Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF)

Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF)
Name	Puerto Rico Fiscal Agency and Financial Advisory Authority
Native name	Autoridad de Asesoría Financiera y Agencia Fiscal
Formed	2016
Jurisdiction	San Juan, Puerto Rico
Headquarters	La Fortaleza (Puerto Rico)
Chief1 name	Chief Financial Officer
Parent agency	Office of the Governor of Puerto Rico

Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF) The Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF) is an instrumental fiscal entity created to coordinate financial restructuring, budgetary oversight, and fiscal planning for Puerto Rico following the island's public debt crisis. AAFAF works alongside federal and territorial institutions to negotiate restructuring arrangements, manage bondholder claims, and implement fiscal plans approved under federal oversight. Its actions intersect with multiple courts, creditors, and executive offices during PROMESA implementation and related litigation.

History

AAFAF was established amid the aftermath of escalating public debt that involved major creditors such as holders of General Obligation Bonds, PBA Bonds, and bond insurers like Ambac Financial Group and Assured Guaranty. The entity's creation followed high-profile financial events including the declaration of insolvency by several Puerto Rican agencies and the appointment of a financial oversight mechanism under Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). Key early interactions included negotiations with municipal entities like Municipality of San Juan and instrumental engagements with restructuring advisors formerly associated with firms such as Goldman Sachs, Citi, and Moody's Investors Service. Prominent public figures and officials from the Office of the Governor of Puerto Rico coordinated with AAFAF during crises tied to natural disasters like Hurricane Maria and fiscal emergencies that impacted programs administered by agencies including Puerto Rico Electric Power Authority and Puerto Rico Aqueduct and Sewer Authority.

Mandate and Legal Authority

AAFAF derives authority from territorial statutes enacted by the Legislature of Puerto Rico and operates within the framework established by PROMESA, interacting with the Financial Oversight and Management Board for Puerto Rico (FOMB). Its mandate includes negotiating restructuring terms with creditor committees such as holders of General Obligation Bonds and Revenue Bonds, preparing fiscal plans submitted to the FOMB and supervising budget execution across agencies like Puerto Rico Department of Treasury and Puerto Rico Department of Health. AAFAF's legal interactions have involved federal venues including the United States District Court for the District of Puerto Rico and appellate review at the United States Court of Appeals for the First Circuit.

Organizational Structure

AAFAF's leadership historically reported to appointees from the Office of the Governor of Puerto Rico, with key positions filled by individuals who coordinated with external advisors from Law firms and Investment banks engaged in debt negotiations. The organization contains divisions responsible for budget formulation, capital markets engagement, legal coordination, and programmatic financial assistance to agencies like Puerto Rico Electric Power Authority and University of Puerto Rico. AAFAF interacts with bondholder committees represented by firms such as Paul, Weiss, Rifkind, Wharton & Garrison and Proskauer Rose, and consults with analytical entities including S&P Global Ratings and Fitch Ratings.

Role in Puerto Rico Debt Restructuring and Oversight

AAFAF played a central role in negotiating debt adjustment plans under PROMESA Title III cases filed by instrumentalities such as Puerto Rico Sales Tax Financing Corporation (COFINA) and Puerto Rico Electric Power Authority (PREPA). It coordinated with creditor groups including ad hoc committees for bondholders and municipalities, and engaged in contested confirmation proceedings heard by judges from the United States District Court for the District of Puerto Rico and appellate review involving the United States Supreme Court in matters of territorial insolvency and plan confirmation. AAFAF managed interactions with entities like the FOMB and counsel teams representing creditor constituencies, while overseeing settlement processes involving insurers like MBIA and National Public Finance Guarantee Corporation.

Financial Operations and Programs

AAFAF implemented fiscal programs to align budgets of agencies such as Puerto Rico Department of Education and Puerto Rico Health Department with certified fiscal plans, managed cash-flow arrangements including lines of credit negotiated with banks like Banco Popular de Puerto Rico and international lenders, and supervised debt service prioritization affecting bondholders including those holding General Obligation Bonds and Revenue Bonds. It coordinated federal disaster recovery funds from agencies such as Federal Emergency Management Agency (FEMA) to support reconstruction efforts after Hurricane Maria, interacting with recovery programs administered by Department of Housing and Urban Development (HUD) and contractors engaged in infrastructure projects.

Criticisms and Controversies

AAFAF has been scrutinized in debates involving transparency, contract procurement, and the selection of financial advisors tied to firms with previous roles in Puerto Rican finance such as Goldman Sachs, Orrick, Herrington & Sutcliffe, and other advisory houses. Critics including members of the Legislature of Puerto Rico and advocacy groups like Centro de Periodismo Investigativo raised concerns about access to documents in PROMESA-related negotiations, leading to disputes over subpoena compliance in federal proceedings. Controversies extended to interactions with labor organizations such as Unión General de Trabajadores and stakeholders from academic institutions including University of Puerto Rico regarding austerity measures embedded in certified fiscal plans.

Legal and Legislative Developments

AAFAF's operations have been shaped by rulings from federal courts including the United States Court of Appeals for the First Circuit and guidance from the FOMB under PROMESA. Legislative dynamics involving the Legislature of Puerto Rico and executive actions from territorial governors impacted AAFAF's statutory authority and budgetary responsibilities. Ongoing litigation with creditors including Ad Hoc Group of General Obligation Bondholders and settlements with entities like Financial Guaranty Insurance Company tested statutory interpretations of territorial immunity and creditor rights, prompting further legal developments and potential legislative responses from branches such as the Puerto Rico Senate and Puerto Rico House of Representatives.

Category:Government agencies of Puerto Rico