Citi vet Brownstein tapped to advise Over Board on PREPA debt restructuring

The Puerto Rico Oversight Board has brought on David Brownstein, who spent more than three decades at Citi with a focus on derivatives, distressed issuers and debt restructurings, as a restructuring advisor on its plan of adjustment for the Puerto Rico Electric Power Authority.

Brownstein’s new boutique restructuring advisory firm, BGC Partners Advisory LLC, entered into a contract with the board on Feb. 1, with duties including advising the board on restructuring strategies, including developing financing and debt issuance models and alternatives for PREPA, negotiating with creditors, advising on access to capital markets, undertake discussions on behalf of the board with creditors, mediators, and Puerto Rico’s government, among others.

The contract pays BGC a monthly retainer of $850,000 and expires on Jan. 31, 2025, an engagement letter reads.

Brownstein and John Gavin, also formerly of Citi and principal at BGC, had already been involved in the board’s work on Puerto Rico government debt restructurings at Citi, which the board had retained to serve as investment banker and financial advisor. After Citi wound down its municipal finance department in early 2024, the board retained BGC as restructuring advisor.

“The Oversight Board is looking forward to continue working with its team of financial advisors and their newly created firm on restructuring strategies and fulfilling PREPA’s mandate of regaining access to the capital markets,” the board said in an emailed statement. “We appreciate the team’s ongoing support of the Oversight Board’s highly successful debt restructurings, saving the people of Puerto Rico almost $60 billion in principal and interest payments already and supporting the confirmation process for the PREPA plan of adjustment that will add about $15 billion in additional savings.”

Brownstein could not be reached for comment.

The contract between BGC and the board notes that BGC has been retained solely as a restructuring advisor to the board — not to the commonwealth or its agencies — to clarify the firm is not a fiduciary or municipal advisor.

In a declaration on the confirmation of the corrected fourth amended Title III plan of adjustment for PREPA filed with the U.S. District Court of Puerto Rico, Brownstein laid out his work on various Puerto Rico debt restructurings and noted he had taken a lead role in all aspects of Citi’s engagement with the board on the PREPA restructuring.

That included reviewing PREPA’s certified fiscal plans as well as, in conjunction with other board advisors, leading negotiations with claimholders regarding the provisions of the PREPA plan of adjustment, including the plan support agreements with National, the fuel line lenders, and the purchasers under the forward delivery bond purchase agreement. He was acting as the board’s principal negotiator with respect to most of the mediation in PREPA’s case, crafting the bond structure reflected in the plan and the new master indenture, and providing assistance to the board in formulating financial aspects of the corrected fourth amended Title III plan.

The PREPA bankruptcy hearing is scheduled for March 4.

Brownstein has significant experience with all of the Puerto Rico debtors in the Title III cases. He was the board’s investment banker on the COFINA restructuring, which reduced its debt from about $17.6 billion to $12 billion and reduced debt service payments by over $17 billion.

Brownstein also was closely involved with the board’s restructuring of the commonwealth’s debt pursuant to its plan of adjustment. That restructuring of the Commonwealth of Puerto Rico, the Employees Retirement System, and the Puerto Rico Public Buildings Authority, reduced those debts from about $35 billion to $7 billion, excluding the contingent value instruments, and reduced debt service payments, along with the COFINA restructuring by over $50 billion.

The commonwealth’s restructuring is and remains the largest confirmed municipal restructuring in U.S. history.

Brownstein also played a significant part in HTA’s restructuring, taking a lead role in all aspects of Citi’s engagement, including negotiating the treatment of creditors and the settlements contained in various plan support agreements.

The HTA restructuring resulted in a debt reduction from about $6.4 billion to $1.25 billion, with debt service savings of over $3 billion.

Brownstein was the banker on Jefferson County, Alabama’s, 2013 sewer refinancing, and Detroit with its 2014 water and sewer debt restructuring.

Citi was listed as lead underwriter on the county’s most recent Jefferson County deal that refunded the 2013 sewer warrants until the county dropped the firm after Citi announced its exit from the municipal industry.

Brownstein began his career at Citi as head of municipal derivatives, which was merged into Citi’s public finance department, which he co-headed before leading it solo. Brownstein also served as a credit officer of Citi, responsible for all municipal bridge loans and all forward delivery bond commitments. He developed Citi’s standardized forward delivery bond structure and executed, as lead banker or manager of bankers, 34 forward delivery bonds with a par amount exceeding $3.7 billion for municipal issuers. Brownstein was also responsible for the execution of all derivatives transactions with municipal issuers, which included forward swaps to lock-in market rates on future debt issuances with a total notional amount exceeding $30 billion.