The Puerto Rico Fiscal Agency and Financial Advisory Authority reached a restructuring deal with an investment fund to pay 94% of the Puerto Rico Industrial Development Co.'s due debt.
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The PRIDCO deal is the fifth proposed Puerto Rico debt restructuring.
As PROMESA nears its third anniversary, deals have been consummated for $4.1 billion of Government Development Bank for Puerto Rico debt and $17.6 billion of Puerto Rico Sales Tax Financing Corp. (COFINA) bonds. There have been preliminary deals reached for $8.25 billion in Puerto Rico Electric Power Authority bonds and $191 million of Puerto Rico Infrastructure Finance Authority ports bonds.
If the PRIDCO deal goes through, the bondholders would exchange their bonds for new ones with values equal to 94 cents for every dollar of value of their current bonds. The new bonds will have a maturity extension and a two-year moratorium on principal payment.
If the bonds are found to be federally taxable they will have an interest rate of 7.25% and a final maturity of 2039. If they are found to be tax-exempt they will have an interest rate of 5.75% and a final maturity of 2034. Currently 100% of the debt is taxable.
The current bonds have an interest rate of 5.4%. According to Puerto Rico government’s October 2016 proposed fiscal plan, none of the debt is insured.
The Restructuring Support Agreement “represents an important step in PRIDCO’s goal of achieving an operational restructuring and furthering its mission of supporting the economic development of Puerto Rico,” FAFAA Executive Director Christian Sobrino said.
The deal is subject to approval by the Puerto Rico Oversight Board and the U.S. District Court for Puerto Rico.
The deal has been negotiated with GoldenTree Asset Management, which holds over two-thirds of outstanding PRIDCO bonds. In this way it has sufficient holdings to meet Title VI’s requirements for bondholder approval of the deal.
“This agreement will put PRIDCO in a position to play a continued role in the future economic growth of Puerto Rico, benefiting all stakeholders, including most importantly, the people of Puerto Rico,” GoldenTree said in a press statement.
According to FAFAA, if the deal goes forward, PRIDCO would establish a new, “bankruptcy remote” subsidiary to issue the bonds. It would transfer certain properties within its portfolio to the new issuer and the properties’ revenue would support the new bonds.
The current revenue bonds are secured by rental revenue from the leasing of PRIDCO-built industrial buildings that are leased to private firms.
PRIDCO issued its revenue bonds to finance the construction of industrial facilities and repay capital improvement credit lines.
PRIDCO bonds have been in payment default since July 2017, according to Moody’s Investors Service.
