The San Juan Daily Star
Group representing island investors seeks $7 million for role in restructurings
By The Star Staff
The local group Bonistas del Patio Inc., or Backyard Bondholders, filed a motion Tuesday requesting $7 million in fees and expenses from the commonwealth for their contribution in achieving the restructuring of the Puerto Rico Sales Tax Corp. (COFINA) and the commonwealth debt.
In 2018, Bonistas’ payment was opposed by the Unsecured Creditors Committee, which noted that Bonistas had to submit documentation backing their claims.
Bonistas del Patio Inc., a Puerto Rico not-for-profit corporation established in 2016 to protect the interests of on-island investors in bonds issued by the commonwealth and its instrumentalities, said that throughout Puerto Rico’s fiscal crisis, it served as a unified voice for the interests of this otherwise unrepresented but crucial constituency, who would, absent the efforts of Bonistas del Patio, risk being sidelined by larger, more organized institutional investors in Puerto Rico’s bonds.
“As an advocate in the mediation process for Puerto Rican holders generally, Bonistas del Patio played a critical role in the achievement of the compromises and settlements necessary to resolve the Title III cases of the Commonwealth and the Puerto Rico Sales Tax Financing Corporation (COFINA), including in connection with the negotiation, development, confirmation, and consummation of the COFINA Plan,” the groups said.
Bonistas del Patio was an active participant in all stages of negotiations of the COFINA Plan and the settlements and made direct, concrete contributions to the plan, including in connection with structuring the COFINA Plan’s taxable bond election, and helping to obtain necessary support for the COFINA Plan from local bondholders.
Bonistas del Patio also participated in the mediation of the Commonwealth plan of adjustment and contributed to the development of possible contingent payment mechanisms that ultimately formed the basis for the contingent value instruments provided for under the commonwealth’s plan of adjustment, the group said.
“Bonistas del Patio’s unique contribution to the successful restructuring of COFINA was memorialized in the Plan Support Agreement for the COFINA Plan and recognized by the Puerto Rico Fiscal Agency and Financial Advisory Authority [AAFAF by its Spanish initials], by the Financial Oversight and Management Board for Puerto Rico and by other creditor parties in the COFINA Plan negotiations,” the group said.
“None of the contributions of Bonistas del Patio would have been possible had it not been represented in the mediation and plan process by experienced and well respected attorneys and financial advisors,” Bonistas said. “It was understood by AAFAF and the other COFINA PSA parties that the expenses of parties to the mediation process in connection with the COFINA Plan, such as the Bonistas’ Expenses would be paid by the Commonwealth or its instrumentalities.”
Rather, having been invited to participate in the mediation process to act as a voice for local bondholders and having committed to be a party to the COFINA PSA and to promote the COFINA Plan among local bondholders, the bonistas’ expenses were payable under a different COFINA Plan provision, Section 15.2. That section provides that the commonwealth will pay “all expenses … incurred by the Commonwealth or COFINA … in connection with the development, negotiation, confirmation and consummation of the COFINA Plan and the compromise and settlement of the Commonwealth-COFINA Dispute” as well as payment of Allowed Administrative Claims.