University of Puerto Rico, bondholders strike agreement
SAN JUAN — At a time when the University of Puerto Rico (UPR) still seeks to assess the impact of steep cuts to its budget and draw up a fiscal plan, the institution will transfer, reserve or pay $40 million to its creditors, who agreed not to sue the UPR or the government for at least the next two months.
The UPR trustee, U.S. Bank Trust National Association, announced the agreement between the university and its creditors in a filing made Thursday. The deal would allow the UPR and its creditors to negotiate an out-of-court, debt restructuring agreement for the university’s $500 million in outstanding principal.
Under the arrangement, which would run until Aug. 31 and was negotiated by the island’s Financial Advisory & Fiscal Agency Authority (Fafaa), the UPR will make two transactions in favor of its bondholders, of $20 million each. The first one takes place Friday, June 30, while a second transaction would be made on Aug. 31.
In its notice, U.S. Bank Trust didn’t specify if these transfers will be directly covered by the university or by reserve funds under the trustee’s custody. According to the commonwealth’s fiscal plan, roughly $60 million were available in a debt-service reserve fund held by U.S. Bank Trust.
Pursuant to moratorium orders and legislation still in place, the UPR stopped transferring pledged revenues to its trustee. Debt service payments have been covered by U.S. Bank Trust with funds in reserve.
During the period in which the agreement is in force, the UPR must also segregate approximately $4 million of pledged revenues it receives and would otherwise cover its debt-service payments. Pledged revenues mostly include student’s tuition fees, which serve as a source of repayment of the debt issued by the UPR.
Both the commonwealth government and the creditors who signed on the forbearance deal agreed that it only covers matters relating to the UPR’s debt obligations, and not other causes of action that the parties may have over the rest of the island’s debt.
Meanwhile, the university still lacks a president, a fiscal plan and an internal budget. Its governing board just recently saw enough members to establish quorum, after more than a month of being inoperative due to several resignations to the UPR’s governing body.
Caribbean Business reported that the university’s governing board will resume its work on July 7. It seek to promptly address the presidency vacancy and financial matters such as the drafting and delivery of its fiscal plan and the approval of its budget.