Commonwealth of Puerto Rico – Bank of New York Mellon Objects to Disclosure Statement, Questions $322 million Payment to Certain Institutional Holders

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November 13, 2018 – The Bank of New York Mellon (“BNYM”) filed an objection [Docket No. 4210] to Disclosure Statement for the Title III Plan of Adjustment of the Debts of Puerto Rico Sales Tax Financing Corporation [Doc. No. 4073]. BNYM asserts, “BNYM serves as trustee for all of the Existing Securities issued by COFINA under the Existing Bond Resolution. Under the express terms of the Resolution, BNYM acts for the equal benefit, protection, and security of all holders of beneficial interests in the Existing Securities, all of which are of equal rank without preference, priority, or distinction, except as expressly provided in the Existing Bond Resolution.  The Plan provides that certain institutional holders of beneficial interests in the Existing Securities, which participated in the mediation process and executed the Plan Support Agreement, receive additional compensation over and above that provided to other holders in the same class. This payment is to be made from all holders’ shared collateral. The Disclosure Statement describes this payment, in the aggregate amount of approximately $332 million, as compensation for the cost of negotiation, confirmation, and consummation of the Term Sheet and the Plan. In its role as trustee for all of the Existing Securities, BNYM seeks to ensure that holders who did not participate in the mediation process receive disclosure necessary for them to make an informed, intelligent decision with regard to the Plan. BNYM has received numerous inquiries from individual retail and other holders of beneficial interests in the Existing Securities regarding payment of the Consummation Costs. The Disclosure Statement does not explain the basis under PROMESA and applicable provisions of the Bankruptcy Code for making this payment from holders’ shared collateral to selected institutional holders generally and, more specifically, in the amount of $332 million.”

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