Dispute in Puerto Rico HTA case is apparently resolved

What appeared to be the last major dispute preventing the approval of the Puerto Rico Highways and Transportation Authority plan of adjustment seems to be settled.

The parties to the dispute jointly filed a response in the bankruptcy Tuesday evening saying they had agreed on changes to the plan and the custodial trusts, and suggested the plan be confirmed with the modifications. The dispute which pitted Assured Guaranty against Nuveen and Franklin Advisors had consumed most of the plan of adjustment hearing last week.

After the plan of adjustment hearing, HTA bankruptcy Judge Laura Taylor Swain directed the parties to try to reach a compromise.

The investment funds argued the two options for payment offered in the plan of adjustment did not guarantee return of their premium.

In the proposed changes to the plan of adjustment, standard terms of the HTA custodial trusts and individual custodial trust agreements, Assured and the investment funds agreed to let the differences remain and to allow the funds to contest Assured's actions at a later date if they choose.

Even if Swain approves the proposed changes, one more dispute remains. A group of HTA workers say their work responded to a federal government mandate for safety and they should get compensated, as promised.

Puerto Rico Oversight Board Attorney Brian Rosen said the workers' compensation had nothing to do with federal law and the board believes it is dischargeable in bankruptcy. The board wants the plan to retain the changes to the workers' compensation.

Swain will have to decide this dispute.

According to the terms of the HTA plan of adjustment, holders of $4.3 billion of HTA bonds would receive $1.2 billion of new bonds with 5% coupons and $389 million of cash. The generosity of the deal depends on what type of HTA bond is held.

Holders of HTA bonds may also receive recoveries through clawback contingent vehicle instruments on account of HTA claims against the commonwealth.

The plan settles about $2.2 billion of outstanding loans held by the Debt Recovery Authority, the successor of the Government Development Bank for Puerto Rico.

About $1.2 billion of the original par value is uninsured and the rest is insured by Assured Guaranty, National Public Finance Guarantee, Financial Guaranty Insurance Corp., and Ambac Assurance.

If Swain were to approve the HTA plan of adjustment, it would leave the Puerto Rico Electric Power Authority as the only major Puerto Rico government creditor in bankruptcy.