Puerto Rico owes investors $5.4 billion of bond payments in the next 12 months. A lot of this debt is for COFINA, which is sales tax debt, and securities that were sold by the Government Development Bank.
As a result of the upcoming payments and overall debt of the Commonwealth, Puerto Rico Governor Alejandro Garcia Padilla is continuing to press for a restructure of Puerto Rico’s $72 billion debt, which he claims the island cannot pay. Because Puerto Rico has over a dozen kinds of bonds with different security pledges, negotiations over this debt have proved challenging. While some general obligation bonds are protected by the constitution of the commonwealth, others are revenue-backed. Negotiations must move fast as roughly $1 billion is due in January.
This week, PREPA, Puerto Rico’s public power authority, criticized bondholders’ new offer to refinance billions of dollars in debt. The plan was drafted by 40% of the agency’s bondholders, including investors such as BlueMountain Capital and Franklin Advisors. It would divide roughly $8 billion of debt into two tranches.
One tranche would take the form of capital appreciation bonds, which would allow for payments to be deferred for years. Payment for the first tranche, holding about $5.7 billion of debt, would come with debt relief through 2019. Payments on the second tranche, which would hold $2.4 billion, would not have to be completed until 2035.
Despite these concessions, PREPA said that the plan would not lead to “successful restructuring” and that it was unachievable. Bond insurers that would have to cover the debt if PREPA defaults also are against the plan, which counters an earlier restructuring proposal by the power authority that the creditors opposed.
PREPA’s plan sought for uninsured bondholders to trade their bonds for turbo bonds. Principal payments would not have to be paid for five years.
Earlier this month, the territory’s Public Finance Corporation failed to transfer $94 million to pay principal plus interest for a bond payment due August 1, 2015. Puerto Rico said that the transfer was not made to a trustee because the legislature didn’t appropriate the money.
If the agency fails to make the bond payment on time, this would be the first time Puerto Rico has defaulted on a debt payment it owes. In total, the Public Finance Corporation owes approximately $1 billion.
Over the last two years, our Puerto Rico municipal bond fraud lawyers have been working with investors in Puerto Rico and throughout the U.S. who suffered substantial losses when the bonds or bond funds they purchased at the recommendation of Banco Popular, UBS (UBS), Banco Santander and Oriental fell in value. Many of these investors should never have put their money in Puerto Rico municipal bonds. Others should not have been encouraged to hold such concentrated positions.
If you lost money in Puerto Rico bonds or bond funds, please contact Shepherd Smith Edwards and Kantas, today to explore your legal options.
Samuel B. EdwardThe U.S. territory of Puerto Rico owes investors $5.4 billion of bond payments, all due in the next 12 months. According to a recent report, JP Morgan (JPM) stated, based on information from Standard & Poor’s and Bloomberg, that for next month alone, the commonwealth and its agencies owe $635 million, including a $36.3 million payment from the Public Finance Corp. $263 million of principal, and $333 million of interest. A lot of this debt is for Cofina, which is sales tax debt, and securities that were sold by the Government Development Bank.
Meantime, Puerto Rico Governor Alejandro Garcia Padilla is continuing to press for a restructure of its $72 billion debt, which it claims the island cannot pay. Because it has over a dozen kinds of bonds with different security pledges, negotiations have proved challenging. While some general obligation bonds are protected by the constitution of the commonwealth, others are revenue-backed. Some $1 billion is due in January and another $2 billion will be due a year from now.
This week, PREPA, Puerto Rico’s public authority criticized bondholders’ new offer to refinance billions of dollars in debt. The plan, drafted by 40% of the agency’s bondholders, including investors such as BlueMountain Capital and Franklin Advisors, would divide some $8 billion of debt into two tranches.
One tranch would take the form of capital appreciation bonds, which would allow for payments to be deferred for years. Payment for the first tranche, holding about $5.7 billion of debt, would come with debt relief through 2019. Payments on the second tranch, which would hold $2.4 billion, would not have to be competed until 2035.
PREPA, however, said that the plan won’t lead to “successful restructuring” and that it was unachievable. Bond insurers that would have to cover the debt if PREPA defaults also are against the plan, which counters an earlier restructuring proposal by the power authority, which the creditors opposed. PREPA’s plan sought for uninsured bondholders to trade their bonds for turbo bonds. There wouldn’t have to be principal payments for five years.
Earlier this month, the territory’s Public Finance Corporation failed to transfer $94 million to pay principal plus interest for a bond payment due August 1. Puerto Rico said that the transfer was not made to at trustee because the legislature didn’t appropriate the money.
If the agency fails to make the bond payment on time, this would be the first time that Puerto Rico has defaulted on a debt payment it owes. In total, the Pubilc Finance Corp. owes approximately 1 billion.
Over the last two years, our Puerto Rico municipal bond fraud lawyers have been working with investors who suffered substantial losses when the bonds they had purchased at the recommendation of Banco Popular, UBS Puerto Rico (UBS), and Banco Santander (SAN) failed.
Many of these investors should never have put their money in Puerto Rico municipal bonds to begin with even though certain brokers were pushing them aggressively and inappropriately.
Please contact Shepherd Smith Edwards and Kantas, LTD LLP today to explore your legal options.
Puerto Rico on the Brink Owes Investors $5 Billion in Next Year, Bloomberg, July 20, 2015
Puerto Rico’s PREPA bondholders propose $8 bln restructuring – outline, Reuters, July 23, 2015