puerto rico debt rebalancing proposal g25

8/15/2019 Puerto Rico Debt ReBalancing Proposal G25

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June 7, 20

Debt Rebalancing Restructuring Transaction

Proposal by Puerto Rico’s Credit Unions to t e !o"ern#ent o$ Puerto Rico

G25CooperativismoAhorro y Crédito


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Present Situation – GO’s, Related Issuers and COFINA

he Common!ealth’s "or#in$ Group has proposed an annual allo%ation o& '(,)*+ -to repay '*.,/.) o& PR 0e1t2 3nder its proposal, the Central Government !ouldassume (++4 o& the payment o& 1onds issued 1y the Related Issuers and COFINA25o!ever, in %al%ulatin$ the proposed de1t servi%e %apa%ity o& (*4 o& revenues, the"or#in$ Group leaves out %ertain revenues assi$ned to those Related Issuers !hi%h!ere pled$ed in &avor o& 1ondholders, su%h as6

3PR’s 7Pled$ed Revenues8, 0e1t Servi%e Rent Component at P9A, PRI0CO’s RentRevenues and Revenues under the (:/) and (::) Resolutions at PR5 A2--

he S3 %omponent retained 1y COFINA to servi%e its de1t2 ; otal COFINA revee?+>.+(/

For 0is%ussion PurposesOnly


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Present Situation – GO’s, Related Issuers and COFINA he %urrent hi$h level o& de1t servi%e is due to a 7&ront loaded8de1t amortiDation stru%ture, %on%entrated !ithin .+ years, !ithannual payments in the order o& '?,*++ durin$ the years.+(/ to .+..2 ;Present de1t servi%e reEuires payments o&'?,*. , '?,?/+ y ?,) : &rom F .+(/ to F AF .+()2=

In the &a%e o& the do!n$radin$ o& the Common!ealth s %redit, itsredu%ed revenues and the mountin$ de1t servi%e o1li$ations,the positions adopted 1y the Common!ealth’s "or#in$ Groupand its advisors ; illstein and Cleary>Gottlie1= have 1een%ounterprodu%tive6

• he Government de%lared itsel& una1le to pay2

• hey propose, as their sole alternative, a 7Super 9ond8stru%ture that entails severe prin%ipal dis%ounts2 As it relates toGO’s, this option %ontravenes the %onstitutional priority $rantedto their de1t servi%eH yet they o er that same %onstitutionalprovision as a &oundation &or the ne! 7Super 9ond82• Contradi%tin$ the Common!ealth s representations to the 9ond ar#et ;in%ludin$ those made 1y the present

Administration on (+>?(>.+(?=, they have raised dou1ts as to the le$ality o& the S3 pled$e in &avor o& the COFINA1onds, openin$ the door to a %on&rontation 1et!een the GO and COFINA 1ondholders2

• heir a%tions propitiated materialiDation o& the Je$islative Appropriation ris# !ith re$ards to %ertain RelatedIssuers ;&or e


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he Re>9alan%in$ o& G2O2s is premised on upholdin$ the Constitutional Guarantee and priority !ith respe%t to their payment o&Prin%ipal, !ithin the %onte


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otal outstandin$ de1t o& Related Issuers amounts to appro9alan%in$ Restru%turin$ ransa%tion6 Related Issuers

Issuer($000’s)

Outstanding

Balance!aCu

@RS '?,)B(,((+ (+4

G09 '?,/**,:.. (+4

5 A 'B,) ),//+ (+4

P9A 'B,+ (,)? PFC '(,+:+, B+ (+PRCC0A ' ?: , B+ (

PRIFA '.,)B ,/+* (+PRI0CO ' ( ,(+* (+3PR ' *(),.B* (+

otal '.(,B ),:/B

- he Re>1alan%in$ Restru%turin$ assumes that COFINA $enerates &unds that are not 7Availa1le Revenue8 to the General Fund and that the S3 %an amortiDe

COFINA’s de1t and %ontri1ute to the General Fund the remainin$ &unds2

he Re>9alan%in$ Restru%turin$ &ollo!s the &ollo!in$prin%iples6

All 9onds o& a Related Issuer !ould 1e e


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otal redu%tion o& prin%ipal o& appro


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0urin$ F .+(/ the S3 $enerated appro


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7@ntry>Point8 Clause6 o prevent unLust or e


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o nan%e in&rastru%ture proLe%ts and %apital improvements in Puerto Ri%o that a%onsidered &undamental &or e%onomi% development, a ne! pu1li% trust !ould 1e

esta1lished in a%%ordan%e !ith A%t ( / o& the (::* ;Pu1li% rusts=2 ; F%apital improvements !ill 1e &unded throu$h the PRI@0F 2=

he Common!ealth !ill endo! PRI@0F up to .4 o& the S3 and !ill %ontra%tually%ommit to not restri%t nor inter&ere !ith the Ko! o& &unds to the trust until any

nan%in$ stru%tured 1y the PRI@0F is &ully repaid2COFINA’s rustee shall trans&er to the trustee &or the PRI@0F the amount o& S3o!ed !ithout intervention o& Government o& Puerto Ri%o2 he ri$hts o& COFINA’s1ond holders !ill not 1e altered2For illustration purposes only6 A 1ond issue at 4 7 rue Interest Cost8 &or ?+ yearsand to !hi%h .4 o& S3 ;'BB) = is assi$ned &or de1t servi%e %ould raise up to'*,**/ 2

his !ould e e%tively institute a %apital investment pro$ram o& appro


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he proposed Re>9alan%in$ Restru%turin$ ransa%tion !ill a%hieve the &ollo!in$ 1ene ts6

JiEuidity relie& to the Common!ealth6 otal de1t servi%e &or GOs and Related Issuers !ould 1e limited to the $oal set 1y the Common!ealth’s "or#in$Group and its advisors ;'(,2)*+ =Annual de1t servi%e &or GOs !il l 1e redu%ed on avera$e 'B+: durin$ the years .+( to .+..2Annual de1t servi%e &or Related Issuers !ill 1e redu%ed '/* &or ea%h o& the ne

puerto rico debt rebalancing proposal g25

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