Contrary to popular press reporting, the Commonwealth of Puerto Rico's GO and guaranteed bonds do not constitute the government's senior debt. They constitute the central government's only valid and enforceable debt.

The single largest problem is that COFINA Corporation bonds are as patently invalid and unconstitutional.

The Governor has successfully postured himself as a man of the people, unwilling to sacrifice citizen's health and safety for the sake of greedy investors who will not settle on reasonable terms. A tough time arguing with that, except in reality his actions embrace the exact opposite.

Needlessly defaulting on its affordable constitutional debt in order to protect COFINA and appropriation bondholders from possible total loss, given the circumstances, is damaging the public good, not just putting it last.

COFINA Corporation bonds and Commonwealth GOs are both widely held by Puerto Rico's upper class, including high government officials, executives, lawyers, and judges. Appropriation bonds are held mostly by hedge and high yield bond funds.

Unlike constitutional debt, which can be issued only for funding capital improvements, subject to the debt limit, COFINA bonds and appropriation- backed bonds can be issued for any purpose in any amount deemed appropriate by the Legislature (assuming investors would buy them).

I hope the Governor’s smoke and mirrors routine does not fool his new federal restrainers, or worse, that the facts don't get obscured in a PROMESA process that devolves into a political pseudo legal process.

Had PROMESA not included the Commonwealth's sole direct constitutional GO debt along with its many shell corporations and two essential service public utilities, the best interests of residents of Puerto Rico would have been served.

Full payment of GO P&I is affordable, consuming less than 15% of general fund revenue, per the Island's constitution. Not because a document says, they must be paid come hell or high water. The Governor says 15% is the maximum amount the central government can afford to pay for bond P&I going forward.

Ten years ago, COFINA sales tax bonds did not exist; $18 billion including the accreted value of 40-year zero coupon bonds are now outstanding.

Because of COFINA, the general sales tax rate is nearly 11%.

In 2006, the market was telling the Commonwealth they had little appetite for more of what the Commonwealth then termed extra-constitutional debt or optional pay appropriation-backed bonds outstanding then in the amount of $16 billion. At least $6 billion are still outstanding.

More than ten different state sponsored corporations, including the GDB, issued these non-debt debts. The GDB Board is the same across all of the shell corporations. GDB is not a bank but rather the Commonwealth's fiscal agent and as useful as a second appendix.

None has any source of revenue, including the GDB, other than non-mandatory Commonwealth general fund appropriation. Failure to appropriate results in default, but the bondholder has no legal recourse, or standing for that matter, to enforce payment.

COFINA bonds, originally created to refinance (replace) appropriation debt with secure enforceable debt, subsequently were also issued to finance several billion dollars of multi-year general fund operating deficits.

The $6 billion-plus of Commonwealth appropriation debt issued by almost a dozen different corporations has yet to be disavowed by the Governor, i.e. the Commonwealth shall pay no further P&I on debts it is not legally obligated to pay.

As mentioned, COFINA was created to solve a crisis of market access that would come if nothing were done. Under duress and with legal controversy surrounding the COFINA Act, sales tax bonds were authorized and sold, with no court review, on the approval of an acting attorney general.

COFINA bond offering official statements have more red flags than a Chinese May Day military parade*. They are unconstitutional and invalid and not without precedent (WPPSS #4 & #5).

Why hasn't the Governor sought a validity opinion from a court of competent jurisdiction?

If valid, no gain. If not valid, a windfall of debt relief for the government and public, but not for Puerto Rico's upper class who hold GOs and COFINA bonds in roughly equal amount. For them an 80% and 70% on GO’s and COFINA, or $150 on $200, is far better than 100% on GO’s and zero on the illegal COFINA bonds

Obviously, the Governor is not a friend the people.

If the PROMESA board does not see through this or aids and abets the Governor's wishes, GO bondholders will be in court seeking full restitution and interest on past due interest at the applicable coupon rate.

Congressional plenary power does not suspend a citizen's right to due process.

Puerto Rico has a congressionally approved Constitution and a congressionally approved debt limit that it has never violated. It has circumnavigated its debt limit with bond issuance, on relative basis, much larger than anything ever seen in the history of U.S. public debt.

The U.S. government's handling of other people's money in Puerto Rico allows the trampling of constitutional creditors' rights.

Most of PROMESA is essential, but including GOs is a big mistake if the control board does not quickly see the facts and cure the temporary GO and guaranteed bond default. What other vehicle would provide access for the Commonwealth to borrow in its own name?

Even though it appears fenced off, the market is watching the outcome of appropriation debt as well, and whether that so-called debt receives anything or if a small-unjustified recovery will be viewed as a legitimization of the technique.

COFINA bonds must be challenged in court and will most certainly be deemed invalid.

COFINA Red Flags (three of several)

• During the first few years of issuance, there was no bond counsel, only underwriter's counsel. The later issues carry an opinion from Nixon Peabody as bondcounsel.

• Paraphrasing that opinion, the firm believes that in their personal and professional opinions the bonds are valid and binding and if brought to Commonwealth Supreme Court they feel the use of general fund sales tax revenue to pay COFINA bonds would be held constitutional, but they cannot guarantee that result, and if held unconstitutional it would be definitive, with no path for appeal.

• Each offering statement also carries the following warning: "To the extent that a court determines that the Pledged Sales Tax constitutes "available resources" for purposes of the Constitutional Debt Priority Provisions, the Pledged Sales Tax may have to be applied to the payment of principal and interest on the Commonwealth's public debt before being used to pay principal of and interest on the Bonds, including the Senior Series 2011 Bonds. Should such application be required, the ratings on the Bonds may be adversely affected." An understatement.

Individually, each of the above is unusual. What good is a constitutional debt limit if it can be overridden by illegal trickery?