This agreement will restructure approximately $17.5 billion — or about 23.8% — of the total debt. That`s the bulk of all Puerto Rico government debt. Judge Laura Taylor Swain has decided to certify a Title III restructuring agreement for Bondholders of the Sales Tax Financing Corporation (COFINA) for more than $17 billion in Puerto Rico`s public debt. The 40-year agreement allows priority COFINA bondholders to get 93 cents on the dollar from the original price, while juniors receive 54 cents on the dollar. According to a CDL financial advisor, the agreement reduces Puerto Rico`s debt by about $24 billion. In addition, it reduces the debt repayment period by ten years and limits the amount allocated to servie the debt to 9.16% of government revenues. The agreement also raises the subordinated bonds of the Puerto Rico Sales Tax Financing Corporation (COFINA, in Spanish) and allocates a portion of the proceeds from the sale and the Puerto Rico User Tax (SUT) for debt repayment. A restructuring agreement for bondholders of Puerto Rico Sales Tax Financing Corp., known as COFINA, was approved Monday by the federal judge overseeing Puerto Rico`s bankruptcy. Swains` decision resolves 6 appeals in relation to COFINA, although the parties may challenge the verdict in the First Circuit Court of Appeals. Governor Ricardo Rossella`s government supports the agreement, while the minority of the People`s Democratic Party (PDP), trade unions, diaspora groups and others have rejected the plan as overly generous to bondholders. The financial control body set up by PROMESA and the government of Governor Ricardo Rossellé are selling this plan as a victory and a step towards restoring the country`s access to credit markets. In particular, the reductions in the haircuts agreement increased from about $17.6 billion to $11.9 billion, a 32% reduction. The question is whether these reductions are sufficient.
In a joint statement, the leaders of COFINA and the Tax Agency and the Puerto Rico Financial Advisory Authority said the agreement was „a major achievement in advancing Puerto Rico`s public goal of achieving fiscal responsibility and access to capital markets.” Puerto Rico has reached an agreement with many of its general bondholders – and with the holders of the Constitutionally protected Puerto Rico Building Authority. „This new agreement is another step forward for Puerto Rico, which brings the island closer to bankruptcy,” said Natalie Jaresko, EXECUTIVE director of FOMB. According to FOMB President José B. Carrién, Puerto Rico`s reduced debts would be repaid in about 20 years.