Cofina stakeholders, Puerto Rico officials reach deal on plan terms

By Caroline Salls

Pittsburgh, Aug. 9 – The Cofina Senior Bondholders Coalition, which represents holders of bonds issued by the Puerto Rico Sales Tax Financing Corp., said an agreement between Cofina stakeholders, 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.”

“The terms lay the groundwork for future capital markets access, equitable recoveries and the resumption of restructured cash interest for all bondholders, including a large cross-section of local retirees and individuals,” the coalition said in a statement released Thursday.

“Importantly, the deal also reduces Puerto Rico’s debt by approximately $7 billion, preserves access to low-cost securitizations and increases the commonwealth’s FY2019 sales tax revenue by more than $360 million.

“We now look forward to working with all parties to finalize a plan of adjustment that can be confirmed by year’s end.”

Support deal terms

In a separate release, Assured Guaranty Municipal Corp., a municipal bond insurance subsidiary of Assured Guaranty Ltd., said it has 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.

A presentation released Tuesday by the oversight board said 53.65% of pledged sales tax base amount cash flow through 2058 will nr 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.

Assured said the agreement applies to the SUT revenues allocated to Cofina under a previous agreement between the court-appointed agents for Cofina and Puerto Rico and is supported by senior and subordinate Cofina creditors representing a total of $10 billion of Cofina debt, as well as by the oversight board.

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.

Improved recovery

As the insurer of $273 million of outstanding subordinate Cofina bonds, Assured said it believes the additive value created by attaching its insurance policy to its allocated exchange bonds will significantly improve its overall recovery well above 60% and create a new insurance premium for the company.

“For Assured Guaranty and other junior bondholders, the agreed terms represent a significantly better recovery when compared with recent market prices,” Assured president and chief executive officer Dominic Frederico said in the release.

“Additionally, subordinated Cofina exposures will be converted to senior obligations that have investment-grade characteristics and will be protected from dilutive issuance of additional senior bonds.

“While there is still an irrefutable need to improve financial disclosure and implement operational and process reforms, the resolution of the treatment of the Cofina bonds clears a path for other Puerto Rico bond restructurings.”

The Commonwealth of Puerto Rico announced its Title III petition filing in the U.S. Bankruptcy Court for the District of Puerto Rico on May 3, 2017. The case number is 17-03283.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.