Wed 06/15/2022 17:58 PM
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Relevant Document:
SUT/Rum Excise Tax Report

As expected, the Puerto Rico central government’s 5.5% portion of the sales-and-use tax, or SUT, totaled $1.393 billion through March, surpassing the $1.283 billion baseline outperformance metric in the commonwealth plan of adjustment for general obligation and clawback contingent value instrument, or CVI, payments for fiscal 2022, according to a report posted to EMMA this afternoon by the Puerto Rico Fiscal Agency and Financial Advisory Authority. The report shows that the rum excise tax collections during the first 10 months of fiscal 2022 totaled $389.7 million, which also surpasses the $208.6 million outperformance metric of rum tax portion for clawback CVI payments during fiscal 2022.

The SUT outperformance totaled $110 million as of April 30, while the rum tax outperformance totaled $181.1 million through April, according to the report.

The SUT report notes the April SUT collections totaled $142.2 million in April, but the figure does not include $62.2 million of unallocated collections as of April 30, “pending the filing of the corresponding tax return and determination as to the portion of such collections that corresponds to the 5.5% SUT,” according to a footnote. Rum excise tax collections totaled $35.4 million in April.

As part of the execution of the commonwealth plan of adjustment, which took effect in mid-March, the commonwealth issued GO CVIs in the aggregate original notional amount of $3.5 billion with a maturity date of July 1, 2043, and a final redemption payment date of Nov. 1, 2043, and clawback CVIs in the aggregate original notional amount of $5.2 billion with a maturity date of July 1, 2051, and a final redemption payment date of Nov. 1, 2051.

The CVIs are based upon sharing of outperformance between bondholders and the commonwealth of 5.5% SUT collections and general fund rum tax collections, both subject to annual and lifetime caps. Payments to investors on the SUT portion of the CVIs are triggered by outperformance of the 5.5% SUT collection targets established in the May 2020 fiscal plan. For the rum tax apportion of the clawback CVIs, the metric to measure outperformance on waterfall general fund rum tax collections is based on the April 2021 fiscal plan projections.

GO and clawback CVI holders can receive up to 90% of annual outperformance subject to annual cap of $375 million, while rum tax CVI holders can receive up to 50% of annual outperformance subject to annual cap of $30 million. Detailed descriptions of the CVI terms and waterfall provisions are provided in exhibits J and M of the commonwealth plan of adjustment. The CVI terms are discussed in the graphic below from a recent AAFAF presentation:

The SUT outperformance metrics related to the GO and clawback CVIs for every fiscal year through 2051 are included in the following chart:

The rum excise tax outperformance metrics related to the rum tax CVIs for every fiscal year through 2051 are included in the following chart:

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