Bondholders of debt issued by Puerto Rico’s Sales Tax Financing Corp., known as COFINA, were cleared Tuesday by the court overseeing Puerto Rico’s bankruptcy to vote on a restructuring agreement.
The court was given jurisdiction under Title III of the Puerto Rico Oversight, Management and Economic Stability Act.
The proposed COFINA agreement, filed with the court Oct. 19, restructures all $17.6 billion of COFINA debt and represents 24% of Puerto Rico’s total bonded debt. The agreement is supported by bondholders and bond insurance companies and is expected to go into effect in January.
The deal reduces COFINA debt overall by 32% and gives senior bondholders 93% of the value of the original bonds and junior bondholders 55%. It also saves Puerto Rico about $17.5 billion in debt service and enables local retail bondholders in Puerto Rico to receive a significant recovery, according to the Financial Oversight and Management Board for Puerto Rico created by PROMESA.
The first debt adjustment plan to advance in Puerto Rico’s bankruptcy process was welcomed by Natalie A. Jaresko, the board’s executive director, who said in a statement that it “is another positive step towards our goal of restructuring Puerto Rico’s debt in a sustainable manner, to put Title III behind us and to be able to regain access to capital markets.” Ms. Jaresko said the oversight board will continue trying to reach consensual agreements with other creditors.