Judge hears arguments on Title VI restructuring of PRIFA, CCDA bonds
By The Star Staff
The Financial Oversight and Management Board for Puerto Rico argued this week before the Title III Bankruptcy Court in support of the restructuring of bonds issued by the Puerto Rico Infrastructure Financing Authority (PRIFA) and the Puerto Rico Convention Center District Authority (CCDA), two important steps in Puerto Rico’s overall debt restructuring process.
The debts of the two entities are being restructured using Title VI of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) instead of Title III, which provides for restructuring in court. Title VI provides a collective action mechanism for a restructuring of financial debt out of court except for its approval. An agreement is negotiated between creditors and bondholders and then taken to the judge for approval.
The Title VI qualifying modifications for PRIFA and CCDA are parallel to and complement the transactions contemplated in the Plan of Adjustment for the Commonwealth of Puerto Rico under Title III of PROMESA.
The oversight board said it had filed proposals to modify $1.9 billion of PRIFA bonds and about $383 million of CCDA bonds on Oct. 8, 2021, under Title VI of PROMESA as part of an integrated approach to restructuring the debt of the Puerto Rico government and various instrumentalities.
U.S. District Court Judge Laura Taylor Swain heard arguments this week for the restructuring of the two entities and took the matter under advisement.
Bondholders of CCDA and PRIFA held certain asserted clawback claims against the commonwealth for monies historically conditionally appropriated to CCDA and PRIFA. The terms under the Title VI modifications reflect the agreement CCDA and PRIFA bondholders had previously reached to settle their asserted clawback claims in the Plan of Adjustment and qualifying modifications for CCDA and PRIFA, the oversight board said in a statement.
Under the restructuring, PRIFA bondholders would receive $260 million in cash, inclusive of restriction fees. In addition, the agreement includes a contingent value instrument based on potential outperformance of Puerto Rico’s 5.5% sales and use tax relative to projections in the 2020 Certified Fiscal Plan and Puerto Rico’s general fund rum tax collections relative to projections in the 2021 Certified Fiscal Plan. Cash consideration to all PRIFA claims reflects a fixed reduction of the amount of PRIFA claims of around 90%.
CCDA bondholders will receive $112 million in cash, inclusive of restriction fees and consummation costs, from accounts associated with the hotel room tax historically conditionally appropriated by commonwealth law to CCDA. That amount represents a fixed reduction of the amount of CCDA claims of around 70%, the oversight board said.