• The San Juan Daily Star

Title III judge approves disclosure statement for Highways Authority POA

U.S. District Court Judge Laura Taylor Swain

By The Star Staff

U.S. District Court Judge Laura Taylor Swain, who is overseeing Puerto Rico’s Title III bankruptcy cases, has issued the order approving the disclosure statement for the Puerto Rico Highways and Transportation Authority’s (HTA) plan of adjustment.

In the order filed Wednesday, Swain set a hearing to confirm the debt adjustment plan for Aug. 17. Ballots for those entitled to vote in favor of confirming the debt adjustment plan must be sent out by July 1. The ballots must be received by July 27. The debtor and other parties in interest are authorized to file and serve no later than 5 p.m. on Aug. 7, 2022: replies or an omnibus reply to any objections to the confirmation of the plan, the debtor’s memorandum of law in support of confirmation of the plan, witness declarations, voting results tabulation, and the debtor’s proposed findings of fact and conclusions of law.

The board submitted the proposed plan, proposed disclosure statement, and three other motions concerning the legal processes on the road to confirmation earlier this year in the U.S. District Court for Puerto Rico, which is handling all the Puerto Rico government bankruptcies.

According to the terms of the plan of adjustment, holders of $4.3 billion in HTA bonds will receive $1.2 billion in new bonds with 5% coupons and $389 million in cash, which equates to about a 72% haircut.

On May 21, 2017, the Financial Oversight and Management Board for Puerto Rico, at the request of then-Gov. Ricardo Rosselló Nevares, commenced a Title III case for the HTA.

On May 5, 2021, the oversight board entered into the HTA/CCDA Plan Support Agreement with certain holders of in excess of $2 billion in claims against the HTA, including more than 85% of HTA 1968 bonds and nearly 50% of HTA 1998 senior bonds, which include traditional municipal investors and monoline bond insurers Assured Guaranty Corp. and National Public Finance Guarantee Corp. The HTA/CCDA PSA sets forth the framework for the HTA plan of adjustment.

On Wednesday, Moody’s Investors Service affirmed the senior unsecured debt rating of MBIA Inc. (MBIA) at Ba3, the insurance financial strength (IFS) rating of National Public Finance Guarantee Corp. (National) at Baa2 and the IFS rating of MBIA Insurance Corp. (MBIA Corp.) at Caa1. The surplus notes rating of MBIA Corp. was downgraded to C(hyb) from Ca(hyb). The outlook for the ratings of MBIA, National and MBIA Corp. was changed to stable from negative.

The insurers are HTA creditors.

“The change in the rating outlook to stable for National and MBIA reflects reduced uncertainty regarding ultimate losses on National’s Puerto Rico exposures,” the rating agency said. “Following the expected restructuring of Puerto Rico Highway and Transportation Authority (PRHTA) bonds later this year, National will have less than $900 million of remaining Puerto Rico exposure, primarily to bonds issued by Puerto Rico Electric Power Authority (PREPA).”

The change in MBIA Corp.’s rating outlook to stable reflects expected improvements in the firm’s risk-adjusted capital adequacy as a number of large exposures mature during 2022. However, Moody’s notes that MBIA Corp.’s policyholders’ surplus remains just above minimum regulatory levels and the firm’s longer-term solvency remains dependent on the outcome of the firm’s asset recovery efforts.

The downgrade of MBIA Corp.’s surplus notes rating to C(hyb) reflects Moody’s view that expected recovery rates of principal and accrued interest on these defaulted securities is likely to be lower than 35%.

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