By The Star Staff
At a hearing slated for today, U.S. District Judge Laura Taylor Swain is to hear the application of the Puerto Rico Industrial Development Company (PRIDCO) for approval of its qualifying modification filed under Title VI of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) to restructure its debt.
The court is expected to devote some 31 minutes to the request. PROMESA provides for two types of debt restructuring. One is through Title III, which is similar to an ordinary bankruptcy process. The other mechanism, PROMESA’s Title VI, requires that all groups of creditors accept the debt plan before the court can confirm it, and is primarily aimed at financial debt, not pensions or other types of claims.
PRIDCO filed for Title VI bankruptcy to restructure some $189.6 million in bonded debt in October. The amount of the bonded debt will suffer virtually no cuts but will have extended maturities.
Under the terms of the voluntary restructuring filed Oct. 27, bondholders would receive $30 million in cash and replacement debt for the rest of their bonds. The debt would carry coupons of 7.0% to 8.8% and PRIDCO would have the chance to extend the repayment length.
“Among other benefits afforded PRIDCO pursuant to the qualifying modification is a reduction of its funded indebtedness and an extension of more than twenty years to repay or refinance its funded indebtedness,” the Title VI filing said.
The rent paid by companies using PRIDCO structures is used to pay for PRIDCO bonds. The leases -- made to “large, well-established” U.S. and foreign companies -- were “fully competitive and highly attractive” compared with other options, according to the 2003 official statement.
A deal to restructure PRIDCO’s debt has been under discussion since 2019 to pay about 94 cents on the dollar. The restructuring support agreement fell through in April 2021, and bondholders sued, voluntarily dismissing the case months later when PRIDCO agreed to a forbearance agreement that included interest-only monthly debt service payments, the application said. At the time, GoldenTree Asset Management held the majority of the bonds.