Government Development Bank for Puerto Rico bondholders voted to approve a negotiated deal that would pay them 55 cents on the dollar.
Holders of GDB bonds, some guaranteed by Puerto Rico’s central government and some not, voted from mid-August through Wednesday on the proposal. There were two pools voting in this period – one consisting of guaranteed bond holders and another of non-guaranteed bondholders.
On Thursday the GDB and Puerto Rico’s Fiscal Agency and Financial Advisory Authority announced that the requisite proportions of the non-guaranteed bondholders had voted for the deal. In August they said holders of 100% of the guaranteed bonds had expressed support for the deal.
The voting took place as part of a negotiated debt restructuring process, guided by Title VI of the Puerto Rico Oversight, Management, and Economic Stability Act, which states that holders of at least a majority of the par value outstanding must vote in favor and holders of at least two thirds of the par value voted on must vote in favor.
The GDB and FAFAA announced that more than 95% of the par voted on was voted in favor of the deal. They also announced that holders of 70% of par outstanding value voted. Effectively, this means that holders of at least 66% of the par value outstanding voted for the deal.
All these percentages are for non-guaranteed GDB bonds. The organizations didn’t announce the results of the voting on the guaranteed bonds.
These totals are preliminary. The final vote count is to be announced Sept. 19.
The GDB and FAFAA said the completion of approval of the deal was subject to the Puerto Rico Oversight Board certifying the vote and to bankruptcy judge Laura Taylor Swain approving the proposed deal as having satisfied the requirements of section 601 of PROMESA, which governs the voting process.
Meanwhile, the Unsecured Creditors Committee tried to derail the GDB deal on Thursday. On that day its lead lawyer Luc Despins argued in a PROMESA omnibus hearing in Puerto Rico that Swain should continue an automatic stay in the GDB case, thereby stopping or at least postponing the deal.
At Thursday’s hearing Despins told Swain that if the non-bondholding creditors he represents were treated like others in the GDB deal, they would be receiving from $50 million to $75 million in the deal. However, they are not being treated that way and that is why his group is trying to stop the deal, he said.
Despins told Swain that in the Stockton, California, bankruptcy, the court said that the state could not design laws to shape bankruptcy results. He said this ruling was relevant to the GDB deal because Puerto Rico’s local government had passed a law that the deal was using.
FAFAA lawyer Peter Friedman said that the situation in Stockton was different.
Oversight Board lawyer Martin Bienenstock said that the Unsecured Creditors Committee, in its legal actions, was seeking to become the Oversight Board for a term.
Swain she would consider the arguments that had been presented to her and release a decision soon.
