Mon 05/02/2022 19:02 PM
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Relevant Documents:
Plan of Adjustment
Disclosure Statement
DS Approval Motion
DS Motion Governing Objection Procedures
Motion Governing Confirmation Objection Procedures
Press Release

Puerto Rico Debt Restructuring Update from Reorg's Americas Core Credit team. 

The PROMESA oversight board today filed its long awaited plan of adjustment and disclosure statement for the Puerto Rico Highways and Transportation Authority, or HTA, Title III debtor. The HTA plan is premised on the CCDA/HTA plan support agreement with monoline insurers Assured, National, Ambac and FGIC, and on a stipulation with the DRA parties reached in the midst of the commonwealth’s confirmation hearing. The key consideration under the plan consists of new HTA bonds in addition to the already distributed contingent value instruments provided under the commonwealth plan.

According to an oversight board press release, the plan of adjustment would restructure about $6.4 billion of claims against HTA and will cut outstanding debt by more than 80% to $1.2 billion. The plan would also save Puerto Rico more than $3 billion in debt service payments. Under the plan, holders of about $4.2 billion in HTA bonds would receive $1.2 billion in new HTA bonds at 5% interest and $389 million in cash (inclusive of restriction fees and consummation costs). This amounts to more than a 70% cut, the oversight board highlights. Further, the oversight board states that the plan would settle $2.2 billion of outstanding loans held by the Debt Recovery Authority, or DRA, the successor-in-interest to the Government Development Bank, or GDB.

The DRA parties would receive no consideration under the HTA plan. Unsecured claims would be reduced to $265 million under the plan, and would be paid $25 million in cash, plus the net recoveries of avoidance actions attributable to the avoidance action trust, subject to certain reductions. To facilitate the cash payments under the plan, HTA would obtain a loan from the commonwealth for $314 million, which would be repayable over 30 years at 2.5% interest.

The oversight board had targeted Jan. 31 to file the documents, but that date was repeatedly extended in response to issues that arose while finalizing the documentation, according to the oversight board.

In a press release, Oversight Board Chairman David Skeel called the filing of the HTA plan “another significant step towards ending Puerto Rico’s financial distress and fulfilling the mandate of PROMESA.” Skeel said the HTA plan of adjustment and fiscal plan create a “solid financial foundation to ensure repair, maintenance, and future investment to ensure the mobility of residents and allow businesses to move goods efficiently. HTA must move on from its current inefficient state to the fiscal stability that will support Puerto Rico’s economic recovery and growth.”

In a statement this afternoon, Gov. Pedro Pierluisi said his administration is committed to achieving “expedited confirmation” of the HTA plan so that island highways can be improved through effective use of public-private partnerships on toll roads and maximizing usage of federal highway and reconstruction funding.

“I continue committed to ending the HTA bankruptcy by the end of the year (or sooner) and work collaboratively with the board to achieve this objective,” the governor said. Pierluisi touted the proposed plan’s “significant” reduction of HTA's debt and provisions allowing the establishment of P3s for island toll roads.

“The reduction of the debt and the P3 process allowed in the HTA plan will be fundamental to undertaking these policies and supporting the economic vision of my administration for the future of the island,” Pierluisi added.

The oversight board requests a disclosure statement hearing on June 17 at 9:30 a.m. ET and a confirmation hearing on Aug. 10.

The oversight board notes that the plan requires HTA to implement structural reforms, including separating construction and maintenance responsibility of toll and non-toll roads by establishing a toll management office exclusively responsible for toll roads and transferring Tren Urbano to the Puerto Rico Integrated Transit Authority, or PRITA. The DS also states that the fiscal plan provides for HTA to pursue a public-private partnership to access new sources of capital funding and utilize inflation-based fare hikes and fines. The “highway assets” (versus the “transit assets”) would be operationally and financially separated from the toll road assets and non-toll road assets with a “‘ring fenced’” structure.

According to the DS, the HTA/CCDA plan support agreement currently has the support of (i) $384 million, or 100%, of CCDA claims; (ii) over $700 million, or over 85%, of the aggregate amount of HTA 68 bond claims; and (iii) over $2.1 billion, or 67%, of HTA 98 senior bond claims. As it relates to the monoline insurers, the HTA/CCDA PSA, in conjunction with the Puerto Rico Infrastructure Financing Authority, or PRIFA plan support agreement, resolves the monolines’ revenue bond claims litigation against the commonwealth.

The DS highlights that under the plan, certain holders of claims would be entitled to elect the distribution they receive on account of their claims. Holders of monoline insured claims may elect the commutation treatment or the noncommutation treatment as detailed in the monolines’ plan subsections. Convenience claims may elect to reduce the amount of such holder’s allowed claim to $20,000 and receive payment in full in cash of such reduced claim pursuant to the treatment of convenience claims in Class 19; holders of multiple general unsecured claims may reduce their claims to an aggregate amount of $40,000 and receive full cash payment. The aggregate amount of consideration to be paid with respect to convenience claims is capped at $2.5 million (subject to waiver by UCC).

The DS provides the following overview of new HTA bonds to be issued in connection with the effective date:

  • New HTA CABs: About $238 million in capital appreciation bonds, Series 2022B, with a maturity date of July 1, 2032, and 5% interest per annum;

  • New HTA CCABs: $407.04 million of convertible capital appreciation bonds, Series 2022C, with a maturity date of July 1, 2053, a conversion date of July 1, 2032, and interest rate of 5% per annum;

  • New HTA CIBs: $600 million of current interest bonds, Series 2022A, with a maturity date of July 1, 2062, and interest rate of 5% per annum.


The new bonds would be paid solely from the trust estate, which would consist primarily of toll receipts. The bonds would be secured by first priority lien on the trust estate. The new bonds would be dated as of the earlier of (i) July 1 and (ii) the HTA effective date. The new HTA bonds include a toll rate covenant, for the benefit of the bondholders, which must be deemed valid, binding and legal enforceable obligations of the reorganized HTA under Puerto Rico, New York and federal law by the Title III court as a condition precedent to emergence, subject to waiver. Further terms of the bonds are detailed below.

Additionally, on the HTA effective date, reorganized HTA would issue subordinated debt equal to the amount outstanding on the commonwealth loan, plus any accrued but unpaid interest. The subordinated debt would be secured by a junior lien on the trust estate.

The HTA 68 bond recovery would consist of (i) $311.5 million of new HTA CIBs; (ii) $123.5 million of new HTA CABs; and (iii) $211.3 million of new HTA CCABs, provided, however, that at the election of the commonwealth and HTA, in their joint and absolute discretion, cash may be substituted in lieu of new HTA bonds, which would be issued on the HTA effective date on a dollar-for-dollar basis.

HTA 98 senior bond recovery would consist of (i) $288.18 million of new HTA CIBs; (ii) $114.4 million of new HTA CABs; and (iii) $195.7 million of new HTA CCABs, provided, however, that at the election of the commonwealth and HTA, cash may be substituted in lieu of new HTA bonds, which would be issued on the HTA effective date on a dollar-for-dollar basis.

HTA 98 sub bond recovery is defined as “[t]he aggregate recovery by holders of Allowed HTA 98 Sub Bond Claims, Allowed HTA 98 Sub Bond Claims (Assured), Allowed HTA 98 Sub Bond Claims (FGIC), and Allowed HTA 98 Sub Bond Claims (National).” HTA 98 sub bond claims are those claims against HTA on account of HTA 98 sub bonds other than those bonds insured by a monoline. The HTA 98 sub bonds were issued by HTA as $75.05 million Series 1998 subordinated transportation revenue bonds and $320.545 million Series 2003 subordinated transportation revenue bonds.

The HTA plan also contemplates payment of the HTA/CCDA PSA restriction fee of $125 million, minus the amounts that may be payable on account of consummation costs.

DS Approval Motion / Confirmation Timeline

The debtor’s’ disclosure statement approval motion proposes the following confirmation-related timeline:

Plan / Disclosure Statement

Below is a chart of the plan’s classes, along with the approximate recovery and form of consideration:

Treatment of Claims and Interests

The debtors’ plan sets forth the following classification of and proposed distributions to holders of allowed claims and interests:

  • Class 1 - HTA 68 bond claims: Subject to section 25.1 of the plan, each holder would receive such holder’s share of the HTA 68 bond recovery, which, as noted above, consists of (i) $311.5 million of new HTA CIBs; (ii) $123.5 million of new HTA CABs; and (iii) $211.3 million of new HTA CCABs, provided, however, that at the election of the commonwealth and HTA, in their joint and absolute discretion, cash may be substituted in lieu of new HTA bonds, which would be issued on the HTA effective date on a dollar-for-dollar basis.

  • Class 2 - HTA 68 bond claims (Ambac): Subject to section 25.1 of the plan, each holder would receive such holder’s pro rata share of the HTA 68 bond recovery, which consists of (i) $311.5 million of new HTA CIBs; (ii) $123.5 million of new HTA CABs; and (iii) $211.3 million of new HTA CCABs, provided, however, that at the election of the commonwealth and HTA, in their joint and absolute discretion, cash may be substituted in lieu of new HTA bonds, which would be issued on the HTA effective date on a dollar-for-dollar basis.

  • Class 3 - HTA 68 bond claims (Assured): Subject to section 25.1 of the plan pertaining to Assured insured bond claims, each holder would receive such holder’s pro rata share of the HTA 68 bond recovery, which consists of (i) $311.5 million of new HTA CIBs; (ii) $123.5 million of new HTA CABs; and (iii) $211.3 million of new HTA CCABs, provided, however, that at the election of the commonwealth and HTA, in their joint and absolute discretion, cash may be substituted in lieu of new HTA bonds, which would be issued on the HTA effective date on a dollar-for-dollar basis.

  • Class 4 - HTA 68 bond claims (National): Subject to section 25.1 of the plan, each holder would receive such holder’s pro rata share of the HTA 68 bond recovery, which consists of (i) $311.5 million of new HTA CIBs; (ii) $123.5 million of new HTA CABs; and (iii) $211.3 million of new HTA CCABs, provided, however, that at the election of the commonwealth and HTA, in their joint and absolute discretion, cash may be substituted in lieu of new HTA bonds, which would be issued on the HTA effective date on a dollar-for-dollar basis.

  • Class 5 - HTA 98 senior bond claims: Subject to the terms and provision of section 25.1, each holder would be entitled to receive such holder’s pro rata share of the HTA 98 senior bond recovery, consisting of: (i) $288.18 million of new HTA CIBs; (ii) $114.4 million of new HTA CABs; and (iii) $195.7 million of new HTA CCABs, provided, however, that at the election of the commonwealth and HTA, cash may be substituted in lieu of new HTA bonds, which would be issued on the HTA effective date on a dollar-for-dollar basis.

  • Class 6 - HTA 98 senior bond claims (Ambac): Subject to the terms and provision of section 25.1 governing Ambac’s insured bond claims, each holder would be entitled to receive such holder’s pro rata share of the HTA 98 senior bond recovery, consisting of: (i) $288.18 million of new HTA CIBs; (ii) $114.4 million of new HTA CABs; and (iii) $195.7 million of new HTA CCABs, provided, however, that at the election of the commonwealth and HTA, cash may be substituted in lieu of new HTA bonds, which would be issued on the HTA effective date on a dollar-for-dollar basis.

  • Class 7 - HTA 98 senior bond claims (Assured): Subject to the terms and provision of section 25.1, which pertains to Assured insured bond claims, each holder would be entitled to receive such holder’s pro rata share of the HTA 98 senior bond recovery, consisting of: (i) $288.18 million of new HTA CIBs; (ii) $114.4 million of new HTA CABs; and (iii) $195.7 million of new HTA CCABs, provided, however, that at the election of the commonwealth and HTA, cash may be substituted in lieu of new HTA bonds, which would be issued on the HTA effective date on a dollar-for-dollar basis.

  • Class 8 - HTA 98 senior bond claims (FGIC): Subject to the terms and provision of section 25.3, which pertains to FGIC’s insured bond claims, each holder would be entitled to receive such holder’s pro rata share of the HTA 98 senior bond recovery, consisting of: (i) $288.18 million of new HTA CIBs; (ii) $114.4 million of new HTA CABs; and (iii) $195.7 million of new HTA CCABs, provided, however, that at the election of the commonwealth and HTA, cash may be substituted in lieu of new HTA bonds, which would be issued on the HTA effective date on a dollar-for-dollar basis.

  • Class 9 - HTA 98 senior bond claims (National): Subject to the terms and provision of section 25.2, which pertains to National’s insured bond claims, each holder would be entitled to receive such holder’s pro rata share of the HTA 98 senior bond recovery, consisting of: (i) $288.18 million of new HTA CIBs; (ii) $114.4 million of new HTA CABs; and (iii) $195.7 million of new HTA CCABs, provided, however, that at the election of the commonwealth and HTA, cash may be substituted in lieu of new HTA bonds, which would be issued on the HTA effective date on a dollar-for-dollar basis.

  • Class 10 - HTA 98 sub bond claims: Each holder of an allowed HTA 98 sub bond claim shall be entitled to receive such holder’s pro rata share of the HTA 98 sub bond recovery.

  • Class 11 - HTA 98 sub bond claims (Assured): Subject to the terms and provisions section 25.1 pertaining to Assured’s insured bonds, each holder of an allowed HTA 98 sub bond claim (Assured) shall be entitled to receive such holder’s pro rata share of the HTA 98 sub bond recovery.

  • Class 12 - HTA 98 sub bond claims (FGIC): Subject to the terms and provisions section 25.3 pertaining to FGIC’s insured bonds, each holder of an allowed HTA 98 sub bond claim (FGIC) shall be entitled to receive such holder’s pro rata share of the HTA 98 sub bond recovery.

  • Class 13 - HTA 98 sub bond claims (National): Subject to the terms and provisions section 25.2 pertaining to National’s insured bonds, each holder of an allowed HTA 98 sub bond claim (National) shall be entitled to receive such holder’s pro rata share of the HTA 98 sub bond recovery.

  • Class 14 - HTA Moscoso bond claims: Holders of such claims would be deemed unimpaired and would be entitled to receive payments of principal and interest in accordance with the terms and conditions of the HTA Moscoso bonds.

  • Class 15 - Eminent domain/Inverse condemnation claims: From and after the effective date, to the extent not modified prior thereto, the automatic stay extant pursuant to section 362 of the Bankruptcy Code would be deemed modified in order to permit the holder of such claim to liquidate such claim in such holder’s eminent domain proceeding and cause the clerk of the Court of First Instance to distribute to such holder the amount of money on deposit with the court with respect to the condemned property. Subject to the entry of the HTA confirmation order or findings of fact and conclusions of law providing such claims must be paid in full to the extent they are allowed claims for just compensation, upon each such order becoming a final order, and upon the occurrence of another final order determining the validity and amount of just compensation attributable to an eminent domain/inverse condemnation claim, the holder of such claim would be entitled to receive such holder’s unpaid balance of its claim, in cash, 100% of such unpaid balance;

    • Provided, however, that, if the oversight board’s appeal of the commonwealth confirmation order and the findings of fact and conclusions of law relating to the nondischargeability of such claims is successful and the confirmation order is reversed to such extent, the holder of such unpaid balance of an eminent domain/inverse condemnation claim would be entitled to receive, the payments to be made to holders of Class 16 GUC claims pursuant to the terms and provisions of sections 20.1, 20.2 and 20.3 of the plan.



  • Class 16 - General unsecured claims: Subject to the convenience claim election, each holder of a GUC claim would be entitled to receive such holder’s pro rata share of the HTA GUC recovery, up to the GUC recovery cap. The GUC recovery cap is defined in the plan as 40%, provided that for purposes of calculation, any net recoveries by the avoidance action trust would not count toward such cap.

    • Any holder of an allowed HTA GUC claim whose claim is (i) more than $20,000 and who elects to reduce the amount of such claim to $20,000, and (ii) multiple allowed HTA GUCs that are greater than $40,000 in the aggregate and who elects to reduce their claim amount to $40,000, would, at the holder’s option, be entitled to receive payment in cash on the later of the effective date or the date the allowed claim becomes allowed.

    • The general unsecured reserve will be funded with $12.5 million on the HTA effective date and $12.5 million on the first anniversary of the effective date, provided, however, that amounts needed to satisfy the convenience claims would be funded directly to the disbursing agent. Further, if the GUC recovery cap is met, the funds remaining in the GUC reserve would be turned over to HTA for general purposes.



  • Class 17 - HTA/GDB claims: Pursuant to the terms and provisions of the DRA stipulation, allowed HTA/GDB claims would receive no distribution under the plan and would be deemed to accept the plan.

  • Class 18 - Section 510(b) subordinated claims: Holders of such claims would not receive a distribution under the plan and would be deemed to have rejected the plan.

  • Class 19 - Convenience claims: On the later of the HTA effective date and the date such allowed claim is deemed allowed, or as soon thereafter as is practicable, the disbursing agent would pay such holder in cash the full amount of its convenience claim.


Provisions Regarding New HTA Bonds and Additional Indebtedness

From and after the HTA effective date, the new HTA bonds trustee, on behalf of the holders of new HTA bonds, would have a valid and perfected first-priority lien on and first-priority security interest in the toll receipts and the right of reorganized HTA to receive such toll receipts. On the first business day of each calendar month, reorganized HTA would deposit toll receipts in the debt service fund with the new HTA bonds trustee.

The plan establishes a non-impairment covenant and states that the first-priority lien on the trust estate established pursuant to the new HTA bonds indenture would be deemed automatically perfected as of the HTA effective date.

The new HTA bonds would not have rights of acceleration. The new HTA bonds would be callable, in whole or in part, in any order of maturity, at par plus accrued interest thereon, as follows:

  • New HTA CIBs: 2062 CIBS: Callable at par on July 1, 2032;

  • New HTA CABs: 2032 CABS: Noncallable; and

  • New HTA Convertible CABs: 2053 CCABS: Callable at par on Jan. 1, 2023.


An extraordinary call provision would allow HTA to redeem all or a portion of the new bonds at 100% of par from the proceeds of a sale, joint venture, or public-private partnership with respect to the toll road assets, provided, however, that in the event that such redemption is for only a portion of the bonds, such redemption would be done in a manner that preserves the prevailing tax-exempt status.

In the event that the government parties do not obtain a tax-exempt determination from the IRS or an opinion from bond counsel until after the issuance of the new bonds on the effective date, then the holders of the taxable new HTA bonds affected by such determination would be invited to exchange such bonds for converted bonds.

The plan requires the reorganized HTA to maintain and comply with a debt management policy establishing that long-term debt issued after the effective date can only be incurred for capital improvements with maturities capped at 30 years, and principal must commence amortizing within two years from the placed-in-service date of the project being financed. Refinancings of debt would be permitted only if there is no increase in the amount of bond principal and interest payable in any fiscal year and such refinancing produces positive present value savings, with some leeway in the event of natural disaster or similar emergency. In addition, the policy would require that any post-effective HTA fiscal plan must include provisions for the payment of principal and interest with respect to the new HTA bonds in each fiscal year, including, without limitation, sinking fund payments due in such fiscal year.

Other Plan Provisions

The plan provides for releases of the government parties, the HTA/CCDA PSA creditors and the creditors’ committee as well as their respective related persons. Releasing parties would consist of all holders of claims against the debtor or its assets and such holders’ current and former affiliates.
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