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Fiscal board files POA to restructure $6.4 billion in highway authority debt


The Highways and Transportation Authority bankruptcy is the last of the island’s bankruptcy cases to obtain a plan of adjustment.

By The Star Staff


The Financial Oversight and Management Board on Monday filed the proposed plan of adjustment (POA) to restructure about $6.4 billion in claims against the Puerto Rico Highways and Transportation Authority (HTA).


Under the plan, the HTA is slated to be scaled down, the government must provide $340 million and tolls will increase.


The HTA bankruptcy is the last of the bankruptcy cases to obtain a POA. Officials are still mediating a new POA for the Puerto Rico Electric Power Authority.


The plan, filed with the U.S. District Court for the District of Puerto Rico on Monday, cuts the HTA’s outstanding debt by more than 80%, to $1.2 billion, and saves Puerto Rico more than $3 billion in debt service payments.


The plan divides creditors into more than 19 classes.


The oversight board said it provides a path for the HTA to exit bankruptcy and enables the authority to make the necessary investments to improve and maintain Puerto Rico’s roads and other transportation infrastructure.


“The proposed HTA Plan of Adjustment is another significant step toward ending Puerto Rico’s financial distress and fulfilling the mandate of PROMESA [the Puerto Rico Oversight, Management and Economic Stability Act],” said the oversight board’s chairman, David Skeel. “The plan, along with HTA’s Fiscal Plan, creates a solid financial foundation to ensure repair, maintenance, and future investment to ensure the mobility of residents and allow businesses to move goods efficiently. HTA must move on from its current inefficient state to the fiscal stability that will support Puerto Rico’s economic recovery and growth.”


The plan requires the HTA to implement a comprehensive reorganization. HTA must separate construction and maintenance responsibility for toll- from non-toll roads by establishing a Toll Management Office exclusively responsible for toll roads, and transferring the Urban Train (Tren Urbano) to the Puerto Rico Integrated Transit Authority.


“Regular fare increases are necessary to ensure HTA’s ability to cover its expenses and to provide adequate and continued maintenance,” according to a statement. “Holders of about $4.2 billion in HTA bonds had agreed in May 2021 to receive $1.2 billion in new bonds issued by HTA at 5% interest and $389 million in cash, inclusive of restriction fees and consummation costs – a cut of over 70%.”


The plan further settles about $2.2 billion of outstanding loans held by the Debt Recovery Authority, the successor-in-interest following the Government Development Bank’s debt restructuring in 2018, which receives no consideration under the HTA plan but receives a contingent value instrument (CVI) issued under the Commonwealth Plan of Adjustment confirmed by the U.S. District Court on Jan. 18. The CVI is based on potential outperformance of Puerto Rico’s 5.5% sales and use tax relative to projections in the Certified Fiscal Plan.


In addition, the plan reduces $265 million in unsecured claims to $25 million to be paid in cash.


The plan includes a $314 million loan by the island government to HTA to facilitate the cash payments required by the plan, repayable over 30 years at 2.5% interest.


Gov. Pedro Pierluisi Urrutia said his administration is committed to achieving an expedited confirmation of the HTA’s debt restructuring plan to promote improvements to highways, the effective use of public-private partnerships (PPPs) on toll roads, and to maximize the use of federal funds for the reconstruction of all public roads on the island.


“The debt reduction and PPP process allowed in the HTA plan will be critical to carrying out these policies and supporting my administration’s economic vision for the future of our island,” the governor said. “I remain committed to bringing HTA out of bankruptcy by the end of the year, if not sooner, and to working collaboratively with the [oversight] board to achieve that goal.”

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