Bondholder Group Rejects Puerto Debt-Swap Plan
February 10 2016 - 3:40PM
Dow Jones News
A group of Puerto Rico bondholders has proposed a competing plan
in response to the bond swap the U.S. commonwealth announced on
Feb. 1, the latest twist in a long-running battle over the terms
that will determine an expected restructuring of the island
territory's debt.
The group, made up of investors who own debt backed by sales-tax
revenues, offered to agree to a delayed repayment of the bonds in
exchange for preservation of the tax-backed guarantee of the notes,
known by their Spanish acronym, Cofina.
In its earlier proposal, Puerto Rico proposed consolidating
Cofina bonds into the commonwealth's broader debts, which would be
exchanged for two new bonds distributed in varying amounts
depending on the relative legal priority of existing bonds.
The island is trying to restructure about $70 billion of
municipal bonds issued by a variety of government entities. As it
negotiates with bondholders, Puerto Rico's government is asking the
U.S. legislature for the ability to create a debt-restructuring
authority. Congressional Republicans are seeking the establishment
of a control board to oversee Puerto Rico's budget before agreeing
to a restructuring mechanism.
The Cofina bonds are split between $7.6 billion of senior notes
that would be paid off first in a restructuring and $9.7 billion of
subordinated bonds, according to a presentation of the
counterproposal prepared by the group's financial adviser, Miller
Buckfire & Co., and law firm Quinn Emanuel Urquhart &
Sullivan LLP.
The group controls Cofina senior bonds with about a face value
of $1.6 billion and includes MetLife Inc., hedge funds Whitebox
Advisors LLC and Goldentree Asset Management LP and Jose Rodriguez
Perello, a former vice chairman of the board of directors of the
Government Development Bank of Puerto Rico, a person familiar with
the matter said.
Mr. Rodriguez Perello on Feb. 8 sent the Puerto Rico Sales Tax
Financing Corp. a letter demanding it repudiate the proposal and
threatened to declare an event of default on the bonds if the
corporation fails to comply within 30 days, according to a copy of
the letter. An event of default would accelerate the bonds, making
them due immediately.
"We don't comment on discussions with creditors," said a
spokeswoman for the Government Development Bank of Puerto Rico. "A
response to the letter is forthcoming, but we believe the
allegations of a default are legally and factually incorrect."
MetLife declined to comment.
Whitebox, Goldentree and Mr. Rodriguez Perello couldn't
immediately be reached for comment.
Write to Matt Wirz at matthieu.wirz@wsj.com
(END) Dow Jones Newswires
February 10, 2016 15:25 ET (20:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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