Puerto Rico Ad Hoc Group of Constitutional Debtholders Believes Existing Plan Support Agreement Continues to Represent the Best Path Forward for the Commonwealth

Federal Oversight and Management Board’s 2020 Certified Fiscal Plan is Far Too Pessimistic and Underestimates Both Future Growth and the Resiliency of Puerto Rico

Current PSA Between Puerto Rico and its Investors Remains the Fastest Way to Exit Bankruptcy, Regain Access to Capital Markets, and Pave the Way for Future Growth

NEW YORK--(BUSINESS WIRE)--The Puerto Rico Ad Hoc Group of Constitutional Debtholders (the Investor Group) today released a presentation summarizing why the existing Plan Support Agreement (the PSA) continues to represent the best path forward for the Commonwealth and should be preserved. Notably, the presentation details significant issues with the Financial Oversight and Management Board’s (FOMB) Certified Fiscal Plan (2020 CFP), which the Investor Group believes, if corrected, demonstrate the viability of the current PSA.

The presentation is available at this website: www.InvestorsForPuertoRico.com.

The group issued the following statement:

“As investors in Puerto Rico, we believe strongly in its future. The PSA announced in February remains the fastest way for the island to emerge from the restructuring process and to regain critical access to financial markets – while also achieving independence from the oversight of the FOMB. The PSA is based on conservative but realistic assumptions about the future growth of the Puerto Rico economy supported by actual results achieved. It is the best path forward for all stakeholders and we hope to work constructively with the FOMB to execute it.

However, the 2020 fiscal plan put forth by the FOMB dramatically underestimates the resiliency of the people of Puerto Rico and the Commonwealth’s economy. It overstates challenges and expenses, while understating – or overlooking entirely – the counterweight of federal relief and positive indicators. Most importantly, we believe that if these issues with the CFP are corrected, it will reinforce that the PSA should be preserved.”

Key points from the presentation include the following:

• The 2020 CFP significantly understates future tax revenue, surplus and debt capacity of Puerto Rico because it relies on flawed economic inputs, not differences of opinions

– It is premised on the incorrect assumption that the pandemic will have a permanent negative impact on revenues and surplus from which Puerto Rico’s economy will never recover
– Its debt capacity analysis is oversimplified and is based on stale data and arbitrary assumptions that are inconsistent with the assumptions utilized by the same Board earlier this year

• The FOMB prior projections have been consistently understated, as evidenced by Puerto Rico outperforming every revenue projection the FOMB has ever made, even after the unprecedented impact from the 2017 hurricanes, the 2020 earthquakes, and now the global COVID-19 pandemic

– The CFP was finalized on May 27, 2020, just 34 days before the end of FY2020, with most of the year’s revenues and expenses accounted for, yet it still missed the FY2020 revenue projections by at least $153 million
– FY2021 actual general fund collections YTD through November 27, 2020 are $856 million, or 26%, higher than projected in the 2020 CFP

• The February PSA is based on conservative assumptions about the island’s ability to service debt and represents a reasonable and sustainable compromise

– A modest increase in annual debt service as compared to the November 2020 FOMB restructuring proposal would be easily affordable and would still be well below the 15% limit prescribed by Puerto Rico’s constitution
– The PSA has significant support from the GO creditors, many of whom are and will remain long-term investors in Puerto Rico, and provides the fastest way for the Commonwealth of Puerto Rico to emerge from bankruptcy and regain critical access to financial markets

Morrison and Foerster is serving as legal counsel to the group and Perella Weinberg Partners, LP is serving as its financial advisor.