PSA reached with several bond insurers for restructuring HTA, CCDA debt

By The Star Staff

The federal Financial Oversight and Management Board for Puerto Rico announced earlier this week that it has reached a plan support agreement (PSA) with bond insurers Assured Guaranty Corp., Assured Guaranty Municipal Corp. and National Public Finance Guarantee Corp. that reflects the terms of an agreement in principle announced on April 12 to settle their asserted clawback claims against the Commonwealth of Puerto Rico.

The PSA, announced late Wednesday, provides a framework to restructure the debts of the Puerto Rico Highways and Transportation Authority (HTA) and the Puerto Rico Convention Center District Authority (CCDA), and a template for treatment of other asserted clawback claims of similarly situated creditors at the Puerto Rico Infrastructure Financing Authority and the Metropolitan Bus Authority.

The agreement is supported by creditors holding over $2 billion in claims against HTA, including more than 85% of HTA 1968 Bonds, nearly 50% of HTA 1998 Senior Bonds, and nearly 40% of CCDA Bonds.

“This agreement is another significant step towards resolving Puerto Rico’s bankruptcy process,” said Natalie Jaresko, the oversight board’s executive director, in a written statement. “Today, we are adding another consensual agreement to the Commonwealth Plan of Adjustment and establishing a framework for HTA to exit the Title III process under PROMESA [Puerto Rico Oversight, Management and Economic Stability Act], all with considerable creditor support. The Oversight Board continues its path towards consensual and sustainable debt restructurings without lengthy and costly litigation. Puerto Rico needs to move on, recover, and grow.”

Clawback creditors will receive a contingent value instrument, or CVI, based on potential outperformance of Puerto Rico’s 5.5% sales and use tax relative to projections in the 2020 Certified Fiscal Plan.

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. This amount represents a fixed reduction of the amount of CCDA claims of approximately 70%.

HTA bondholders will receive some $1.2 billion in new bonds issued by HTA and $389 million in cash, inclusive of restriction fees and consummation costs. These amounts, in aggregate, represent a fixed reduction of the amount of HTA claims of approximately 70%.

The terms of the PSA, together with the previously announced settlement of Employee Retirement System bondholder claims, will be incorporated into a Third Amended Plan of Adjustment to reduce Puerto Rico’s debt to affordable and sustainable levels.

The PSA does not affect the other terms of the existing Plan of Adjustment, which is expected to reduce the commonwealth’s debt from $35 billion in outstanding claims by about 80% to $7.4 billion in future debt. Taken together with the already completed Puerto Rico Sales Tax Financing Corp. debt restructuring, the Plan of Adjustment is expected to save the commonwealth almost $60 billion in debt service.

A hearing to consider the approval of the disclosure statement related to the Third Amended Plan is scheduled for July 13.

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