At an omnibus hearing on Wednesday, U.S. District Court Judge Laura Taylor Swain will oversee the proposed qualifying modification petition through Title VI of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) to restructure over $1.5 billion in Public Finance Corporation (PFC) debt.

If the qualifying modification is confirmed, the debt will be reduced significantly to a $13.8 million payment and some $47 million in new bonds, according to court documents. Since May 2021, the PFC trustee has advised PFC bondholders that the commonwealth debt adjustment plan provided no distributions to the PFC.

On Oct. 25, the Fiscal Agency and Financial Advisory Authority, which represents the PFC, and the Financial Oversight and Management Board filed the request for a qualifying modification for the PFC as established by Title VI of PROMESA, according to an oversight board document.

On Oct. 28, the oversight board, as the Title VI administrative supervisor, also filed a Title VI proceeding in the bankruptcy court by filing an application seeking approval of the qualifying modification The deadline to vote on the qualifying modification was Nov/ 21.

The qualifying modification deal involves the restructuring of several bonds series issued by the PFC.

The first is Series 2011A Commonwealth Appropriation Bonds, the second is Series 2011B Commonwealth Appropriation Bonds, and the third is Series 2012A Commonwealth Appropriation Bonds.

The participating bonds are payable solely from payments of principal and interest on certain promissory notes issued by certain departments, agencies, instrumentalities and public corporations of the Commonwealth of Puerto Rico, which are payable solely from budgetary appropriations approved by the island Legislature.

If the qualifying modification is approved by the bankruptcy court and implemented, it will result in the discharge of the participating bonds at a significant discount. In particular, the only new economic consideration required to be provided by the commonwealth or the PFC to discharge the more than $1.5 billion, including principal and unpaid interest of participating bonds, is through payment of $13.8 million in cash.

The remaining consideration, subject to and as provided under the qualifying modification, will be in the form of bonds issued by the Government Development Bank Debt Recovery Authority in the face amount of up to some $47 million. In addition, if consummated the qualifying modification will result in the release of all claims against the agencies and public corporations that issued the notes. This will allow the notes’ liability, which is currently carried on the balance sheets of multiple government agencies and public corporations, to be eliminated.

Fuente: The San Juan Daily Star

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