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  • The San Juan Daily Star

Gov’t eyes refinancing COFINA debt, part of ACT debt


Omar Marrero Díaz, executive director of the Fiscal Agency and Financial Advisory Authority

By The Star Staff


The island government is conducting analysis to determine if it should refinance the debt of the Puerto Rico Sales Tax Financing Corp. (COFINA by its Spanish acronym) three years after it underwent a bankruptcy restructuring that reduced debt to $12 billion from $18 billion.


Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials) Executive Director Omar Marrero Díaz told the STAR that a similar analysis is being done with the Highway and Transportation Authority (ACT by its Spanish initials), whose bankruptcy is still alive in the federal Title III court. The bond refinancing will be limited to the debt of the monolines, whose credit is being impacted by the debt adjustment plan of the central government, which was recently approved. The ACT debt adjustment plan is slated to be submitted next month.


It would be the fourth time since October 2020 that the government has gone to the markets to refinance debt and save money on debt payments by executing bond exchanges and tender offers using entities such as Barclays and Morgan Stanley as advisers.


Marrero told the STAR that he wanted to determine the best route possible to achieve savings in debt service payments.


“That way we can use the additional resources,” he said.


The government is looking at whether to conduct a tender offer or a bond exchange. Some of the COFINA bonds are callable, also known as a redeemable bond, or a bond that the issuer may redeem before it reaches the stated maturity date. A callable bond allows the issuer to pay off debt early. The chances are that the government may move ahead with a tender offer instead of a bond exchange, Marrero said.


The process is slated to be directed to a limited audience comprising the current bondholders.


“There is no urgency. There are additional circumstances like inflation that could have an impact in the high yield market,” the AAFAF chief said. “Maybe we can refinance or not.”


When the government went to the markets to restructure the debt of the Puerto Rico Aqueduct and Sewer Authority last year, it saved $1 billion in debt service payments and allowed for the release of $30 million for capital projects.

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