Holders of Puerto Rico’s Valid Constitutional Debt Align with Fellow Creditors and the Oversight Board on Milestone Restructuring Agreement

Plan Support Agreement Covering ~$35 Billion in Claims Establishes
an Equitable Framework for the Consensual Restructuring of ~$18 Billion
in Constitutional Debt

Terms Provide for ~$8 Billion in GO and PBA Debt Reductions As
Well As Baseline Haircuts of ~36% for GO Bondholders

Parties Envision That a Critical Mass of Creditors Will Sign on To
the Agreement, Which Positions Puerto Rico to Accelerate its Exit From
Bankruptcy

SAN JUAN, Puerto Rico & NEW YORK–(BUSINESS WIRE)–The Lawful Constitutional Debt Coalition (the “Coalition” or “LCDC”),
which includes certain major holders of Puerto Rico’s General Obligation
(“GO”) and Public Buildings Authority (“PBA”) bonds issued prior to
March of 2012, today disclosed that three months of negotiations with
the Financial Oversight and Management Board (the “Oversight Board”)
have resulted in a Plan Support Agreement (“PSA”) that establishes terms
for the consensual restructuring of more than $18 billion in GO and PBA
debt. The Coalition’s members, who have joined together to pursue a
consensual restructuring that offers all creditors equitable outcomes,
each signed the PSA made public today. Other PSA signatories include
members of the ad hoc group of Qualified School Construction and
Qualified Zone Academy bondholders.

Susheel Kirpalani of Quinn Emanuel Urquhart & Sullivan, LLP, in his
capacity representing the LCDC, commented:

“It is a very positive development for Puerto Rico that a cross-section
of large bondholders has worked with the Oversight Board to develop a
consensual restructuring agreement that will accelerate the
Commonwealth’s exit from bankruptcy, respect the lawful priority of
valid public debt, and help ultimately restore capital markets access.
The PSA forged by major stakeholders includes approximately $8 billion
in GO and PBA debt reduction while establishing a framework for reducing
the Commonwealth’s total funded debt and general unsecured claims by $23
billion. The terms also create an efficient path for resolving disputes
over the validity and priority of GO debt – one that will enable the
Commonwealth to save hundreds of millions of dollars per year in
restructuring-related expenses upon exiting bankruptcy.

This agreement demonstrates that creditors with long-term investments
and interests in Puerto Rico are willing to make meaningful compromises
intended to reignite capital formation and economic development on the
island. Under the terms, holders of valid GO bonds will accept baseline
haircuts of approximately 36%. When paired with recently announced
consensual agreements with unions and retirees, we believe the
restructuring of more than $18 billion in constitutional debt will help
Puerto Rico speed up its exit from bankruptcy and achieve the type of
revitalization that other municipal issuers have realized following
their bankruptcies.

Looking ahead, the LCDC is optimistic that like-minded creditors will
sign on to the PSA disclosed today. We believe this agreement’s terms
provide all holders of GO and GO-guaranteed debt the opportunity to
realize equitable recoveries based on their relative priority and
rights. We look forward to working alongside constructive stakeholders
to achieve confirmation and then consummation of a Plan of Adjustment
for the Commonwealth in the months to come.”

Please click
here
to access the documentation that has been made public as part
of today’s disclosure. A summary of the key terms provided under the PSA
include:

  • Participating bondholders will receive a combination of new bonds and
    cash;
  • In aggregate, GO bondholders will receive a baseline recovery of
    approximately 64%1;
  • Ratable distributions for disputed bondholder claims will be placed in
    escrow;
  • Authority to litigate or settle existing “late vintage litigation”
    will be transferred to a litigation trust post-confirmation, and;
  • Litigation value of up to $1.4 billion will exist for the Commonwealth.

About the LCDC

The LCDC consists of institutional holders of Puerto Rico’s GO and PBA
bonds issued prior to March of 2012. The Coalition’s mission is to reach
an equitable, economically-viable restructuring that respects the lawful
priority of early vintage constitutional debt and properly characterizes
the PBA structure. 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.

1 The term “baseline recovery” refers to the recovery that GO
bondholders would receive from the allocated cash and bond currency if
early vintage, 2012 and 2014 bondholders had full faith and credit
claims of equal priority.

Contacts

Profile
Greg Marose / Charlotte Kiaie
347-343-2999
gmarose@profileadvisors.com
/ ckiaie@profileadvisors.com