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LCDC Aligns with Oversight Board and Additional Holders of Constitutional Debt on Terms of a Plan That Will Accelerate Puerto Rico’s Exit From Bankruptcy

February 9, 2020 GMT

SAN JUAN, Puerto Rico & NEW YORK--(BUSINESS WIRE)--Feb 9, 2020--

The Lawful Constitutional Debt Coalition (the “LCDC”), which includes certain major holders of Puerto Rico’s General Obligation (“GO”) and Public Buildings Authority (“PBA”) bonds, today disclosed that it has agreed to a global settlement (the “Settlement”) with the Financial Oversight and Management Board (the “Oversight Board”) and other holders of GO and PBA bonds. The compromise, which builds upon the proposed September 2019 plan of adjustment (“POA”) anchored by the LCDC and other creditors, enjoys substantially broader support. The forthcoming amended POA will enable Puerto Rico to consensually restructure approximately $35 billion of outstanding liabilities.

Matt Rodrigue of Miller Buckfire & Co., in his capacity as the LCDC’s financial advisor, commented:

“This agreement among a cross-section of major creditors and the Oversight Board represents a significant step forward for Puerto Rico on its path to exiting bankruptcy on sound financial footing. In addition to reducing the Commonwealth’s outstanding debt by approximately $24 billion, the Settlement shortens the timeline for debt repayment by ten years and places a cap on annual debt service, which will keep payments at or below 9.16% of government revenues. This deal also does not touch federal funds or monies going to pensioners and mitigates the risk of protracted litigation that could have cost the Commonwealth hundreds of millions of dollars per year in restructuring-related expenses.


It is important to highlight that creditors with long-term investments and interests in Puerto Rico have been willing to make meaningful compromises that will ultimately help restore capital formation and ignite economic activity on the island. Under the terms of the agreement, GO and PBA creditors will accept material haircuts that average 30%. These concessions anchor the consensual restructuring of more than $35 billion in outstanding debt and set the stage for Puerto Rico to experience the type of economic revitalization that other municipal issuers such as Detroit realized following their bankruptcies.”

A summary of the key terms provided under the Settlement include:

  • The Commonwealth’s outstanding bond debt will be reduced from approximately $35 billion to approximately $11 billion, resulting in a total reduction of approximately $24 billion;

  • The timeline for debt repayment will be reduced by ten years compared with the prior POA; Commonwealth retains last ten years of cash flow totaling $4.8 billion;

  • Creates a cap on all payments for tax-supported debt of 9.16% of Puerto Rico’s government revenues;

  • Provides for average haircuts for GO and PBA bondholders of approximately 30%;


  • Does not interfere with the level of government expenditures for essential services or pensions;

  • Leaves approximately $15 billion in cash for the Commonwealth and its entities.

About the LCDC

The LCDC consists of institutional holders of Puerto Rico’s GO and PBA bonds. Quinn Emanuel Urquhart & Sullivan, LLP and Reichard & Escalera, LLC are serving as the LCDC’s legal counsel, with Miller Buckfire & Co., a Stifel company, acting as the Coalition’s financial advisor.

Cautionary Statement

This communication and accompanying material are not intended to represent a recommendation or investment advice of any kind. Such content is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational purposes only and, as such, should not be construed as legal or investment advice and/or a legal opinion.

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SOURCE: The Lawful Constitutional Debt Coalition

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PUB: 02/09/2020 06:30 PM/DISC: 02/09/2020 06:30 PM