Bonistas del Patio reiterates support for the Cofina – Diary Metro de Puerto Rico adjustment plan


The Chairman of the Board of Directors of Patio Bonds ("BdP") reiterated Monday his support for the COFINA Adjustment Plan because, due to current circumstances and the risks of litigation, this plan provides a fair and reasonable solution to complex litigation. and disputes and offers a constructive way for the process of fiscal and economic recovery of Puerto Rico.

"The plan represents positive progress in the long-term recovery of the Puerto Rican economy because it will pave the way for future restructuring agreements for other government debt and will encourage economic investments on the island, which is why, in a government context. of poor consensus, the adjustment plan has the support of the government of Puerto Rico, the tax supervisory board, the House and the Senate of Puerto Rico, in addition to many of the largest holders and insurers of COFINA bonds, Rojo stated in written statements .

"If the Plan is confirmed, the COFINA bondholders will start to receive regular payments again for the debt service, with a recovery rate of 93% for Senior subordinated bonds and 56%, for a relatively short period of time. it may already be in 2019. This is a great relief because it prevents them from facing the uncertainty that the litigation could take years to be resolved, "he added.

COFINA is the largest reserve of Puerto Rican bonds held by local investors, which means that any restructuring of COFINA debt will have a significant impact on the island.
"COFINA has not paid capital or interest to bondholders (Senior or Subordinate) since May 2017. In addition, the fiscal crisis and the extensive litigation on the legal structure of COFINA and which has priority among the bondholders of COFINA, has generated a great deal uncertainty about the amount and the moment when there could be some recovery for the bondholders.Therefore, an extreme volatility has been created in the market value of the COFINA bonds ", said Jorge Irizarry, director executive of BdP.

Irizarry added that the COFINA bondholders have found both a total lack of payments from 2017 and, since August 2013, an extreme volatility in the market value of their bonds, generating great uncertainty about when and how much they can recover.

According to the information document approved by the court, the BOP supported the plan for the following main reasons:

  1. Time works against the local bondholder.Statistics show that the Puerto Rican bondholder can not wait for a lawsuit to end because it may take several years to resolve in court. Only last year, local bondholders who hold COFINA have sold nearly $ 1 trillion in savings, thus reducing local holdings from $ 4.8 to $ 3.8 billion in COFINA. Without reaching consensus, it is logical to expect more Puerto Ricans to sell at highly discounted market prices, thus damaging an important Puerto Rican savings base.
  1. Risk of subordinated bonds. The Plan eliminates the legal risk of the holders of subordinated bonds not to receive any payment until the Senior bonds are fully paid, which has been the subject of extensive legal disputes.
  • · Due to the clauses existing in subordinated bond investor contracts, there is a risk that such litigation may result in low consideration by subordinated bond holders, or only receive payments in the distant future.
  • · In addition, pursuant to the Plan, holders of subordinated bonds will receive restructured COFINA bonds with the same characteristics as senior bond holders, eliminating the existing subordination in the previous structure.
  1. Risk of the COFINA structure.The Plan eliminates the risk that holders of both types of COFINA bonds may be deprived of the right to receive funds for sales and use of taxes ("IVU").
  • · Claims presented by government creditors before and during the cases of Title III have questioned the validity and applicability of the entire COFINA structure. If this dispute had been successful, holders of COFINA bonds could be treated as unsecured Commonwealth creditors and would not be entitled to funds for sales and use ("IVU") dedicated to the payment of their obligations. As a result, the bonds would face a severe loss in value with the potential for a very low recovery.
  1. Resumption of the quick payment.The Plan provides the fastest way to resume payments to creditors, it is expected that during the first quarter the recoveries agreed in the Plan will materialize. Without a consensual plan, litigation could take years and consume funds that could otherwise be used to pay creditors. In addition, uncertainty would persist with respect to recoveries, keeping market values ​​low and the non-payment of COFINA bonds will continue until the end of the dispute.
  1. Reinforced legal protections.The Puerto Rico Legislative Assembly and Governor Ricardo Rosselló support the plan and promulgate new legislation to strengthen the legal protections of COFINA and the newly restructured COFINA restraints distributed within the plan. According to this legislation, the restructured COFINA bonds will be guaranteed by a new legal levy on IVU funds dedicated to their payment. Furthermore, the restructuring of COFINA will be regulated by a new board of directors, independent of the government.

  1. Economic recovery. The plan is an important step in the tax recovery of Puerto Rico. The disputes relating to the COFINA bonds are among the most complex and controversial of all the legal disputes that are currently facing bond issuers in Puerto Rico.

We believe that Puerto Rico should continue to seek consensual agreements with its creditors to start the process of tax recovery and eventually recover access to financial markets in order to grow the Puerto Rican economy for the benefit of all Puerto Ricans. The resolution of disputes and complaints related to COFINA obligations in the context of the consensual agreements envisaged by the Plan, opens the way to future restructuring agreements for other government debts.

"For these reasons, among others, BOP supports the Plan and believes that the alternative of prosecuting the dispute would be disastrous for the holders of local bonds and for Puerto Rico," concluded Irizarry.


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