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The Puerto Rico Supervisory Board Concludes a $ 35 Billion Restructuring Agreement with Commonwealth Bondholders

A Puerto Rican flag flutters above pairs of empty shoes on the outside of the Capitol Building on this aerial photo taken at a protest against the government's announcement of the balance sheet. Hurricane Maria in San Juan, Puerto Rico, Friday, June 1, 2018.

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The supervisory board of the saga of the restructuring of the debt of Puerto Rico announced Sunday to have concluded with the creditors obligations of about 35 billion dollars, that is to say nearly 50% of the total debt of the. island.

The agreement, which is part of the adjustment plan, provides for an average discount of more than 60% for the entire 35 billion dollars, a 36% discount on the general obligation or obligations "GO" before 2012, and a haircut of 27% on government bonds with a constitutional guarantee of payment.

The agreement with the ancillary creditors "will reduce outstanding Commonwealth obligations to less than $ 12 billion," said the supervisory board in a press release. The debt service of the bankrupt island, including principal and interest over the next 30 years, will also be cut in half from $ 43 billion to $ 21 billion.

Of the approximately $ 13 billion of outstanding GO bonds, bonds issued before 2012 would receive 64 cents per dollar, while GO bonds of 2012 and 2014 have a settlement option of receiving 45 cents respectively. on the dollar and 35 cents on the dollar. , according to the bridge of the proposed agreement.

The difference in recoveries stems from a legal move made by the federal government's January board, asking the bankruptcy judge to cancel $ 6 billion of general duty obligations. Counsel submits that the bonds issued in 2012 and 2014 violated the terms of the Puerto Rico Constitution and were therefore invalid.

If the 2012 and 2014 bondholders decide not to settle the proposed amounts, they have the opportunity to plead in favor of betting recovery with obligations prior to 2012.

"We have fought hard for the interests of the people of Puerto Rico and we are pleased to have reached a consensual agreement that will significantly reduce the total debt burden and annual payments of Puerto Rico's debt," he said. said Natalie Jaresko, Executive Director of the Supervisory Board. "These were tough negotiations and we are confident that we have reached the best deal possible so that Puerto Rico can recover from debts contracted for decades and that we could not afford."

In July 2016, Puerto Rico began to default for the first time with respect to its general obligations. Indeed, he has not paid about one billion dollars owed to his creditors and has not made any payments since.

"It is very positive for Puerto Rico that a wide range of bond creditors have collaborated with the Supervisory Board to develop a consensual restructuring agreement that will accelerate the exit of the Commonwealth bankruptcy, respect the legal priority of the public debt. valid and restore access to capital markets. "said Susheel Kirpalani, an attorney at Quinn Emanuel Urquhart & Sullivan who represents the bondholders of the Lawful Constitutional Debt Coalition.

The group holds approximately $ 1.4 billion in constitutionally backed debt and includes hedge funds GoldenTree Asset Management, Monarch Alternative Capital, Whitebox Advisors and Taconic Capital, according to public filings.

The agreement, which took about three months of negotiations, should be filed in court within 30 days with bondholders anticipating the final approval of the plan by the time the early 2020, according to a source close to the settlement agreement.

The island's supervisory board made progress in 2019 after being appointed in 2017 to oversee the $ 73 billion restructuring, the largest in the history of the US municipal bond market. .

In February, US District Judge Laura Taylor Swain, who oversees this quasi-judicial process, approved an agreement to restructure approximately $ 17 billion worth of sales tax bonds, known as COFINA. In this transaction, senior bond holders recorded 93% recoveries, while junior bond holders received 53%.

In addition, the court also approved the restructuring of about $ 4 billion of the debt of the Government Development Bank.

A preliminary agreement has also been reached for a debt of about $ 8 billion issued by the island's power plant, currently under siege. And on Wednesday, the Oversight Committee announced an agreement in principle to restructure unfunded pension commitments of more than $ 50 billion.

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