 30 days to negotiate,” and that the government still seeks consensual agreements that can be validated under Promesa’s Title VI.

As for how the administration’s initial debt-restructuring proposal will pan out, he said at the time that the government and its advisers contemplate “different structures,” which will be made accessible to creditors “within the next days.” Portela added that the government’s proposal will be “beneficial and fair” to all stakeholders.

Negotiations with creditors that refuse mediation

According to last week’s letter, the government and the board would be open to receive restructuring proposals from creditor groups that refuse to enter the mediation process. Yet any such offer would be subject to Gropper’s input and be shared and discussed with creditors participating in the mediation.

Last week, several creditor groups opposed the board’s plans for mediation, arguing there should be initial talks before a mediation process, which would take a long time to kick off. The group included the GO ad hoc group; OppenheimerFunds, Franklin, Goldman Sachs, UBS and Santander; and monolines Assured, FGIC, Syncora and National. As of this writing, it is still unknown whether any of these creditor groups will accept the invitation to the mediation process.

While the institutional investors own Cofina debt, they mostly concentrate in subordinate bonds, which would leave them at disadvantage with Cofina’s senior bondholders. These funds also own GO bonds.

As for the ad hoc group of Cofina senior bondholders and bond insurer Ambac, their position on the proposed mediation process is still not clear.

Currently, the government also undertakes negotiations with creditors of the Puerto Rico Electric Power Authority’s (Prepa) over its restructuring support agreement. Prepa creditors include Oppenheimer, Franklin and Goldman Sachs, as well as monolines Syncora, National and Assured.

See also: Oversight Board starts mediation structure to deal with lawsuits next week

See also: Elías Sánchez pleased with oversight board’s 6th meeting

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