Puerto Rico bankruptcy Judge Laura Taylor Swain indicated Monday she would approve the negotiated Puerto Rico Sales Tax Financing Corp. (COFINA) bonds plan of adjustment, formalizing the largest restructuring of U.S. municipal debt in history.
On the same day she released an order approving the settlement between Puerto Rico’s government and COFINA concerning the amounts of revenue each would get. Swain later released an order approving the plan of adjustment, which replaces the old COFINA bonds with new bonds backed by new and reduced promises.
According to Puerto Rico’s federally created oversight board, the COFINA plan will slash debt service on the sales tax-backed debt by $17.5 billion over nearly 40 years, saving the island an average $456 million annually.
Future sales tax revenue previously pledged exclusively to COFINA will be split, with 53 percent going to COFINA bondholders and 46 percent flowing to the commonwealth government.
The judge also noted that the island’s core government debt, which includes roughly $13 billion of general obligation bonds and almost $50 billion in unfunded pension liabilities, must still be addressed.