Cofina’s Title III plan of adjustment confirmed by bankruptcy court

By Caroline Salls

Pittsburgh, Feb. 5 – Puerto Rico Sales Tax Financing Corp. (Cofina) obtained court approval of its Title III plan of adjustment, according to an order filed Tuesday by the U.S. Bankruptcy Court for the District of Puerto Rico.

As previously reported, the Cofina Senior Bondholders Coalition and municipal bond insurer Assured Guaranty Municipal Corp. announced in August 2018 that an agreement between Cofina stakeholders, the Financial Oversight and Management Board for Puerto Rico and the Puerto Rico Fiscal Agency and Financial Advisory Authority had been reached.

Assured said a restructuring support agreement was reached that resolved how Puerto Rico sales and use tax (SUT) revenues will be divided between the holders of senior and subordinate bonds issued by Cofina and secured by the SUT.

The oversight board said 53.65% of pledged sales tax base amount cash flow through 2058 will be fully allocated to the new Cofina bonds.

All pre-fiscal year-2019 Bank of New York Mellon cash will be allocated to Cofina, and subsequent deposits will be split in accordance with the terms of a settlement in principle.

All current Cofina holders will receive new closed senior-lien bonds secured by the 5.50% pledged SUT.

No parity debt may be issued other than refinancing bonds that produce debt service savings in each year for Cofina.

Assured said the agreement applies to the SUT revenues allocated to Cofina under a previous agreement between the court-appointed agents for Cofina and Puerto Rico and is supported by senior and subordinate Cofina creditors representing a total of $10 billion of Cofina debt, as well as by the oversight board.

The Commonwealth of Puerto Rico announced its Title III petition filing in the U.S. Bankruptcy Court for the District of Puerto Rico on May 3, 2017. The case number is 17-03283.

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