The Pressing Interest Fund Corporation (COFINA) was created by virtue of the Law 91 of May 13, 2006, as amended, in order to finance the payment or cancellation of certain obligations of debt of the central government. Through the Sales and Use Tax (IVU) The government guaranteed the debt issued by this public corporation. In 2015, amendments were made to this law and the IVU was increased from 7% to 11.5%.
In 2017, COFINA joined the title III of the PROMESA Act that allowed the public corporation to undergo a bankruptcy process similar to that of Chapter 9 for municipalities in the United States. In 2018, the Fiscal Oversight Board endorsed the Adjustment Plan (or restructuring proposal) presented by the Government of Puerto Rico. The Legislature of Puerto Rico—without any public hearing—voted in favor of it and it was subsequently presented to the bondholders from COFINA.
In February 2019, Judge Laura Taylor Swain gave way to the third amended adjustment plan of Title III of COFINA. He COFINA agreement established that the holders of senior bonds and subordinates of COFINA they exchanged their old bonds for new senior bonds, backed by 54% of the 5.5% of IVU collections. A total of $11,800 billion in interest bonds, with a coupon of almost 6%, were exchanged for $9,600 billion in new bonds with an average coupon of 4.5%; and $6,000 billion in capital appreciation bonds were exchanged for $2,400 billion in new capital appreciation bonds. Senior bondholders received approximately 93 cents on the dollar, with an additional 2 cents for membership in the negotiating groups, while junior bondholders received 56.4 cents on the dollar.
Puerto Rico's debt amounts to more than $72,000 million. In 2014, it represented 110 percent of the National Income of 63,000 million. In 2014, 17 percent of Puerto Rico's consolidated budget was dedicated to debt service. The high amount of debt is the most serious and urgent economic challenge facing the people of Puerto Rico.
With the growing importance of the fiscal situation, it has become a topic of discussion in the daily lives of Puerto Ricans.
This dictionary is an effort to compile terms commonly used in discussions about debt. Its objective is to achieve a better understanding of the problem and encourage the informed participation of citizens in these debates.
It is a living and dynamic document. As debt discussions continue, terms will be added and updated, bringing the most up-to-date lexicon.
Tweet or tweet @menchaut to add terms, suggest changes, or make comments.
Technical notes: To make this dictionary, definitions from financial dictionaries, definitions of terms provided in Puerto Rico government documents, and explanations of concepts available in the printed and Internet news media were taken.
Some terms are presented in English as their use is regularly made in that language and is generally accepted and understood in the language of debt. When necessary, usage examples are provided to clarify the meanings. Hyperlinks are provided to Internet addresses that are used in the construction of the terms. However, it cannot be guaranteed that they will be available at the time the reader tries to access them.
The Debt Dictionary is an education and empowerment tool in times of crisis. Its author is the economist and professor, María E. Enchautegui, who was assisted by Victoria Sofía López Esteves. Sergio Marxuach, Director of Public Policy at the Center for a New Economy, made important contributions.