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Unsecured Creditors, Puerto Rico settle dispute over gov’t bank restructuring

By on October 11, 2018

SAN JUAN – The Puerto Rico Fiscal Agency and Financial Advisory Authority and the Government Development Bank (GDB) for Puerto Rico announced Thursday that on Oct. 5, they reached a stipulation with the Official Committee of Unsecured Creditors to settle a dispute over the GDB’s restructuring support agreement.

The agreement, which was approved by creditors last month, includes transferring to the GDB Debt Recovery Authority the bank’s municipal loan portfolio and real estate assets. The authority will issue new bonds that will be backed by a lien on the assets equal to 55 percent of the outstanding debt. The agreement calls for the creation of a Public Entity Trust that will receive non-performing loans made by the GDB to other entities.

The “Committee Settlement Stipulation” requires that the GDB “make certain fixed and contingent cash payments to the Public Entity Trust at and after the Closing Date, and certain adjustments to claim amounts against, and the priority of payments within, the Public Entity Trust,” a statement reads.

Also that “the GDB acknowledge and affirm that certain legal claims with respect to GDB’s prior role as fiscal agent and financial advisor to certain Title III [of the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa)] Debtors and other governmental entities (to the extent any such claims exist) are the property of the applicable Title III Debtors and other governmental entities,” the statement continues.

The committee, on the other hand, agreed to withdraw, with prejudice, and not refile any claims challenging the GDB Restructuring Act, the Qualifying Modification or the GDB restructuring. The qualifying modification allows the debt issuer’s resources to be used by the commonwealth after consulting with creditors and being certified by the island’s fiscal oversight board.

The stipulation advances the island’s first qualifying modification of the debt under Promesa. The Unsecured Creditors Committee had sued to stop the proposed GDB restructuring deal, arguing it violated the court-ordered stay on litigation and Promesa in part because Title III debtors would not have been able to file legal claims against the GDB, which as the island’s fiscal agent was largely responsible for financial decisions made by the government.

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