The dispute between COFINA bondholders and Puerto Rico’s general obligation bondholders took a new turn Wednesday, as the former parties asked the federal judge overseeing the commonwealth’s restructuring to let Puerto Rico’s Supreme Court determine once and for all whether tax-backed bond issuer COFINA is even constitutional.The bondholders of COFINA, or the Puerto Rico Sales Tax Financing Corp., are confident the island’s high court will uphold the 2006 law that established the government-owned corporation, which issues bonds backed by a portion of the island’s sales tax.Puerto Rico’s general obligation bondholders have been adamant that interest on their instruments should be paid first, saying even sales tax revenue is fair game if that is what it takes, despite the fact that the revenue is promised to COFINA bondholders.But the COFINA bondholders said Wednesday that either the general obligation bondholders are right and COFINA is unconstitutional, or they are wrong and the law is solid. Regardless, the only way to resolve the “lynchpin issue once and for all” is to certify the question to the high court, according to Wednesday’s motion. Any ruling in the restructuring case will just end up there eventually anyway, the COFINA bondholders said.
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