New Tax Bonds Issued As Part Of Puerto Rico’s Latest Debt Restructuring


SAN JUAN, Feb.12 (Reuters) – Puerto Rico’s sales tax finance company known as COFINA on Tuesday issued $ 12 billion in new bonds as a federal court-approved deal enters the bankrupt US Commonwealth and its creditors went into effect, according to island officials. .

The adjustment plan approved by U.S. District Court Judge Laura Taylor Swain on February 4 restructures around $ 17 billion in sales tax-backed debt, letting senior bondholders recoup 93% of their initial investment, while junior bond holders only get 56% back. The island, which is trying to restructure around $ 120 billion in debt and pension liabilities through a form of municipal bankruptcy overseen by Swain, has already gained court approval for a consensual settlement with creditors on about $ 4 billion in debt related to its Government Development Bank (GDB).

According to the supervisory board created by the federal government of Puerto Rico, the COFINA plan will reduce sales tax-backed debt service by $ 17.5 billion over nearly 40 years, allowing the island to ‘save an average of $ 456 million per year.

Future sales tax revenue previously pledged exclusively to COFINA will be split, with 53 percent going to COFINA bondholders and 46 percent going to the Commonwealth government.

The new COFINA bonds were listed on the City Securities Regulatory Council’s disclosure website with maturities in 2047 and 2054.

“Today’s achievement is proof that the government of Puerto Rico can implement creative restructuring solutions that protect the interests of the people of Puerto Rico,” Governor Ricardo Rosselló said in a statement.

The supervisory board said on Tuesday it had certified a budget for fiscal 2019 for COFINA that includes funds to cover past and future operating expenses of the entity.

S&P Global Ratings said last week that the credit quality of the restructured COFINA bonds is tied to Puerto Rico’s long-term credit situation.

“While the COFINA Rules provide some degree of certainty regarding the Commonwealth’s balance sheet, the lack of audited financial statements and the lingering uncertainty regarding pension obligations hamper our ability to assess its long-term solvency.” , S&P said.

The watchdog turned its attention to the island’s core debt of around $ 13 billion in general bonds and nearly $ 50 billion in unfunded pension liabilities.

Last month, the board asked Swain to write off more than $ 6 billion in GO bonds, claiming the debt was issued in violation of Puerto Rico’s Constitution. (Reporting by Karen Pierog in Chicago and Luis Valentin Ortiz in San Juan Editing by Matthew Lewis)

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