Saturday, July 4, 2020

Sobrino Ready to Take on His Three Roles

By on July 28, 2017

SAN JUAN — Economic development adviser, president of the Government Development Bank (GDB) and now the new governor’s representative before the island’s financial control board: Christian Sobrino says he can do it all.

“It requires effective time management and good communication,” said the recently appointed emissary of Gov. Ricardo Rosselló during an interview with Caribbean Business.

In addition to his plans under the new role, the GDB president let on, without going into details, that the administration is working on the legislation needed to push forward a restructuring deal struck in May between the GDB and its creditors.

GDB President Christian Sobrino will replace Elías Sánchez as the Government’s representative before the Financial Oversight & Management Board, created by the U.S. Government to monitor the island’s finances. (Juan J. Rodríguez/CB)

“The legislative process is being worked on and I cannot comment about it,” Sobrino said about the agreement recently approved by the board under Title VI of the federal Promesa law. The latter provides for a consensual debt-restructuring framework.

As for his new hat on the fiscal board, Sobrino stressed he will push the Rosselló administration’s public policy, assist in the implementation of the certified fiscal plan and budget, and draw attention to economic development efforts. He believes that beyond the board’s use of Title V to advance “critical projects” of infrastructure, economic development must also show up more “in their discourse, in the measures they want to recommend.”

As the seven-member panel established by Promesa readies to implement tough fiscal adjustment measures, is the new government representative ready to communicate the difficult decisions to come?

“I will announce what has to be announced…. Now, if there is a measure that is recommended and the government of Puerto Rico does not agree to it, I will also announce that we do not agree and that we will follow the process to be able to solve that difference,” said the 33-year-old lawyer, a graduate from Boston College and University of Puerto Rico’s School of Law.

He added that as the representative before the board, a relationship must be established with the members that allows both moments of difference, as well as consensus.

A public official

Although subject to certain ethics rules applicable under Promesa, the attorney and now former representative to the board, Elías Sánchez, did not serve as a public official.

“The job now requires a person who is 100% dedicated to public service. In that line, they brought me,” Sobrino said. On the departure of his predecessor, he asserted that “his time on the board, not that he had a calendar, did have a purpose.

“It was to lay the foundation. Then [Sánchez] understood that he was going to step down from the board and another person was going to occupy the position, so that a public official could [not only] be in charge of being the liaison with the board, but also support government entities in the implementation; in making the fiscal plan and the administration’s plan a reality,” he added.

Sobrino went on to stress that with a certified fiscal plan in place, restructuring strategies through Title III and VI targeted, and the approval of a budget, “there is an established basis.”

Pushing the GDB deal

The GDB president also seeks to push forward the process under Title VI for the bank’s restructuring support agreement (RSA). The pipeline includes disclosures, solicitation and legislation related to the proposed settlement.

The transaction contemplates that municipalities, credit unions and noteholders of the bank’s debt—which amounts to about $4.1 billion—agree to exchange their claims for three types of new bonds. The latter would be issued by a new public entity and would be paid through the GDB’s municipal loan portfolio. The agreement provides haircuts that range from 25% to 45%, depending on the tranche.

Sobrino, moreover, explained the board’s conditional approval of the deal. “The modifying qualification process under Title VI requires additional steps that have yet to take place. The condition is that we continue the process under Title VI of Promesa, that we make the representations needed in any issuance of public debt and we continue the process established in the [RSA],” he said.

If there are any “substantial changes” to the deal, the board must reissue a certification. “That’s the condition,” he noted.

Although the agreement currently has the endorsement of the board and a majority of GDB creditors, some municipalities have raised flags in opposition to the transaction, including in federal court.

“In the case of Caguas, it sued the GDB, Fiscal Agency & Financial Advisory Authority, CRIM [Municipal Revenue Collections Center by its Spanish acronym], everybody. Even one of the allegations is that paying the municipal loans [to the GDB] was a ‘taking’ against a municipality. Lawyers have to explain that to me,” said Sobrino, who urged parties to view the “balance of interests” and “equal treatment” to all GDB creditors—a “Solomonic solution,” according to the GDB chief.

“Everyone has a theory about why they should be No. 1, and receive 100%…. They all sound great. But that is uncertainty. First, it hurts [municipalities], in their long-, medium- and short-term financial planning. Second, the litigation costs will siphon many of the available assets themselves. This is not a situation where this is an operation that will continue into the future. The bank is over,” Sobrino noted.

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