AAFAF seeks service providers to implement parts of debt adjustment plan
By The Star Staff
The Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials) is seeking service providers for the implementation of certain aspects of Puerto Rico’s debt adjustment plan, according to three separate requests for proposals issued this week.
Confirmation hearings on the plan of adjustment (POA) ended this week with Judge Laura Taylor Swain taking the matter under advisement rather than ruling immediately.
Proposals for each bidding process can be submitted until Dec. 2 at 5 p.m. EST.
The AAFAF is seeking a trustee, paying agent, and registrar under a trust agreement for the new general obligation (GO) bonds; a trustee, paying agent, and registrar under one trust agreement for the GO contingent value instrument (CVI) and the clawback CVIs; as well as entities interested in serving as calculation agent for the CVIs and other obligations.
On the effective date of the commonwealth debt deal, the government is slated to issue new GO Bonds, consisting of new GO Current Interest Bonds, new GO 5.375% Capital Appreciation Bonds and new GO 5.0% Capital Appreciation Bonds. Over $7.5 billion in GO bonds are slated to be issued. The commonwealth GO CVIs, in the aggregate amount of $3.5 billion, have a maturity date of July 1, 2043 and a final redemption payment date of Nov. 1, 2043. The commonwealth must also issue the Clawback CVIs, in the amount of $5.2 billion, having a maturity date of July 1, 2051 and a final redemption payment date of Nov. 1, 2051.
The trustee or paying agent must be a trust company or bank with powers of a trust company, having a capital and surplus of not less than $50 million and an investment grade rating from S&P, Moody’s or Fitch.
In order to allow AAFAF to conduct an assessment of potential conflicts of interest, the trustee must identify any existing or potential conflict of interest, or any relationships that might be considered a conflict of interest, that may affect or involve transaction(s) for the Financial Oversight and Management Board, AAFAF or the commonwealth, including but not limited to conflicts with financial advisers or law firms providing services to the oversight board, AAFAF or the commonwealth.
The entities interested in becoming calculation agents must be nationally recognized accounting or consulting firms. The selected firm will monitor the sales and use tax, the pension reserve and general rum tax collections, among other services.
The proposed eighth amended POA would reduce the commonwealth’s outstanding debt by almost 80%, from $33 billion to $7.5 billion. The restructuring also covers the Employees Retirement System and the Public Buildings Authority, both of which filed for bankruptcy in 2017.