PIRATES OF THE CARIBBEAN

THE SANTANDER-LED GDB AGGRESSIVELY
PURSUES QUESTIONABLE COFINA BONDS TO
MAINTAIN PUERTO RICO’S CREDIT RATINGS
With his team in place at the GDB, Garcia moved swiftly to reassure the bond market. In order to
maintain Puerto Rico’s credit ratings, Garcia relied on issuance of a new category of municipal debt,
secured by regressive Puerto Rican sales and use tax receipts. These “safe” bonds, known by their
Spanish language acronym, COFINA, were issued mainly to refund outstanding interest and principal
on previously issued government debt, and also provide deficit financing for the Commonwealth. 29
The legality of COFINA as a separate governmental structure with a dedicated revenue stream to
exclusively to pay bondholders has never been determined by a court, although it is the subject of an
ongoing federal lawsuit between rival groups of COFINA and General Obligation (GO) bondholders. 30
Fortuño then had a law passed in January 2009 that doubled the amount of sales tax revenue
set aside for COFINA bonds, enabling the Garcia’s GDB to issue more debt underwritten by
Santander and other banks. Law 7, passed in March 2009, permitted the Treasury Secretary
to refinance debt without considering whether it would actually save Puerto Rico money. 31
Mass protests in Puerto Rico over layoffs and Public Law 7.
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