NEW YORK -- S&P Global Ratings said it lowered its rating on Puerto Rico Sales Tax Financing Corp.'s (COFINA) senior sales tax bonds to D from CC on non-disbursement by the trustee of scheduled monthly interest payments due June 1, 2017, in compliance with an order of the U.S. District Court for the District of Puerto Rico.
On May 30, the court ordered the trustee to interplead future payments of principal and interest on both the senior and subordinated COFINA sales tax bonds by holding those funds in their existing accounts until a final order of the court has been entered directing the timing and manner of disbursement of funds. At this time, the court's order has only affected the disbursement of interest payments on the COFINA sales tax bonds that require current monthly interest payments; principal payments on certain of the COFINA sales tax bonds are due Aug. 1, 2017.
"We understand that the trustee holds funds sufficient to make debt service payments through at least Aug. 1, 2017, on both the senior and subordinated sales tax bonds," said S&P Global Ratings credit analyst David Hitchcock. "However, due to disputes between senior and subordinate bondholders regarding the application of funds held by the trustee and a dispute between the trustee and COFINA as to whether an event of default has occurred, the court has stayed all claims to the funds pending a further order of the court," Mr. Hitchcock added.
An acceleration, if determined by the court to have occurred and/or permitted by the court under applicable law, could potentially affect relative recovery between senior and subordinated bondholders. All parties claiming a right to the disputed funds are required to assert their rights to the funds in the court proceeding.