VI

CREDITOR COLLECTIVE ACTION

601.

Creditor Collective action

(a) Definitions In this title: (1) Administrative supervisor The term Administrative Supervisor means the Oversight Board established under section 101. (2) Authorized territorial instrumentality The term Authorized Territorial Instrumentality means a covered territorial instrumentality authorized in accordance with subsection (e). (3) Calculation agent The term Calculation Agent means a calculation agent appointed in accordance with subsection (j). (4) Capital appreciation bond The term Capital Appreciation Bond means a Bond that does not pay interest on a current basis, but for which interest amounts are added to principal over time as specified in the relevant offering materials for such Bond, including that the accreted interest amount added to principal increases daily. (5) Convertible capital appreciation bond The term Convertible Capital Appreciation Bond means a Bond that does not pay interest on a current basis, but for which interest amounts are added to principal over time as specified in the relevant offering materials and which converts to a current pay bond on a future date. (6) Information agent The term Information Agent means an information agent appointed in accordance with subsection (k). (7) Issuer The term Issuer means, as applicable, the Territory Government Issuer or an Authorized Territorial Instrumentality that has issued or guaranteed at least one Bond that is Outstanding. (8) Modification The term Modification means any modification, amendment, supplement or waiver affecting one or more series of Bonds, including those effected by way of exchange, repurchase, conversion, or substitution. (9) Outstanding The term Outstanding, in the context of the principal amount of Bonds, shall be determined in accordance with subsection (b). (10) Outstanding principal The term Outstanding Principal means— (A) for a Bond that is not a Capital Appreciation Bond or a Convertible Capital Appreciation Bond, the outstanding principal amount of such Bond; and (B) for a Bond that is a Capital Appreciation Bond or a Convertible Capital Appreciation Bond, the current accreted value of such Capital Appreciation Bond or a Convertible Capital Appreciation Bond, as applicable. (11) Pool The term Pool means a pool established in accordance with subsection (d). (12) Qualifying modification The term Qualifying Modification means a Modification proposed in accordance with subsection (g). (13) Secured pool The term Secured Pool means a Pool established in accordance with subsection (d) consisting only of Bonds that are secured by a lien on property. (14) Territory government issuer The term Territory Government Issuer means the government of the Commonwealth of Puerto Rico.

(b) Outstanding bonds In determining whether holders of the requisite principal amount of Outstanding Bonds have voted in favor of, or consented to, a proposed Qualifying Modification, a Bond will be deemed not to be outstanding, and may not be counted in a vote or consent solicitation for or against a proposed Qualifying Modification, if on the record date for the proposed Qualifying Modification— (1) the Bond has previously been cancelled or delivered for cancellation or is held for reissuance but has not been reissued; (2) the Bond has previously been called for redemption in accordance with its terms or previously become due and payable at maturity or otherwise and the Issuer has previously satisfied its obligation to make, or provide for, all payments due in respect of the Bond in accordance with its terms; (3) the Bond has been substituted with a security of another series; or (4) the Bond is held by the Issuer or by an Authorized Territorial Instrumentality of the Territory Government Issuer or by a corporation, trust or other legal entity that is controlled by the Issuer or an Authorized Territorial Instrumentality of the Territory Government Issuer, as applicable. For purposes of this subsection, a corporation, trust or other legal entity is controlled by the Issuer or by an Authorized Territorial Instrumentality of the Territory Government Issuer if the Issuer or an Authorized Territorial Instrumentality of the Territory Government Issuer, as applicable, has the power, directly or indirectly, through the ownership of voting securities or other ownership interests, by contract or otherwise, to direct the management of or elect or appoint a majority of the board of directors or other persons performing similar functions in lieu of, or in addition to, the board of directors of that legal entity.

(c) Certification of disenfranchised bonds Prior to any vote on, or consent solicitation for, a Qualifying Modification, the Issuer shall deliver to the Calculation Agent a certificate signed by an authorized representative of the Issuer specifying any Bonds that are deemed not to be Outstanding for the purpose of subsection (b) above.

(d) Determination of pools for voting The Administrative Supervisor, in consultation with the Issuer, shall establish Pools in accordance with the following: (1) Not less than one Pool shall be established for each Issuer. (2) A Pool that contains one or more Secured Bonds shall be a Secured Pool. (3) The Administrative Supervisor shall establish Pools according to the following principles: (A) For each Issuer that has issued multiple Bonds that are distinguished by specific provisions governing priority or security arrangements, including Bonds that have been issued as general obligations of the Territory Government Issuer to which the Territory Government Issuer pledged the full or good faith, credit, and taxing power of the Territory Government Issuer, separate Pools shall be established corresponding to the relative priority or security arrangements of each holder of Bonds against each Issuer, as applicable. (B) For each Issuer that has issued senior and subordinated Bonds, separate Pools shall be established for the senior and subordinated Bonds corresponding to the relative priority or security arrangements. (C) For each Issuer that has issued multiple Bonds, for at least some of which a guarantee of repayment has been provided by the Territory Government Issuer, separate Pools shall be established for guaranteed and non-guaranteed Bonds. (D) Subject to the other requirements contained in this section, for each Issuer that has issued multiple Bonds, for at least some of which a dedicated revenue stream has been pledged for repayment, separate Pools for such Issuer shall be established as follows: (i) For each dedicated revenue stream that has been pledged for repayment, not less than one Secured Pool for Bonds for which such revenue stream has been pledged, and separate Secured Pools shall be established for Bonds of different priority. (ii) Not less than one Pool for all other Bonds issued by the Issuer for which a dedicated revenue stream has not been pledged for repayment. (E) The Administrative Supervisor shall not place into separate Pools Bonds of the same Issuer that have identical rights in security or priority.

(e) Authorization of territory instrumentalities A covered territorial instrumentality is an Authorized Territorial Instrumentality if it has been specifically authorized to be eligible to avail itself of the procedures under this section by the Administrative Supervisor.

(f) Information delivery requirement Before a Qualifying Modification to solicit the consent or the vote of any holder for a Qualifying Modification is submitted, the Issuer shall— (1) provide to the Calculation Agent, the Information Agent, and the Administrative Supervisor, the following information— (A) a description of the Issuer’s economic and financial circumstances which are, in the Issuer’s opinion, relevant to the request for the proposed Qualifying Modification, a description of the Issuer’s existing debts, a description of the impact of the proposed Qualifying Modification on the Territory’s or its territorial instrumentalities’ public debt; (B) if the Issuer is seeking Modifications affecting any other Pools of Bonds of the Territory Government Issuer or its Authorized Territorial Instrumentalities, a description of such other Modifications; and (C) the applicable Fiscal Plan certified in accordance with section 201; and (2) not propose the Modification to the holders of Bonds in the Pool for which the Modification is being proposed until it has received a certification from the Administrative Supervisor that the Pool has been established in accordance with this section and that the proposed Modification is a Qualifying Modification.

(g) Qualifying modification A Modification will not be considered to be Qualifying Modification unless— (1) the Issuer proposing the Modification has consulted with holders of Bonds in the Pool for which the Modification is being proposed prior to soliciting a vote on such Modification; (2) each exchanging, repurchasing, converting, or substituting holder of Bonds of any series in a Pool affected by that Modification is offered the same amount of consideration per amount of principal, the same amount of consideration per amount of interest accrued but unpaid and the same amount of consideration per amount of past due interest, respectively, as that offered to each other exchanging, repurchasing, converting, or substituting holder of Bonds of any series in a Pool affected by that Modification (or, where a menu of instruments or other consideration is offered, each exchanging, repurchasing, converting, or substituting holder of Bonds of any series in a Pool affected by that Modification is offered the same amount of consideration per amount of principal, the same amount of consideration per amount of interest accrued but unpaid and the same amount of consideration per amount of past due interest, respectively, as that offered to each other exchanging, repurchasing, converting, or substituting holder of Bonds of any series in a Pool affected by that Modification electing the same option under such menu of instruments); (3) if the Modification relates to Bonds in a Secured Pool, the holders of such Bonds retain the liens securing such Bonds and the Modification does not reduce the Outstanding Principal amount of such Bonds; and (4) the Modification is certified by the Administrative Supervisor as— (A) the plan is in the best interests of creditors and is feasible; and (B) being consistent with the applicable Fiscal Plan that has been certified under section 201; or (C) if an applicable Fiscal Plan has not yet been certified by the Administrative Supervisor, being an appropriate Modification, in the Administrative Supervisor’s sole discretion.

(h) Solicitation (1) Upon receipt of a certification from the Administrative Supervisor under subsection (f)(2) that a proposed Modification is a Qualifying Modification, the Information Agent shall, if practical and except as provided in paragraph (2), submit to the holders of any Outstanding Bonds affected by such Qualifying Modification, including holders of the right to vote such Outstanding Bonds, the information submitted by the relevant issuer under subsection (f)(1) in order to solicit the vote or consent of such holders. (2) If the Information Agent is unable to identify the address of holders of any Outstanding Bonds affected by a Qualifying Modification, the Information Agent may solicit the vote or consent of such holders by— (A) delivering the solicitation to the paying agent for any affected Outstanding Bonds or Depository Trust Corporation if it serves as the clearing system for any affected Outstanding Bonds; or (B) delivering or publishing the solicitation by whatever additional means the Information Agent, after consultation with the Issuer, deems necessary and appropriate in order to make a reasonable effort to inform holders of any affected Outstanding Bonds of the Qualifying Modification which may include, notice by mail, publication in electronic media, publication on a website of the Issuer, or publication in newspapers of national circulation in the United States and in a newspaper of general circulation in the Commonwealth of Puerto Rico.

(i) Voting For each Pool, any Qualifying Modification may be proposed only by the Issuer and made, and future compliance therewith may be waived, with the written consent of the Issuer and the affirmative vote or consent of holders of the right to vote the Outstanding Bonds of at least two-thirds of the aggregate Outstanding Principal amount of the Outstanding Bonds of all Bonds in the Pool.

(j) Calculation agent For the purpose of calculating the principal amount of the Bonds of any series eligible to participate in such a vote or consent solicitation and tabulating such votes or consents, the Territory Government Issuer may appoint a Calculation Agent for each Pool reasonably acceptable to the Administrative Supervisor.

(k) Information agent For the purpose of administering a vote of holders of Bonds, including the holders of the right to vote such Bonds, or seeking the consent of holder of Bonds, including the holders of the right to vote such Bonds, to a written action under this section, the Territory Government Issuer may appoint an Information Agent for each Pool reasonably acceptable to the Administrative Supervisor.

(l) Binding effect (1) For each Pool, a Qualifying Modification will be conclusive and binding on all holders of the relevant series of Bonds or all holders of all series of Bonds whether or not they have given such consent, and on all future holders of those Bonds whether or not notation of such Qualifying Modification is made upon the Bonds, if— (A) the holders of the right to vote the Outstanding Bonds in such Pool pursuant to subsection (i) have consented to or approved the Qualifying Modification; (B) each holder who has not consented to or approved the Qualifying Modification will receive or retain under the Qualifying Modification on account of their claims, property of a value, as of the effective date of the Qualifying Modification, that is not less than the amount that such holders would so receive or retain if there were no Qualifying Modification; (C) the Administrative Supervisor certifies that— (i) the voting requirements of this section have been satisfied; (ii) the Qualifying Modification is— (I) consistent with the applicable Fiscal Plan that has been certified under section 203; or (II) if an applicable Fiscal Plan has not yet been certified by the Administrative Supervisor, an appropriate Qualifying Modification, in the Administrative Supervisor’s sole discretion; and (iii) any conditions on the effectiveness of the Qualifying Modification have been satisfied or, in the Administrative Supervisor’s sole discretion, satisfaction of such conditions has been waived by the Administrative Supervisor; and (D) the United States District Court for the District of Puerto Rico has, after reviewing an application submitted to it by the applicable Issuer for an order approving the Qualifying Modification, entered an order that the requirements of this section have been satisfied. (2) Upon the entry of an order under paragraph (1)(C), the conclusive and binding Qualifying Modification shall satisfy, release, and discharge all Bond Claims affected by the Qualifying Modification, and shall be binding on any person or entity asserting claims or other rights, including a beneficial interest (directly or indirectly, as principal, agent, counterpart, subrogee, insurer or otherwise) in respect of Bonds subject to the Qualifying Modification, any trustee, any collateral agent, any indenture trustee, any fiscal agent, and any bank that receives or holds funds related to such Bonds. The property that is the subject of the Qualifying Modification shall vest in the Issuer free and clear of all claims in respect of any Bonds of any Issuer.

(m) Judicial review (1) The United States District Court for the District of Puerto Rico shall have original and exclusive jurisdiction over civil actions arising under this section. (2) Notwithstanding section 106(e), there shall be a cause of action to challenge unlawful application of this section. (3) The district court shall nullify a Modification and any effects on the rights of the holders of Bonds resulting from such Modification if and only if the district court determines that such Modification is manifestly inconsistent with this section.

(n) Completion required Prior to any certification pursuant to section 206 or the filing of any petition under title III, an offer for a Qualified Modification shall be made to each Pool established under subsection (d).