Puerto Rico Bondholders Committee

Puerto Rico Bondholders Committee
Name	Puerto Rico Bondholders Committee
Formation	2016
Type	Creditor committee
Purpose	Representation of bondholders in debt restructuring
Location	San Juan, Puerto Rico
Key people	Managed by legal and financial firms

Puerto Rico Bondholders Committee is a coalition of institutional investors and law firms assembled to represent holders of bond and bond-like securities issued by Puerto Rican territorial entities in major insolvency and restructuring proceedings. The committee engaged with multiple United States District Court for the District of Puerto Rico cases, interacted with federal officials including the United States Secretary of the Treasury and the United States Department of Justice, and negotiated alongside territorial representatives and other creditor groups during the island's fiscal crisis and Title III municipal-style bankruptcy process.

Background and Formation

The committee formed amid a fiscal emergency following interactions among the Commonwealth of Puerto Rico, the Puerto Rico Government Development Bank, and creditors such as Assured Guaranty, MBIA, National Public Finance Guarantee Corporation, and Ambac Financial Group. The emergence followed legislative action including the Puerto Rico Oversight, Management, and Economic Stability Act and administrative steps by the Financial Oversight and Management Board for Puerto Rico and its chair José Carrion III. The committee's origins trace to negotiations after defaults on securities from issuers like the Puerto Rico Sales Tax Financing Corporation, the Puerto Rico Electric Power Authority, the Puerto Rico Highways and Transportation Authority, and the Municipality of San Juan.

Membership and Representation

Membership consisted of representatives from investment firms, hedge funds, bond insurers, and institutional managers including entities linked to BlackRock, Goldman Sachs, Cerberus Capital Management, Oaktree Capital Management, Apollo Global Management, Elliott Management Corporation, PIMCO, Prudential Financial, Vanguard Group, Fidelity Investments, and specialized municipal funds. Legal representation included law firms with experience in municipal restructuring such as Proskauer Rose, Paul Hastings, Orrick, Herrington & Sutcliffe, Kirkland & Ellis, and Debevoise & Plimpton. The committee coordinated with other creditor groups like bondholder ad hoc committees for General Obligations bonds, COFINA bonds, PREPA bonds, and GDB bonds.

Role in Puerto Rico's Debt Restructuring

The committee acted as an organized creditor body in proceedings before the United States District Court for the District of Puerto Rico and pursuant to Title III of PROMESA. It participated in mediation efforts with the Financial Oversight and Management Board for Puerto Rico, counsel for the Commonwealth of Puerto Rico, and fiscal agents such as Citigroup, Banco Popular de Puerto Rico, and Goldman Sachs. The committee assessed proposals affecting General Obligation bonds, priority schemes for revenue bonds, treatment of pension obligations involving the Puerto Rico Employees Retirement System, and relief sought by territorial utilities like PREPA and Puerto Rico Aqueduct and Sewer Authority. It filed proofs of claim and contested plan of adjustment provisions, seeking recovery for secured and unsecured creditors amid competing positions from public-sector unions like the Puerto Rico Teachers Association and municipal entities like the Municipality of Ponce.

Legal Actions and Litigation

The committee engaged in litigation involving issues adjudicated by judges such as Laura Taylor Swain and references to precedents in the Second Circuit Court of Appeals, the United States Court of Appeals for the First Circuit, and interactions with the Supreme Court of the United States for certiorari considerations. Parties squared off in adversary proceedings over stay orders, sovereign immunity doctrines including the Eleventh Amendment, and the scope of PROMESA's clawback and restructuring powers. Litigation featured motions involving trustees like U.S. Bank National Association, fiscal agents tied to Banco Santander Puerto Rico, and disputes over lien priorities with bond insurers National Public Finance Guarantee and Assured Guaranty Municipal Corp..

Negotiations and Settlement Agreements

The committee negotiated settlement frameworks addressing payment schedules, principal haircuts, new bond issuances, and continuity provisions for essential services. Negotiations produced term sheets and proposed plans that referenced swap counterparties such as J.P. Morgan Chase, Morgan Stanley, and Credit Suisse. Agreements examined restructuring of COFINA revenues, SUT allocations, and securitization involving agents like Wells Fargo. The committee also interacted with instrumentalities negotiating separate deals, for example settlements for PREPA with Whitefish Energy-adjacent claims and HTA restructuring overseen by multilateral stakeholders including the Inter-American Development Bank.

Criticisms and Controversies

Critics accused the committee of prioritizing recovery for large creditors over island residents and public priorities, aligning with commentators from outlets tied to figures like Amy Goodman, Jared Bernstein, and Paul Krugman. Some municipal advocates and community organizations including Casa Pueblo and labor unions raised concerns about austerity measures endorsed in certain settlement proposals, arguing potential impacts on services overseen by agencies such as the Puerto Rico Department of Education and the Puerto Rico Department of Health. Allegations of conflicts of interest were raised regarding advisory roles of firms linked to BlackRock and Goldman Sachs in both advisory and investment capacities. The committee's positions sparked debates in forums including hearings before the United States Senate Committee on Energy and Natural Resources, testimony involving officials like Alejandro García Padilla, and coverage in media outlets such as The New York Times, The Wall Street Journal, and The Washington Post.

Category:Finance in Puerto Rico Category:Bondholder committees