Central parties reached a deal concerning Puerto Rico Sales Tax Financing Corp. (COFINA) bonds that would lead to a more than 32% reduction in COFINA debt.

The Puerto Rico Oversight Board announced the deal Wednesday. Along with the board, the government of Gov. Ricardo Rosselló, COFINA senior bondholders’ representatives, COFINA subordinate bondholders’ representatives, and bond insurers agreed to the deal.

Puerto Rico Title III bankruptcy Judge Laura Swain introduced Chief Mediator Barbara Houser on Wednesday.
Judge Laura Taylor Swain will ultimately handle considering the deal as part of the COFINA Title III process. U.S. Courts

“The board expects this deal to lead to a consensual plan of adjustment for COFINA and represents a significant milestone in resolving Puerto Rico’s debt crisis,” the board said in a press statement.

The Oversight Board and other parties will create a COFINA restructuring support agreement. They will then convert the restructuring support agreement into a plan of adjustment for the COFINA bonds.

Title III bankruptcy Judge Laura Taylor Swain would have to approve it before it goes into effect. She will consider as part of the Title III process. Observers have differing opinions as to how much flexibility she has in deciding whether to approve the plan.
The majority of the holders of the COFINA senior and subordinate bonds and the bonds’ insurers already support the agreement, according to a COFINA senior bond source.

Neither the Ad Hoc Group of General Obligation Bondholders nor the Unsecured Creditors Committee (which represents the non-bondholding creditors of the Puerto Rico government) have signed on to the deal. They may attempt to challenge it in the Title III proceedings.

The terms of the COFINA deal can be found on the board’s website, in the site’s documents section.

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