Judge Swain Rules on Puerto Rico’s COFINA Bonds

Judge Swain Rules on Puerto Rico’s COFINA Bonds

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On Monday, February 4th Judge Laura Taylor Swain, judge presiding the Bankruptcy hearings for The Commonwealth of Puerto Rico, indicated she would approve the negotiated Puerto Rico Sales Tax Financing Corp. (COFINA) bonds plan of adjustment, formalizing the largest restructuring of U.S. municipal debt in history.

On the same day she released an order approving the settlement between Puerto Rico’s government and COFINA concerning the amounts of revenue each would get. Swain later released an order approving the plan of adjustment, which replaces the old COFINA bonds with new bonds backed by new and reduced promises.

In the order Swain states, “Many of the formal and informal objections raised serious and considered concerns about the Commonwealth’s future ability to provide properly for the citizens of Puerto Rico who depend upon it. These objections argued that, if the Commonwealth does not have full access to the tax revenues that are the subject of the Commonwealth-COFINA Dispute, it will not be able to provide a sufficiently robust foundation for population retention and economic growth as it works to overcome its current crisis. The concerns are logical, and reflect well-founded anxieties of citizens about issues that the Oversight Board and the elected government will have to address in responsible, meaningful ways in formulating a plan of adjustment for the Commonwealth”. Placing faith upon the local government and the Oversight Board as responsible for providing a legitimate fiscal plan.


Swain released a “Memorandum of findings of fact and conclusions of law” concerning the plan of adjustment indicating that the COFINA Plan is a necessary “component of Puerto Rico’s recovery efforts and is essential to ensure that Puerto Rico is on a path that will restore its access to financial markets as it builds a stronger economy.”

The restructuring affects $17.6 billion in Puerto Rico debt, the largest class of Puerto Rico debt. It is the first one successfully completed within the Title III process.

The Puerto Rico Oversight Board said last summer that with the proposed deal, if bond trustee money was included as the plan specifies, there would be recoveries of 93% for COFINA senior bondholders and 56.4% for COFINA subordinate bondholders.

The Puerto Rico Fiscal Agency and Financial Advisory Authority said Puerto Rico’s government “looks forward to continuing to work constructively with all stakeholders and progressing Puerto Rico’s debt restructuring efforts in the coming months.”

Board Executive Director Natalie Jaresko said, “We welcome the court’s confirmation of the agreement, which fulfills a key objective of [the Puerto Rico Oversight, Management, and Economic Stability Act and avoids additional costly and time-consuming litigation in the Title III proceeding.”

In her memorandum and findings of fact Swain said she was addressing the “Third Amended Title III Plan of Adjustment” for COFINA, dated Jan. 9, as modified by revisions made at and subsequent to the confirmation hearing “as set forth in the Confirmation Order.”  In her statement she overruled all objections made both in writing and by the public towards the plan.