By The Star Staff
The University of Puerto Rico (UPR) has extended for the 18th time the standstill agreement with creditors on certain revenue bonds through May 31, 2023, proof that it has done little to restructure its debt.
The information, contained in a recent filing with Electronic Municipal Market Access (EMMA), confirms information from STAR sources that discussions with respect to a consensual restructuring of UPR revenue bonds have not been active in the past year, prompting a need for the extension. UPR has about $365 million in bonded debt.
On June 29, 2017, the bond trustee and UPR, at the direction of the Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials), entered into a letter agreement providing that the university will transfer certain amounts in respect of pledged revenue to its bond trustee, U.S. Bank Trust National Association, on the condition that the trustee will not institute, commence, or continue certain legal proceedings against UPR to get payments.
According to its 2021 fiscal plan, UPR has taken few steps to increase revenues and cut expenditures and may face pre-debt service operating deficits growing to $455 million in fiscal 2026.
The document filed last week indicated that the U.S. Bank Trust National Association, as trustee, and the AAFAF, on its own behalf and on behalf of UPR, agreed to amend the period on UPR University System refunding bonds, Series P and Q, to May 31, 2023.
In consideration for the extending of the compliance period, UPR will make some $21.38 million divided into six monetary transfers totaling $3.58 million each to the trustee to hold or to make payments or distributions as required under the trust agreement. The failure by UPR to make any such payment, if not cured within one business day, will result in a termination of the compliance period.
The first payment for $3.58 million must be made on or before Dec. 23, and the last one on May 18, 2023.
Other conditions include that UPR or the AAFAF will provide the U.S. Bank with detailed plans and specifications for repairing, replacing or reconstructing UPR property that was damaged or destroyed by Hurricane Maria.
UPR will deposit all proceeds of casualty insurance policies or direct federal aid in segregated UPR accounts at a commercial bank. All repair funds in excess of $1 million will be used pursuant to a written requisition, which will state the amount to be paid, the name of the person, firm, or corporation to whom payment is due, and the purpose for which the obligation is to be paid, and will be signed by the finance director. On or before the 15th calendar day of each month, UPR will submit the preceding month’s requisitions to the U.S. Bank.
On the 15th calendar day of each month UPR or the AAFAF will provide, or cause relevant agencies to provide, U.S. Bank with all project requests, progress or other reports provided to the Federal Emergency Management Agency (FEMA) or to any casualty insurance company with respect to the expenditure of repair funds during the preceding month.
The U.S. Bank will cooperate in good faith to provide UPR with the balances of the bond service account and the reserve account as of May 18, 2023 for the purpose of calculating any credit.
The parties also agreed to use commercially reasonable efforts during the compliance period to arrive at a permanent resolution of the disputes which have given rise to the letter agreement and the various standstill extension agreements prior to May 31, 2023.