AAFAF - Autoridad de Asesoría Financiera y Agencia Fiscal de Puerto Rico

Investor Relations

For your convenience, this website contains the most recent financial reports, official statements, credit ratings, debt management policies and other fiscal information relating to the debt portfolio of the government of Puerto Rico and its instrumentalities. Please check this page often for up-to-date information.

AAFAF provides certain information relating to Puerto Rico’s outstanding bonds and notes to the Electronic Municipal Market Access (EMMA) system, operated by the Municipal Securities Rulemaking Board (MSRB) each year. AAFAF also provides notices of any “material events” to EMMA. You are encouraged to review the information related to the Government’s outstanding bonds and notes made available through EMMA.

AAFAF Governance

The Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF, its Spanish acronym) is an independent public corporation and governmental instrumentality with separate legal existence, fiscal and administrative autonomy.


Background on Puerto Rico and PROMESA

Puerto Rico is an unincorporated territory of the United States, located in the Caribbean approximately 1,600 miles southeast of New York City. It has an area of approximately 3,500 square miles and a population estimated by the United States Census Bureau of approximately 3.34 million as of July 1, 2017.

Puerto Rico is an unincorporated territory of the United States, located in the Caribbean approximately 1,600 miles southeast of New York City. It has an area of approximately 3,500 square miles and a population estimated by the United States Census Bureau of approximately 3.34 million as of July 1, 2017.

Puerto Rico came under United States sovereignty pursuant to the Treaty of Paris of 1898. Puerto Ricans have been citizens of the United States since 1917. In 1950, the United States Congress authorized Puerto Rico to draft and approve a Constitution, which was drafted by a popularly elected constitutional convention, approved in a special referendum by the people of Puerto Rico, amended and ratified by the United States Congress, and subsequently approved by the President of the United States in 1952. The Constitution of Puerto Rico provides for the separation of powers of the executive, legislative and judicial branches of government.

The current Governor, Wanda Vázquez Garced, was sworn into office on August 7, 2019 for a term ending on January 2021. The Legislative Assembly consists of a Senate and a House of Representatives, the members of which are elected for four-year terms.

The people of Puerto Rico are citizens of the United States but do not vote in Presidential elections and are represented in Congress by a non-voting Resident Commissioner. Most federal taxes, except those such as Social Security and Medicare taxes, are not levied in Puerto Rico.

Puerto Rico has faced an unprecedented fiscal emergency for the past decade as a result of, among other things, economic decline, accumulated operating deficits and excessive borrowing. In response to this crisis, Congress enacted the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) in 2016. PROMESA is codified at 48 U.S.C. §2101 et seq.

The statute establishes an oversight board, within the government of Puerto Rico, with certain statutorily defined and limited governmental powers, a process for restructuring debt, and expedited procedures for approving critical infrastructure projects in order to address public debt and other financial obligations in Puerto Rico. Among said oversight board’s powers are certification of a fiscal plan and budget for covered territories, instrumentalities and public corporations.

The Financial Oversight and Management Board for Puerto Rico was established on August 31, 2016 (the “Oversight Board”).
The Oversight Board’s website is available here.

PROMESA Title III and Title VI

A critical facet of PROMESA is its mechanisms for restructuring public debt. PROMESA has two titles dealing with debt restructuring: Title III and Title VI.

Title III

Title III of PROMESA establishes an in-court process for adjusting the debts of Puerto Rico and other United States territories modeled after the process by which municipal entities can adjust their debts under chapter 9 of the U.S. Bankruptcy Code.

In order to qualify as a debtor under Title III, the Government or any of its instrumentalities or public corporations must satisfy three criteria (the “Title III Requirements”): (i) have an oversight board established for it or be designated a “covered entity”; (ii) have the oversight board issue a restructuring certification under PROMESA section 206(b); and (iii) “desire to effect a plan to adjust its debt.” PROMESA § 302.

If the entity satisfies the Title III Requirements, the oversight board has sole authority to commence a Title III case for such entity by filing a voluntary petition seeking protection under Title III of PROMESA. See PROMESA § 304(a). Currently, the Puerto Rico’s Oversight Board has commenced Title III cases for the Commonwealth of Puerto Rico, the Puerto Rico Sales Tax Financing Corporation (“COFINA”), the Puerto Rico Highways and Transportation Authority, the Employees Retirement System of the Government of the Commonwealth of Puerto Rico, and the Puerto Rico Electric Power Authority (collectively, the “Title III Cases”).

In a Title III case, the Oversight Board acts as the debtor’s representative and is authorized to take any actions necessary to prosecute the Title III case. See PROMESA § 315. Immediately upon filing the Title III petition, Bankruptcy Code section 362 (which is incorporated into Title III cases under PROMESA) applies to automatically stay substantially all litigation against the debtor. After the Title III case is commenced, the Chief Justice of the United States must designate a district court judge to sit by designation and preside over the Title III case. On May 5, 2017, the Chief Justice designated the Hon. Laura Taylor Swain of the United States District Court for the Southern District of New York to preside over all Title III Cases.

The result of a successful Title III case is the confirmation by a United States District Court judge of a plan of adjustment of the debts of the debtor. The Oversight Board has the exclusive authority to file and modify a plan of adjustment prior to confirmation. See PROMESA § 312. In order to be confirmed, a disclosure statement for a plan must have been approved by the District Court and sent to creditors, and votes on the plan must be properly solicited from creditors holding claims that arose before the commencement of the applicable Title III Case.

After proper solicitation of the proposed plan of adjustment, the District Court will review the proposed plan of adjustment to ensure that it satisfies the requirements set forth under PROMESA section 314. A full description of the requirements for confirmation of a Title III plan of adjustment are beyond the scope of this website. If the proposed plan of adjustment satisfies these requirements, the District Court will enter an order confirming its approval of the plan of adjustment.

Upon the confirmation of a debtor’s plan of adjustment and its becoming effective, the debtor is discharged of all of its debts pursuant to Bankruptcy Code section 944 (as incorporated into Title III of PROMESA) and implements the plan according to its terms, which includes the process of providing distributions to certain creditors as provided for in the plan.

Title VI

Title VI of PROMESA establishes a streamlined out-of-court process for achieving negotiated modifications of certain bond financings and other indebtedness (collectively referred to in Title VI as “Bonds”) of the Commonwealth or a covered territorial instrumentality with the consent of a supermajority of those voting in any affected class (referred to in Title VI as “Pools”), as long as such supermajority of those voting also constitutes a majority of the Bonds outstanding in each Pool. If the dual-pronged voting threshold is satisfied, the terms of the debt modification will apply to all holders of claims within the same Pool.

Under PROMESA section 601(d), the Oversight Board is authorized to establish Pools of Bonds issued by each Puerto Rico government-related issuer based upon relative priorities. After establishing the Pools, the government issuer or any bondholder or bondholder group may propose a modification to one or more series of the government issuer’s Bonds. In order for a Title VI modification to be binding on all creditors, such modification must be approved under the following process:

Step 1: The Oversight Board must certify the Voluntary Agreement

If an issuer (or any other entity authorized to propose a Title VI modification) intends to seek certification of a Qualifying Modification (defined below), the Oversight Board must certify that such issuer has entered into a voluntary agreement (a “Voluntary Agreement”) with holders of Bond claims to restructure such Bond claims.

Under Section 104(i) of PROMESA, the Oversight Board will certify a Voluntary Agreement if the Oversight Board determines, in its sole discretion, that the Voluntary Agreement meets one of the following three requirements (the “Voluntary Agreement Requirements”):

  • The Voluntary Agreement conforms to the fiscal plan certified by the Oversight Board;
  • If no fiscal plan has been certified, the Voluntary Agreement provides for a sustainable level of debt for the issuer; or
  • If no fiscal plan has been certified, the Voluntary Agreement is limited solely to a one-year extension of principal and interest on Bonds affected by the Voluntary Agreement.

Step 2: The proposed modification must be certified by the Oversight Board as a “Qualifying Modification.”

In order for a proposed Bond modification to be considered a “Qualifying Modification,” which allows solicitation of votes on the modification to move forward, the Oversight Board must issue a certification that one of two processes has satisfactorily occurred:

Voluntary Agreement Process

Under the Voluntary Agreement Process, the Oversight Board must determine that the following two requirements have been satisfied:

  • The Voluntary Agreement has been (a) certified by the Oversight Board as a Voluntary Agreement (as described in Step 1 above), and (b) entered into by a majority in amount of the Bond claims of such issuer that are to be affected by the Voluntary Agreement; and
  • Each holder in a Pool affected by that Bond modification is offered the same consideration on a pro rata basis, as set forth in section 601(g)(1)(B) of PROMESA (the “Same Consideration Requirement”).

Consultation Process

Alternatively, under the Consultation Process, a Bond modification can become a Qualifying Modification if the following three requirements have been satisfied:

  • The issuer proposing the Bond modification has consulted with holders of Bonds in each Pool prior to soliciting votes on such modification;
  • The Same Consideration Requirement is satisfied (as described in the Voluntary Agreement Process, above); and
  • The proposed Bond modification is (x) certified by the Oversight Board as satisfying the Voluntary Agreement Requirements, (y) is in the best interests of creditors, and (z) is feasible.

Step 3: The Issuer must deliver certain information

After being certified as a Qualifying Modification but prior to solicitation of votes, the issuer must provide the Calculation Agent, the Information Agent and the Oversight Board, as Administrative Supervisor, with the following information, as set forth in section 601(f) of PROMESA (collectively, the “Information Delivery Requirement”):

  • a description of (i) the issuer’s economic and financial circumstances, (ii) existing debts, and (iii) the impact of the proposed Qualifying Modification on the territory’s or its territorial instrumentalities’ public debt;
  • a description of any other Bond modifications being sought by the issuer affecting any other Pools;
  • if a fiscal plan with respect to such issuer has been certified, the applicable fiscal plan; and
  • such other information as may be required under applicable securities laws.

Step 4: The Issuer must solicit votes to approve or reject the Qualifying Modification

Following certification of the Bond modification as a Qualifying Modification and satisfaction of the Information Delivery Requirement, a Qualifying Modification may be solicited for approval or rejection by the holders of the Bond claims eligible to vote on such Qualifying Modification.

In order to solicit the vote of eligible voters, the Information Agent submits to the holders of any “Outstanding Bonds” (as defined under Title VI of PROMESA) of the issuer (including holders of the right to vote such Outstanding Bonds) a package of solicitation materials, which must include the materials submitted in satisfaction of the Information Delivery Requirement.

Step 5: Voting requirements

For a Qualifying Modification to be approved, Section 601(j) of PROMESA requires that the Qualifying Modification satisfy both of the following requirements (the “Requisite Approvals”):

The Majority Vote Requirement.

Eligible voters holding over 50% of the “Outstanding Principal” amount of Outstanding Bonds in each Pool actually voted in the solicitation to approve the Qualifying Modification.

The Supermajority Vote Requirement.

Of the eligible voters who actually voted in the solicitation to approve or reject the Qualifying Modification, over 66 ⅔% of the “Outstanding Principal” amount of Outstanding Bonds in each Pool voted to approve the Qualifying Modification.

Step 6: Binding Effect Requirements

For a Qualifying Modification to become conclusive and binding on all holders of Bonds (present and future) that are subject to the Qualifying Modification (including bondholders who voted to reject the Qualifying Modification), the following requirements set forth in Section 601(m) of PROMESA must be satisfied (collectively, the “Binding Effect Requirements”):

  • the Requisite Approvals have been obtained (see Step 5 above);
  • the Oversight Board, as Administrative Supervisor, certifies that:
  • the Requisite Approvals have been obtained; the Qualifying Modification complies with the Voluntary Agreement Requirements or the Consultation Process; and any conditions on the effectiveness of the Qualifying Modification have been satisfied or, in the Oversight Board’s sole discretion, satisfaction of such conditions has been waived (except for any conditions that have been identified in the Qualifying Modification as non-waivable);
  • with respect to a Bond claim that is secured by a lien on property and with respect to which the holder of such Bond claim has rejected or not consented to the Qualifying Modification, the holder of such Bond:
  • retains the lien securing such Bond claims; or receives on account of such Bond claim through deferred cash payments, substitute collateral or otherwise at least the equivalent value of the lesser of the amount of the Bond claim or of the collateral securing such Bond claim; and
  • the District Court has entered an order approving the Qualifying Modification as satisfying the requirements of Section 601 of PROMESA (see Step 7 below).

Step 7: U.S. District Court Approval

With respect to the District Court order, the applicable issuer must file an application with the District Court for an order approving the Qualifying Modification. In determining whether to enter an order approving the Qualifying Modification, the District Court must determine whether the requirements of section 601 of PROMESA have been satisfied.

Upon the entry of an order by the District Court approving the Qualifying Modification:

the Qualifying Modification shall be valid and binding “on any person or entity asserting claims or other rights . . . in respect of Bonds subject to the Qualifying Modification”; and all property of the issuer subject to the Qualifying Modification “shall vest in the issuer free and clear of all claims in respect of any Bonds of any other issuer.” PROMESA § 601(m)(2).

In addition, the District Court’s order approving the Qualifying Modification is “full, final, complete, binding, and conclusive,” and not subject to any collateral attack in any court or other forum. PROMESA § 601(m)(2).

To date, the Title VI process has been used to complete a Qualifying Modification for the Government Development Bank for Puerto Rico (“GDB”). On November 7, 2018, the District Court approved a Qualifying Modification for GDB, which became effective on November 29, 2018.

The order approving the GDB Qualifying Modification is available here.


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