COFINA swaps out bonds in biggest U.S. muni restructuring


The Puerto Rico Sales Tax Financing Corp. (COFINA) swapped new bonds for old on Tuesday in the biggest municipal debt restructuring in U.S. history.

What had been about $17.6 billion in COFINA bond par value became about $12 billion in new COFINA bond value. The Puerto Rico Oversight Board announced the consummation of the deal.

Additionally, on Monday the board approved a fiscal year 2019 budget for the COFINA organization.

In recent weeks the COFINA trustee has held about $1.6 billion. In the deal about 95% was to be distributed to bondholders or the bondholder attorneys and advisors. The remainder was to be held for the July 1, 2019 payment. The board didn’t provide an explanation as to whether this money was immediately released.

On Monday Puerto Rico Attorney John Mudd, in his Control Board Watch blog, said he had heard of plans to appeal the approved plan of adjustment.

While appeals of plans of adjustment are allowed in the Puerto Rico Oversight, Management, and Economic Stability Act, Chapman Strategic Advisors Managing Director James Spiotto said in U.S. municipal bankruptcies appeals they were rare. Spiotto said they rarely succeeded, particularly after deals had been consummated.

The board said last summer that with the proposed debt, if the money at the bond trustee is included, there would be recoveries of 93% for COFINA senior bondholders and 56.4% for COFINA subordinate bondholders.

The Master Trust Indenture for the new bonds is found as docket number 579 in the COFINA docket at and number 5091 in the Commonwealth docket on the same site.

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