Friday, December 14, 2018

Puerto Rico gov’t solicits votes to make way for GDB restructuring

By on August 9, 2018

SAN JUAN – The Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish acronym) and the Government Development Bank for Puerto Rico (GDB) have begun the solicitation of votes for creditor approval of the qualifying modification proposed for the bank under Title VI of the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa).

If approved, the qualifying modification will result in a restructuring of some of the GDB’s debt. According to the terms of the modification, all participating bond claims will be “exchanged at a discount for New Bonds…issued by a newly formed statutory public trust and governmental instrumentality, the GDB Debt Recovery Authority.”

The modification is contemplated under the restructuring support agreement among the GDB and some of its creditors, dated May 15.

The GDB plans to commence a proceeding under Title VI of the Puerto Rico Oversight, Management, and Economic Stability Act  (Promesa) in the U.S. District Court for the District of Puerto Rico by filing an application for approval of the qualifying modification.

(CB file)

Upon commencement of the Title VI proceeding, the GDB said, it will file a motion “to obtain court approval of procedures and a schedule in connection with the Court’s consideration of the Qualifying Modification.

The deadline for voting expires Sept. 12 at 5 p.m, but ballots must be received by Epiq Corporate Restructuring, the calculation and information agent, before the deadline.

“The Solicitation and the Qualifying Modification involve complex financial decisions and agreements that involve substantial risks. Prior to making any decision with respect to the Solicitation and/or voting to approve or reject the Qualifying Modification, each Eligible Voter should carefully read the entire Solicitation Statement and consult with its legal, financial and tax advisors to analyze the terms and risks of the Solicitation and the Qualifying Modification,” the government’s release reads.

The participating bond claims consist of “all rights to payment and related rights to equitable remedies in respect of…the public bonds issued and outstanding pursuant to that certain trust indenture, dated as of February 17, 2006, as amended or supplemented, between GDB and Wilmington Trust, National Association, as successor trustee,” as well as “the public bonds, issued and outstanding pursuant to that certain trust indenture, dated as of April 29, 2016, as amended or supplemented, between GDB and UMB Bank, National Association, as trustee…,” the release says.

Also included are “certain deposits at GDB after giving effect to the adjustments pursuant to the GDB Restructuring Act on the Closing Date…and…certain contingent and unliquidated claims against, and other outstanding obligations of, GDB,” it adds.

The participating bonds “include, but are not limited to,” the following:

Title Maturity Date CUSIP
Senior Notes, 2011 Series H August 1, 2023 745177FF7
Senior Notes, 2012 Series A (Taxable) February 1, 2019 745177FN0
Senior Notes, 2010 Series A August 1, 2020 745177EN1
Senior Notes, 2011 Series B May 1, 2016 745177EX9
Senior Notes, 2011 Series I August 1, 2018 745177FK6
Senior Notes, 2012 Series A (Taxable) February 1, 2017 745177FM2
Senior Notes, 2011 Series H August 1, 2017 745177FB6
Senior Notes, 2010 Series C August 1, 2019 745177ET8
Senior Notes, 2011 Series H August 1, 2019 745177FC4
Senior Notes, 2010 Series B (Issuer Subsidy Build America Bonds) August 1, 2025 745177EP6
Senior Notes, 2011 Series H August 1, 2021 745177FD2
Senior Notes, 2011 Series H August 1, 2026 745177FH3
Senior Notes, 2010 Series D (Issuer Subsidy Build America Bonds) August 1, 2025 745177EU5
Senior Notes, 2011 Series H August 1, 2022 745177FE0
Senior Notes, 2016 Series A (Federally Taxable) May 1, 2017 745177GG4
Senior Notes, 2006 Series B December 1, 2016 745177CH6
Senior Notes, 2006 Series B December 1, 2017 745177CJ2
Senior Guaranteed Notes (2013), Series B-1 December 1, 2017 745177FQ3
Senior Guaranteed Notes (2013), Series B-1 December 1, 2018 745177FR1
Senior Guaranteed Notes (2013), Series B-1 December 1, 2019 745177FS9

“Upon the consummation of the Qualifying Modification, each $1,000 of Participating Bond Claims (calculated, for the avoidance of doubt, as principal plus unpaid interest accrued up to, but not including, the Closing Date) will be exchanged for New Bonds having a face amount equal to $550.

“The New Bonds will be issued by the Issuer and will bear interest at 7.500% per annum, payable semi-annually in arrears, and will be secured by a first priority statutory lien on the Restructuring Property (as defined in the Preliminary Offering Memorandum),” the release explains.

The restructuring includes GDB assets as of July 1.

The new bonds “are not indebtedness or liabilities of GDB, AAFAF, the Commonwealth or any of the Commonwealth’s public instrumentalities or political subdivisions, other than the Issuer,” and “are not backed by the good faith, credit and taxing power of the Commonwealth nor are they payable or guaranteed” by the aforementioned and “represent indebtedness solely of the Issuer.”

The government reiterated that bondholders should not expect to receive payment in full in cash of principal and interest due on the new bonds.

“While there are scenarios that may result in full payment of principal and interest on the New Bonds, there is considerable uncertainty as to whether the Restructuring Property will provide sufficient cash flow to make all payments of interest and principal (including any PIK Amounts).”

“Commencing the solicitation process for GDB represents an important step towards the overall debt restructuring efforts of Puerto Rico. This critical step affirms that the Government and creditor groups can sit down together and effectively resolve legacy issues without litigation,” Gov. Ricardo Rosselló said in a release issued by his office, La Fortaleza.

“The launch of the solicitation is an important milestone in the ultimate resolution of GDB,”  GDB President and AAFAF CEO Christian Sobrino added.

All pleadings filed in the Title VI proceeding will be available in electronic format on the case website at http://dm.epiq11.com/GDB.

BofA Merrill Lynch is acting as the lead solicitation agent and Barclays Capital Inc. is acting as the co-solicitation agent. Voters seeking assistance may contact the lead solicitation agent at BofA Merrill Lynch, One Bryant Park, New York, New York 10036, Attn: Debt Advisory, collect: (646) 855-8988, U.S. Toll Free: (800) 292-0070 or the co-solicitation agent at Barclays, 745 7th Avenue, New York, New York 10019, Attn: Municipal Sales, (212) 528-1115, U.S. Toll Free: (866) 744-4575.

Questions or requests for assistance or for additional copies of the solicitation statement or related documents may be directed to Epiq, at 777 Third Avenue, 12th Floor, New York, New York 10017, Attn: GDB Ballot Processing, (503) 520-4490, U.S. Toll Free: (877) 552-1788.

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