Cofina Plan Support Agreement

Mississippi, which has a population similar to Puerto Rican and a slightly larger economy, has between $4 billion and $5 billion in tax-financed debt, about $500 million in annual debt service, and about $6 billion in revenue. Puerto Rico will have about five times The Debt of Mississippi and three times as much annual debt service. Second, GOs and more recent claims on the Commonwealth (bonds, recovered bonds, including recovered Highway bonds, PFC bonds, and GDB legacy loans to the Commonwealth) represent only a portion of the Commonwealth`s tax-backed debt. When assessing the total debt sustainability, the already restructured VAT-backed bonds (COFINA) must be added to the total amount. This changes the overall picture a bit — the Total Commonwealth tax entitlements before the restructuring were just over $50 billion. If the proposed terms are accepted without further amendment, they will be settled for approximately $23 billion in new obligations and approximately $5 billion in cash (including cash payments for COFINA obligations under this Regulation, see Appendix 2 here). The Board of Supervisors renegotiated Puerto Rico`s debt with one overarching goal: to reach an amicable settlement in puerto Rico`s best interests with as many stakeholders as possible. In order to gain approval from a wide range of GO bondholders, the Board of Directors has made a number of modest concessions: since 2016, the Government of Puerto Rico has not made any debt payments. PROMESA allows the Government of Puerto Rico to stop debt payments while the Supervisory Board works on agreements with creditors to reduce debt to sustainable levels. But the announcement of the deal was puzzling – the Supervisory Board prioritized the art of selling over clarity. Puerto Rico has entered into an agreement with a large portion of its general duty holders – and the holders of the „Puerto Rico Construction Authority Bonds” protected by the Constitution. The agreement to support the COFINA plan continues the Memorandum of Understanding announced by the Supervisory Board on 8 August 2018.

Under the COFINA Support Agreement, the creditor parties agree, inter alia, to support the submission of an adjustment plan for DIE COFINA, which provides for a distribution of the counterparty of the scheme consisting of new COFINA bonds and cash, with a total nominal amount of approximately 93% (plus the provision, in August 2018) of the exposure amounts of the cofina principal bondholders at the reporting date. excluding AAFC`s insurance policy for AAFC-insured bonds and a nominal amount of approximately 56% (plus provision, effective August 2018) of amounts receivable from holders of a COFINA bond subordinated to the reporting date. The planned adjustment plan, once confirmed by the court supervising the Title III cofina procedure, will also definitively resolve all disputes related to COFINA and validate the cofina structure. First, General Commitment (GO) obligations (which are a priority under the Constitution of Puerto Rico and have special status under PROMESA) represent only a portion of the $35 billion debt covered by the Commonwealth Adjustment Plan. Holders of GO and PBA bonds have claims of $18.6 billion (the total amount is greater than the face value of the old bonds thanks to accrued interest), and creditors involved in the agreement have accepted, on average, discounts of about 27 cents on the dollar to their claim. GO and PBA bondholders have agreed to accept about $10 billion in new bonds for $18 billion in receivables – but only because they also receive $3.4 billion in cash. So most of the $24 billion in deleveraging that the board has highlighted comes from the proposed 97-cent discount on the Commonwealth`s $16 billion in subordinated debt, and those creditors clearly did not agree to those terms. In principle, the announced agreement has slightly softened the terms of GO bonds, to the detriment of more recent claims. How many tax-financed debts will Puerto Rico remain if the council`s latest proposal is accepted by the courts? Puerto Rico`s public pension obligations amount to approximately $55 billion. The largest pension system was about 1% funded. Even states with severely underfunded public pension systems, including New Jersey, Kentucky, and Illinois, still maintain a capital ratio of more than 30 percent.

The terms of the COFINA adjustment plan and the related documentation that will carry out the planned transactions remain subject to negotiation and judicial approval. In February 2021, after carefully analysing the impact of the pandemic, the Supervisory Board submitted an amended adjustment plan. In May 2019, the Supervisory Board, the Government of Puerto Rico and the Puerto Rico Electric Power Authority entered into a Restructuring Support Agreement (RSA) with bondholders and bond insurer Assured Guaranty Corp. to adjust PREPA`s $10 billion debt. But public sector debt can be roughly divided into four buckets: Puerto Rico`s $70 billion debt has been issued by more than a dozen public entities, from the central government itself and from the public employee pension system to separate public bodies such as the Puerto Rico Electric Power Authority and the University of Puerto Rico. The amount of these claims ranges from less than $18 billion to more than $18 billion. Without restructuring, the central government alone would have provided up to $3.9 billion in debt payments to creditors each year. Before PROMESA, 25 cents of every dollar collected by the government in taxes and fees was used to pay off the debt. And clarity on the path of debt servicing would allow the council to focus on using revenues from federal spending to increase public investment — and ensure that already approved federal aid actually goes to Puerto Rico. AAFC insures $808.5 million of the initial capital of the COFINA Capital Appreciation Senior Bonds (approximately $1,325.4 million in impairment as at May 5, 2017 (the „Petition Date”) as part of the COFINA Title III process.

AAFC also holds approximately 58% of AAFC`s senior COFINA bonds. After the proposed restructuring, per capita debt (over $7,000) will still be much higher than in any other state. Debt servicing for its own revenues will be one of the most indebted states. But this is largely because Puerto Rico`s revenues are exceptionally high, not because debt service resulting from the restructuring is particularly low.* In May 2017, the Government of Puerto Rico and GDB signed a Restructuring Support Agreement (RSA) with a significant portion of GDB`s creditors to restructure GDB`s debt under PROMISA`s Title VI. The HAR was amended in April 2018. . Therefore, retirees are considered unsecured creditors under PROMESA. Retirees would have stopped receiving pension cheques if pension payments had not been included in Puerto Rico`s budget plan and if the government had not begun to pay pension benefits from its general operating budget. There are two important things that can be seen in this agreement: the board`s announcement covered both groups of mid-market receivables – but the focus was (for fairly obvious reasons) on the deal with GOs/PBA bonds, not the reduced supply for more subordinated debt.

NEW YORK, Aug. 30, 2018 (GLOBE NEWSWIRE) — Ambac Financial Group, Inc. (Nasdaq: AMBC) („Ambac”), a holding company whose subsidiaries, including Ambac Assurance Corporation („AAC”), provide financial guarantees, today announced that AAC, the Puerto Rico Financial Supervisory and Management Board (the „Supervisory Board”), the Puerto Rico Sales Tax Financing Corporation („COFINA”), the Puerto Rico Tax Agency and the Financial Advisory Authority, Bonistas Del Patio, Inc., other bond insurers and certain holders of Junior COFINA Bond Claims has entered into a plan support agreement (the „COFINA Plan Support Agreement”) for the restructuring of all COFINA senior and junior bonds. . In February 2019, the U.S. District Court approved the Puerto Rico Sales Tax Financing Corporation`s (COFINA) adjustment plan, the first debt restructuring completed under ProMESA Title III. . The report examined Puerto Rico`s debt, which dates back to 2006. It looked at the amount of debt spent and how the proceeds were used. He delved deeply into lending and sales practices; the range of debt instruments; how Puerto Rico`s debt practices are compared to those of states and major municipal governments; and how debt ultimately contributed to Puerto Rico`s structural budget deficit. .