The Ad Hoc Group of Puerto Rico General Obligation bondholders addressed a memo Tuesday to island policymakers claiming the unconstitutionality of the Sales Tax Financing Corp., known as COFINA, and asking for its invalidation.
COFINA, which carries $17 billion in Commonwealth bond debt, is financed through the allocation of sales and use tax revenues. It was created in 2007.
In the memo, GO bondholders claim, “the most powerful path for solving the Commonwealth’s fiscal crisis is to recognize the invalidity of the assignment of the Commonwealth’s sales and use tax revenues to COFINA.”
The group called upon the Commonwealth’s government and the Financial Oversight and Management Board for Puerto Rico to take steps to eliminate the “inexplicable favoritism on COFINA’s debt.”
Putting a halt to diverting collections to COFINA, would “immediately increase the General Fund by more than $700 million in the current fiscal year alone, and by more than $50 billion over the remaining life of COFINA’s existing bonds,” the group said.
GO bondholders and COFINA creditors have been at odds for months over how they should get paid back the billions the Commonwealth owes as part of the restructuring process.
The GO bondholders claim the Commonwealth has bestowed favoritism on COFINA debt holders by paying them in full and “opposing [on procedural grounds] the GO group’s legal challenge to the COFINA debt.”
“The Oversight Board has likewise sought [also on procedural grounds] to prevent that challenge from moving forward,” the creditor group said.
To read the GO bondholder group’s full memorandum, click HERE.