Cofina disclosure statement approved; plan hearing to begin Jan. 16

By Caroline Salls

Pittsburgh, Dec. 3 – The Puerto Rico Sales Tax Financing Corp. (Cofina), obtained court approval of the disclosure statement for its Title III plan of adjustment, according to an order filed Friday with the U.S. Bankruptcy Court for the District of Puerto Rico.

The plan confirmation hearing will begin on Jan. 16.

As previously reported, the Cofina Senior Bondholders Coalition, the Financial Oversight and Management Board for Puerto Rico and the Puerto Rico Fiscal Agency and Financial Advisory Authority “marks a major milestone for Puerto Rico on its road to recovery.”

In addition, Assured Guaranty Municipal Corp. said it agreed to the terms for a restructuring support agreement resolving how Puerto Rico sales and use tax (SUT) revenues will be divided between the holders of senior and subordinate bonds issued by Cofina and secured by the SUT.

The oversight board said 53.65% of pledged sales tax base amount cash flow through 2058 will be fully allocated to the new Cofina bonds.

All pre-fiscal year-2019 Bank of New York Mellon cash will be allocated to Cofina, and subsequent deposits will be split in accordance with the terms of a settlement in principle.

All current Cofina holders will receive new closed senior-lien bonds secured by the 5.50% pledged SUT.

No parity debt may be issued other than refinancing bonds that produce debt service savings in each year for Cofina.

The oversight board said it also seeks to create long-term market access for Puerto Rico with an expanded subordinate-lien ABT.

Under the agreement, Assured said both senior and subordinate Cofina creditors will exchange their positions for new senior closed-lien Cofina bonds.

Implied recoveries, including fees for parties to the support agreement, will be in the mid-90% range for the senior bonds and approach 60% for the subordinate bonds.

Assured said it expects to wrap its share of the new senior-lien exchange bonds, which will be offered and sold in the public capital markets.

Under a plan support agreement with Ambac Assurance Corp., a distribution will be made comprised of new Cofina bonds and cash, with a face amount equal to 93% of the bondholders’ petition date claim amounts and a face amount of 56% of junior bondholders’ petition date claim amounts.

Holders of Ambac Assurance-insured senior Cofina bonds will have the option to elect to either commute their rights related to the insurance policy associated with the existing senior Cofina bonds, which will be cancelled, in exchange for new Cofina bonds, cash and additional consideration or exchange their senior Cofina bonds for trust certificates issued by a custodial trust, which would receive distributions from Cofina under the new bonds, plus payments under the existing insurance policy in connection with any shortfalls.

The Commonwealth of Puerto Rico announced its Title III petition filing on May 3, 2017. The case number is 17-03283.

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