Today, Puerto Rico will face one of the most important hearings since PROMESA Title III cases started: Judge Laura Taylor Swain will examine the Board´s disclosure statement on the Sales Tax Financing Corporation (Cofina, Spanish acronym) debt.
The hearing will be at New York Southern District Court where the process of the parties will be analized. If the agreement is endorsed, a 28 percent of the principal owed will be cut.
According to Christian Sobrino, executive director of the Puerto Rico Fiscal Agency & Financial Advisory Authority (FAFAA), the voting process on the adjustment plan may begin as soon as November 30.
During today´s hearing, they will examine an extensive, technical document that took long months to prepare, as El Nuevo Día reported, and that is among those works billed by Title III lawyers and advisors.
Until October, Brady Williamson, court-appointed fee examiner, recommended payments for $203.1 million to those firms working on Title III cases.
That bill -which barely represents the first part of what the bankruptcy process will cost- joins another $227.4 million that Puerto Rico paid, between 2007 and 2011, in commissions and similar services to investment bankers and lawyers that sold Cofina.
An analysis of the documents of Cofina's offer made by this newspaper suggests that Puerto Rico sold, through that entity, about $ 16,314 billion in 14 transactions. Then, some 28 investment firms sold Cofina, and now some of those firms charge for renegotiating that debt.
Citi or Citigroup, for example, is the Board´s financial advisor, but served as leader, co-manager or Cofina union part on a dozen occasions.
The same happened with Santander Securities and UBS Financial Services. Through its now-defunct investment firm on the island- Santander managed, co-managed or participated in the Cofina syndicate of banks on eight occasions. The subsidiary Santander Asset Management supports the agreement with the Board.
While UBS –through its subsidiary on the island or UBS Investment Bank- participated in a dozen Cofina transactions leading o co-managing most of the series sold in Puerto Rico. The funds of the firm subscribe the agreement for Cofina.
Little economic effect
According to the document, Puerto Rico seeks to modify a debt that almost did not help the economy of the island. A third of Cofina's issuances went to pay extra-constitutional debt and settle high-risk instruments such as swaps.
And almost half of the debt in Cofina was to include interest payment to bondholders in the principal and reserve funds, special accounts to pay bondholders.
The 621-page document to be discussed today in New York does not include such observations and they didn´t appear either in the comments done yesterday by the Cofina Senior Bondholders Coalition or the government.
"The Cofina Plan of Adjustment, which is supported by a large cross-section of local bondholders and elected leaders, will help end years of financial uncertainty and economic hardship in Puerto Rico,” said the Senior Bonds Coalition in written statements.
For the Coalition, the agreement will give the government significant access to revenues of the SUT that was previously exclusive for Cofina.
Court confirmation of the plan should be a major step forward on the island's path to reviving its economy and re-accessing the capital markets at the right time.
Meanwhile, Sobrino Vega was confident that the court will recognize the work done by endorsing the disclosure statement.
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