Mutual Fund Holders of COFINA Debt Disclose Proposed Senior-Subordinated Bond Split
NEW YORK & SAN JUAN, Puerto Rico--(BUSINESS WIRE)--Certain mutual funds and institutions, including OppenheimerFunds, the First Puerto Rico Family of Funds, and the UBS Family of Funds, who are original par holders of Puerto Rico’s COFINA bonds, released the below statement today regarding a proposal made by them, GSAM, and GoldenTree Asset Management, as collective holders of over $4 billion of COFINA bonds, on June 19, 2018 to certain hedge fund investors and monoline insurers that hold COFINA bonds on how to allocate the reduced cash flow to COFINA implied by the recently announced agreement in principle between the COFINA Agent and the Commonwealth Agent:
“We have always had confidence in the COFINA structure, having invested in it since its inception in 2006. While we believe that the recent agreement in principle reached by the COFINA Agent and the Commonwealth Agent does not reflect the strengths of the COFINA structure and our strong chances of winning any litigation challenges to the COFINA structure, we attempted to sit down with certain other investors in COFINA debt to see if we could develop a consensual resolution of the reduced cash flow to COFINA that would arise from the COFINA Agent’s and Commonwealth Agent’s agreement in principle.
Although we were willing to discuss a myriad of potential solutions for the appropriate apportionment of risk of the continued litigation against the COFINA structure and for a fair allocation of the burden imposed on the COFINA bondholders by the Agents’ agreement in principle, we believe the distribution of the reduced cash flow to COFINA among Senior and Subordinated COFINA bondholders under our proposal more fairly compensates for the disproportionate burden borne by Subordinated COFINA bondholders and increases the likelihood of a confirmable plan of adjustment for COFINA. Our proposal would also provide much-needed tax exempt income to COFINA investors, many of whom reside within Puerto Rico and depend on such income, and it is accordingly supported by multiple on-island mutual fund families as well as large mainland financial institutions."
A description of the proposal made orally on June 19, 2018 to certain hedge fund investors and monoline insurers that hold COFINA bonds can be found above.