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PUERTO RICO UPDATE NOTICE TO BONDHOLDERS

Wednesday, Jan 10, 2018

Seema Balwada, CFA

NOTICE TO HOLDERS OF PUERTO RICO SALES TAX FINANCING CORPORATION SALES TAX REVENUE BONDS SENIOR SERIES 2007A, 2007B, 2007C, 2008A, 2009C, 2011C, 2011D FIRST SUBORDINATE SERIES 2009A, 2009B, 2010A, 2010C, 2010D, 2010E, 2011A, 2011B

As of January 2, 2018 BNY Mellon holds over $1 billion ($1,021,041,858.64) in COFINA Sales Tax Bonds debt service accounts. On December 1, 2017 the amount of debt service being held was $903,707,632.84.

THIS NOTICE CONTAINS IMPORTANT INFORMATION THAT IS OF INTEREST TO THE BENEFICIAL OWNERS OF THE SUBJECT BONDS. ALL DEPOSITORIES, CUSTODIANS, AND OTHER INTERMEDIARIES RECEIVING THIS NOTICE ARE REQUESTED TO EXPEDITE RETRANSMITTAL TO SUCH BENEFICIAL OWNERS IN A TIMELY MANNER.

The Bank of New York Mellon (the “Trustee”) serves as trustee under the Amended and Restated Sales Tax Revenue Bond Resolution (as amended and supplemented from time to time, the “Resolution”), adopted on July 13, 2007, by the Puerto Rico Sales Tax Financing Corporation (“COFINA”), pursuant to which COFINA issued the above-referenced senior and subordinate sales tax revenue bonds (the “Bonds”). Capitalized terms used but not defined in this notice have the meanings given in the Resolution.
 

Title III Proceeding and Interpleader Action

The Trustee previously advised Bondowners that, on May 5, 2017, The Financial Oversight and Management Board for Puerto Rico filed a petition for relief on behalf of COFINA under title III of the Puerto Rico Oversight, Management, and Economic Stability Act, 48 U.S.C. § 2101 et seq., in the United States District Court for the District of Puerto Rico (the “Court”). COFINA’s title III proceeding is being administered jointly on the docket of the United States Bankruptcy Court for the District of Puerto Rico at Case No. 17-BK-03283-LTS.2

The Trustee also previously advised Bondowners that, pursuant to the Order Granting Interpleader, Staying Pending and Future Litigation Against The Bank of New York Mellon, as Trustee, Pursuant to 28 U.S.C. § 2361, and Granting Related Relief (the “Interpleader Order”) entered by the Court in Adv. Proc. No. 17-AP-00133-LTS, the Trustee will not make any payment on the Bonds from the Pledged Sales Tax received by the Trustee until the Court enters a further order directing the timing of distributions and identifying the recipients of such funds. Pending direction from the Court, the Trustee holds funds in the existing accounts on behalf of the party or parties ultimately determined by the Court to be entitled to them.3

The balance of each debt service account as January 2, 2018 and December 1, 2017, is set forth on chart attached to this notice as Annex A. 

Direction from Bondowners

Pursuant to sections 1102 and 1105 of the Resolution, Bondowners holding the requisite percentage in principal amount of the outstanding Bonds may direct the Trustee with respect to the exercise of rights and remedies and the method of conducting any remedial proceedings with respect to the Bonds.  The Trustee has no obligation to exercise any of the rights or powers vested in it by the Resolution at the request or direction of any of the Bondowners without first receiving security or indemnity satisfactory to the Trustee against the costs, expenses, and liabilities which might be incurred by it in compliance with such request or direction. 

2 To the extent of any discrepancy between this notice and the documents filed with the Court, the filed documents control. 

3 The Trustee takes no position with respect to the record date of any payments made at the Court’s direction

Retention of Counsel  
The Trustee has retained the law firm of Reed Smith LLP and, specifically, Eric A. Schaffer, to represent the Trustee in connection with the Resolution and COFINA’s title III proceeding. The Trustee’s counsel may be contacted by mail at Reed Smith LLP, Attn: Eric A. Schaffer, 225 Fifth Avenue, Suite 1200, Pittsburgh, PA 15222, or by email at eschaffer@reedsmith.com. 

The Trustee has incurred and will continue to incur fees, expenses, and disbursements, including professional fees, expenses, and disbursements, from time to time. The Trustee reserves its rights under the Interpleader Order, the Resolution (including, without limitation, sections 505, 804, and 1103), and any other applicable statute, order, or agreement for reimbursement of any unpaid fees and expenses, including the Trustee's professional fees, expenses, and disbursements, prior to payment of the Bonds.

Further Information 
Questions concerning this notice may be directed to the Trustee by contacting Mr. Alex Chang at The Bank of New York Mellon, 101 Barclay Street, New York, NY 10286, or by email at alex.chang@bnymellon.com. The Trustee may conclude that a specific response to particular inquiries from individual Bondowners is not consistent with equal and full dissemination of significant information to all Bondowners or parties in interest. In such event, the Trustee may decline to provide a response to a particular inquiry when presented in favor of sending a notice to all Bondowners setting forth such specific response.Bondowners should not rely on the Trustee as their sole source of information. The Trustee makes no recommendations and gives no legal, investment, accounting, financial, or tax advice as to the above matters or the Bonds generally. Bondowners should consult with their own professionals regarding matters relating to the Bonds. 

THE BANK OF NEW YORK MELLON, as Trustee 

If you have any questions or desire updated information contact your GMS Account Executive. Information taken from sources deemed reliable. This update does not purport to include all available information

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