Puerto Rico HTA plan confirmation hearing set for mid-August

BY SourceMedia | MUNICIPAL | 06/24/22 04:10 PM EDT By Robert Slavin

Puerto Rico bankruptcy Judge Laura Taylor Swain this week approved key Puerto Rico Highways and Transportation Authority bankruptcy documents and dates, moving the plan closer to confirmation with a final hearing set for mid-August.

Swain filed her order Wednesday in the U.S. District Court for Puerto Rico, approving the Oversight Board-proposed disclosure statement, ballots, and election notices on the proposed plan of adjustment. Swain set the confirmation hearing for Aug. 17 to 18.

In mid-May, the Oversight Board told Swain the plan already was supported by enough of the creditors to assure passage.

Sign in front of Puerto Rico highway
Swain set the date for votes to be received to be July 27 and objections to the confirmation are due July 27 with replies to the objections by Aug. 7. Objections to the board?s findings of fact and conclusions of law are due by Aug. 15.

While the terms of the HTA bond restructuring were largely set in the central government?s plan of adjustment approved in January, HTA bondholders did not get cash, bonds, or contingent value instruments when that plan was executed in March. Further conditions had to be met, including court approval.

According to the terms of the proposed HTA plan of adjustment, holders of $4.3 billion of HTA bonds would receive $1.2 billion of new bonds with 5% coupons and $389 million of cash. The generosity of the deal depends on what type of HTA bond is held.

The plan includes a $314 million loan by Puerto Rico's central government to HTA to facilitate the cash payments required by the plan, repayable over 30 years at 2.5% interest.

About $1.2 billion of the original par value is uninsured and the rest is insured by Assured Guaranty (AGO), Financial Guarantee Insurance Corp., and Ambac Assurance.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.