UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

In re: 

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO

as representative of

THE COMMONWEALTH OF PUERTO RICO, et 

al.1,

Debtors.

PROMESA

Title III

No. 17 BK 3283-LTS

(Jointly Administered)

In re: 

THE FINANCIAL OVERSIGHT AND 

MANAGEMENT BOARD FOR PUERTO RICO

as representative of

PUERTO RICO SALES TAX FINANCING 

CORPORATION,

Debtor.

PROMESA

Title III

No. 17 BK 3284-LTS

DECLARATION OF BRIAN M. RESNICK REGARDING PAYMENT OF 

THE BONISTAS EXPENSES

I, BRIAN M. RESNICK, hereby declare under penalty of perjury:

1. I am an attorney with the law firm of Davis Polk & Wardwell LLP 

(“Davis Polk”), counsel to Bonistas del Patio, Inc. (“Bonistas del Patio”) in connection 

with the court-sanctioned mediation (the “Mediation”) relating to the above-captioned 

 

1 The debtors in the above-captioned Title III cases (each, a “Debtor”), along with each Debtor’s 

respective title III case number and the last four digits of each Debtor’s federal tax identification number, 

are the (i) Commonwealth of Puerto Rico (Bankruptcy Case No. 17 BK 3283-LTS) (Last Four Digits of 

Federal Tax ID: 3481); (ii) Puerto Rico Sales Tax Financing Corporation (Bankruptcy Case No. 17 BK 

3284-LTS) (Last Four Digits of Federal Tax ID: 8474); (iii) Puerto Rico Highways and Transportation 

Authority (Bankruptcy Case No. 17 BK 3567-LTS) (Last Four Digits of Federal Tax ID: 3808); 

(iv) Employees Retirement System of the Government of the Commonwealth of Puerto Rico (Bankruptcy 

Case No. 17 BK 3566-LTS) (Last Four Digits of Federal Tax ID: 9686); and (v) Puerto Rico Electric 

Power Authority (Bankruptcy Case No. 17 BK 4780-LTS) (Last Four Digits of Federal Tax ID: 3747).

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Title III proceedings in respect of the Commonwealth of Puerto Rico 

(the “Commonwealth”), the Puerto Rico Sales Tax Financing Corporation (“COFINA”)

and the other Debtor instrumentalities of the Commonwealth.2

2. I submit this declaration (this “Declaration”) with respect to the 

Stipulation Regarding Section 15.2 Expenses [Case No. 17-3283, Dkt. No. 5097-1]

(the “Stipulation”), relating to the Bonistas Expenses (as defined herein), submitted by 

the Puerto Rico Fiscal Agency and Financial Advisory Authority (“AAFAF”) in 

connection with the Third Amended Plan of Adjustment for Puerto Rico Sales Tax 

Financing Corporation [Case No. 17-3284, Dkt. No. 436] (the “COFINA Plan of 

Adjustment”), and in support of the Response of the Puerto Rico Fiscal Agency and 

Financial Advisory Authority to the Official Committee of Unsecured Creditors’ Urgent 

Response to Informative Motion [Docket No. 584].

Bonistas del Patio

3. Bonistas del Patio is a Puerto Rico not-for-profit corporation that has been 

a key participant and an important local voice throughout the Commonwealth’s fiscal 

crisis and debt restructuring process. Bonistas del Patio’s mission is to safeguard the 

interests of individual residents of Puerto Rico who invested their savings in billions of 

dollars of bonds issued by the Commonwealth and its instrumentalities (“Local 

Bondholders”) and to preserve local capital on-island. Bonistas del Patio was formed in 

recognition of the fact that Local Bondholders have separate and distinct interests from 

non-resident creditors and creditor groups and often hold bonds in denominations too 

small to make their voice heard. As an organization operated by local businesspeople 

 

2

I have been admitted pro hac vice to the District of Puerto Rico for purposes of these Title III 

cases in connection with Davis Polk’s representation of the Commonwealth Bondholder Group.

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who have invested savings of their own into Puerto Rico bonds, and who regularly solicit 

feedback from other Local Bondholders, Bonistas del Patio speaks for a critical 

constituency in the Commonwealth’s debt restructuring negotiations—a constituency that 

must bear the burden both of the Commonwealth’s debt reductions through bond writedowns and of its financial restructuring in the form of increased taxes, reduced public 

services and other reform measures.3 In furtherance of its goals, Bonistas del Patio 

principally advocates for consensual, cost-effective debt restructurings between the 

various government issuers and their creditor constituencies, and was an early and crucial 

participant in the negotiation of the only successful restructurings completed under 

PROMESA to date—the qualifying modification of the Government Development Bank 

for Puerto Rico (“GDB”) under Title VI of PROMESA and the COFINA Plan of 

Adjustment under Title III of PROMESA. 

Bonistas del Patio’s Professionals

4. Bonistas del Patio retained Davis Polk and Ducera Partners LLC 

(“Ducera” and, together with Davis Polk, the “Professionals”) in July of 2017, to 

represent Bonistas del Patio in connection with the Mediation. Because Bonistas del 

Patio has few financial resources of its own, from the time of Bonistas del Patio’s initial 

engagement of the Professionals, and based on discussions since that time with 

representatives and advisors of AAFAF, which recognized that local bondholders are 

entitled to be well represented in any restructuring negotiations, Bonistas del Patio and 

 

3 Although definitive current local holdings are unknown, the report published by the Oversight 

Board’s Independent Investigator indicates that, as of 2015, approximately 22% of Puerto Rico’s 

outstanding debt (approximately $16 billion) was held by Local Bondholders. Kobre & Kim LLP, 

Independent Investigator for the Financial Oversight & Management Board for Puerto Rico, Final 

Investigative Report (Aug. 20, 2018), at 338. According to the Monthly Puerto Rico Bonds Report 

published by the Office of the Commissioner of Financial Institutions of Puerto Rico, Local Bondholders 

held approximately $9 billion in face amount of bonds issued by the Commonwealth or its 

instrumentalities, as of September 30, 2018.

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the Professionals have operated under the expectation that the Professionals’ expenses 

would ultimately be paid by the Commonwealth or its instrumentalities in connection 

with one or more successful plans of adjustment. Accordingly, the Professionals have 

agreed to provide legal and financial services to Bonistas del Patio without recourse to 

Bonistas del Patio for payment. 

5. With such expectations, the Professionals have continued their work on 

behalf of Bonistas del Patio, including in connection with the negotiation, development, 

confirmation and consummation of the COFINA Plan of Adjustment and the compromise 

and settlement of the Commonwealth-COFINA Dispute (collectively, the “COFINA 

Restructuring”). As of the date of this Declaration, the Professionals have not received 

any payments for their work on behalf of Bonistas del Patio from the Commonwealth or 

any of its instrumentalities.

4

Bonistas del Patio’s Key Role in Mediation

6. Bonistas del Patio and the Professionals have played a central role in the 

Mediation. Bonistas del Patio was one of the initial parties to the Mediation Agreement 

entered into in connection with the Order Appointing Mediation Team [Case No. 17-

3283-LTS, Dkt. No. 430] in the summer of 2017, and since that time Bonistas del Patio 

and the Professionals have actively and diligently participated in the Mediation, seeking 

consensual resolutions to Puerto Rico’s fiscal crisis through global settlements and debt 

restructurings. As early as August of 2017, the Professionals, on behalf of Bonistas del 

Patio, began engaging with advisors to AAFAF and the Financial Oversight and 

 

4 With respect to professionals other than Davis Polk or Ducera, those representing Bonistas del 

Patio in connection with the restructuring of GDB were paid fees and expenses incurred in connection 

therewith, upon the consummation of the Qualifying Modification of GDB. Such payments were made by 

GDB.

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Management Board for Puerto Rico (the “Oversight Board” and, together with AAFAF, 

the “Government Parties”) and other creditor constituencies to discuss and help formulate 

potential global settlements. Bonistas del Patio and the Professionals participated in the

Mediation from the outset, where they engaged thoughtfully and constructively in 

discussions regarding the fiscal plan, debt capacity, potential settlement structures and the 

implications of hurricanes Irma and María. In recognition of the Professionals’ 

contributions and the unique and important perspective of Bonistas del Patio, Ducera is 

among a small subset of advisors allowed access to confidential financial updates on 

behalf of the broader creditor constituencies.

7. As an advocate for the interests of Local Bondholders, Bonistas del Patio 

has been particularly focused on achieving consensual resolutions of the CommonwealthCOFINA Dispute and the intra-COFINA creditor disputes. COFINA bonds are largely 

understood to be the most widely held government bonds on-island,5and Bonistas del 

Patio believes, based on information provided to it by local broker-dealers, that local 

holdings were approximately evenly weighted between senior and subordinate COFINA 

bonds prior to consummation of the COFINA Plan of Adjustment. In light of this and in 

furtherance of Bonistas del Patio’s overarching position that consensual resolutions to the 

Commonwealth’s debt crisis are in the best interests of all stakeholders, the Professionals 

were deeply involved from the outset in each stage of negotiations leading to the 

COFINA Restructuring, actively seeking to drive consensus for a deal that Bonistas del 

Patio’s leadership believed represented a reasonable compromise and aiming to smooth 

the process toward confirmation by avoiding a potential cram-down plan. Moreover, 

 

5 According to the Monthly Puerto Rico Bonds Report published by the Office of the 

Commissioner of Financial Institutions of Puerto Rico, Local Bondholders held approximately $3.4 billion 

in face amount of COFINA bonds, as of September 30, 2018.

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because of its significant local influence, Bonistas del Patio was able to make a 

meaningful impact in driving other parties in interest toward consensus.

8. Bonistas del Patio and the Professionals actively participated in the 

resolution of the Commonwealth-COFINA Dispute and the intra-COFINA creditor 

disputes. In connection with the Mediation of those disputes, Bonistas del Patio provided

a balanced voice on behalf of both senior and subordinate bondholders and advocated for 

the interests of Local Bondholders to ensure fair treatment for all bondholders. In 

Bonistas del Patio’s view, it made a significant contribution to the negotiation of the 

COFINA Plan of Adjustment by helping to bridge differences among the creditor parties.

9. Bonistas del Patio and the Professionals provided substantial benefits to 

the Commonwealth and COFINA in connection with the formulation, negotiation, 

confirmation and consummation of the COFINA Restructuring. Among other things, 

Bonistas del Patio and/or the Professionals, as applicable:

 Prepared and submitted mediation statements, as requested by the 

mediators;

 Participated in hundreds of hours of intense and complex 

negotiation sessions, meetings and conference calls (including 

hosting several meetings at Davis Polk) regarding settlement of the 

Commonwealth-COFINA Dispute and intra-COFINA creditor 

disputes;

 Entered into the plan support agreement for the COFINA Plan of 

Adjustment (the “Plan Support Agreement”) and fulfilled its 

obligations and covenants under Section 4.9 thereof to (i) support 

the COFINA Restructuring, (ii) actively encourage support by

Local Bondholders for the COFINA Restructuring, including 

through posting to the Bonistas del Patio website and responding to

Local Bondholders’ questions, (iii) support new Puerto Rico

legislation to implement the COFINA Restructuring, (iv) not take 

any action, nor encourage others to take any action, inconsistent 

with the COFINA Restructuring and (v) not support or encourage 

Local Bondholders to vote for any plan of adjustment (or 

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modification thereto) not proposed or supported by the Oversight 

Board, AAFAF or COFINA;

 Assisted in the formulation of the COFINA Plan of Adjustment 

and the finalization of the definitive agreement and ancillary 

documents, including by serving as a counterparty to the Oversight 

Board and AAFAF in the negotiation of the COFINA Plan of 

Adjustment and helping to ensure the Oversight Board had 

significant Local Bondholder support for the COFINA Plan of 

Adjustment;

 Communicated with Local Bondholders to raise awareness of the 

COFINA Restructuring, and served as a resource for Local 

Bondholders, including through phone calls, emails, at least eight 

public statements published throughout local media outlets and on 

Bonistas del Patio’s website, in-person meetings in Puerto Rico

with the Professionals and Local Bondholders and a remote video 

conference with the Professionals and Local Bondholders; and

 Encouraged support for the COFINA Plan of Adjustment, through 

preparing and disseminating to Local Bondholders “Questions and 

Answers” regarding the COFINA Plan of Adjustment and

distributing announcements notifying and reminding Local 

Bondholders of the voting and election deadlines for the Plan of 

Adjustment, and by encouraging broker-dealers to communicate 

with Local Bondholders with respect to the COFINA Plan of 

Adjustment and assisting the Oversight Board’s counsel in the 

formulation of radio advertisements publicizing the solicitation and 

other documents publicizing the solicitation.6

AAFAF’s Agreements Regarding Payment of the Professionals’ Fees and Expenses

10. In the midst of continued negotiations leading up to the execution of the 

Plan Support Agreement, AAFAF executed a letter agreement (the “July 2018 Letter 

Agreement”) to Bonistas del Patio, confirming and acknowledging that Bonistas del Patio 

and the Professionals provided “significant benefits to local constituents and the 

Commonwealth alike,” and agreeing that a provision could be included in any plan of 

adjustment for the Commonwealth or other Title III Debtor that would require the 

 

6 Certain of these efforts were pursued at the request of the Oversight Board’s advisors, who 

sought to ensure that each class of claims entitled to vote in respect of the COFINA Plan of Adjustment 

satisfied the “numerosity” requirement for acceptance by the class under section 1126(c) of the Bankruptcy 

Code, as made applicable under Title III of PROMESA. 

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payment of the fees and expenses of the Professionals by the Commonwealth or the 

applicable Debtor. In making this commitment, AAFAF specifically acknowledged the 

“constructive role” that Bonistas del Patio and the Professionals “have been playing and 

continue to play” in the Mediation, as well as the “need for the interests of the Local 

Bondholders to be adequately represented by parties committed to negotiating with all 

constituents to achieve a constructive consensual solution to the Puerto Rico debt crisis” 

and the necessity of “experienced external lawyers and financial advisors” in light of the 

“complexity and importance of the mediation.”

11. The Professionals, on behalf of Bonistas del Patio, have dedicated

thousands of hours of time and expended substantial expenses and resources in the 

development, negotiation and implementation of the COFINA Plan of Adjustment in 

order to aid the Oversight Board and AAFAF in achieving a confirmable plan. Among 

other things, the Professionals developed and extensively negotiated terms that advanced 

the interests of Local Bondholders in a manner that ultimately benefited all bondholders, 

including the terms and mechanics of the taxable bond election, which produced a better 

outcome for all holders by providing appropriate incentives for Local Bondholders with 

certain investment goals to elect taxable bond distributions in order to reduce the amount 

of taxable bonds distributable to U.S. holders subject to U.S. federal income tax, thereby 

ensuring that both local and mainland investors received reasonably equivalent treatment 

in respect of their claims. Local Bondholders holding approximately $1.4 billion in 

claims elected a taxable bond distribution as a result. 

12. In August of 2018, during the development and negotiation of the Plan 

Support Agreement, the parties ultimately agreed that COFINA would pay a fee to the 

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holders and insurers of COFINA bonds that were parties to the Plan Support Agreement,

in consideration for the fees and expenses they incurred in connection with the 

development and negotiation of the terms of the COFINA Plan of Adjustment. The 

parties also agreed that, pursuant to Section II(N) of the Plan Support Agreement, the 

Commonwealth would pay fees and expenses incurred by the Commonwealth or 

COFINA in connection with the COFINA Restructuring. But because Bonistas del Patio 

is not a creditor, but rather a not-for-profit entity that advocated on behalf of Local 

Bondholders that would not otherwise have had a voice in the Mediation, Bonistas del 

Patio was not entitled to payment of the fee provided to holders and insurers of bonds 

under the Plan Support Agreement.

13. Concurrently, and in consideration of the significant contributions to the 

COFINA Restructuring and the other benefits to the Commonwealth that the Bonistas del 

Patio and the Professionals have provided, AAFAF agreed in principle to the payment by 

the Commonwealth of a portion of the fees and expenses incurred by the Professionals in 

their representation of Bonistas del Patio in connection with the COFINA Restructuring, 

in an aggregate amount not to exceed $7 million (the “Bonistas Expenses”), to be paid 

upon the consummation of the COFINA Restructuring. It was anticipated that such

payment was to be made pursuant to Section II(N) of the Plan Support Agreement, which 

later became Section 15.2 of the COFINA Plan of Adjustment. The Professionals have 

incurred aggregate fees and expenses in connection with such representation in excess of 

the Bonistas Expenses, but have agreed to payment by the Commonwealth of this 

reduced amount. AAFAF, Bonistas del Patio and the Professionals agreed in principle to 

(and disclosed to the Oversight Board) this arrangement in August of 2018 in connection 

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with the negotiation of the Plan Support Agreement. In order to memorialize the 

agreement in principle, AAFAF, Bonistas del Patio and the Professionals commenced 

negotiations in respect of the Stipulation on February 7, 2019, and agreed to the final 

terms thereof on February 11, 2019, the date on which the Stipulation was filed with the 

Court.

14. All amounts paid to Bonistas del Patio under the Stipulation will be used 

to pay the fees and expenses of the Professionals, as well as those of the local legal and 

financial advisors to Bonistas del Patio.

I declare under penalty of perjury that the foregoing information is true 

and correct to the best of my knowledge and belief.

Dated: February 13, 2019

New York, New York /s/Brian M. Resnick

Brian M. Resnick

Partner, Davis Polk & Wardwell LLP

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