Puerto Rico’s general-obligation bonds rallied, with some yields falling to the lowest since July, after officials said the commonwealth would pay all that it owed on the constitutionally protected debt while missing payments on other securities, Bloomberg News reported yesterday. The island’s benchmark general obligations issued in March 2014 with an 8 percent coupon traded yesterday at an average 73.6 cents on the dollar, to yield 11.4 percent. It’s the highest price since Dec. 11. The yield on securities due in July 2041, the second-most-traded Puerto Rico obligations of the day, touched 9.3 percent, the lowest since July. Puerto Rico Governor Alejandro Garcia Padilla said last week that the island would default on $37 million of the almost $1 billion in bond payments due Jan. 1 and divert revenue to make others. It will fail to pay on $35.9 million of non-commonwealth guaranteed Puerto Rico Infrastructure Financing Authority debt and $1.4 million of Public Finance Corp. bonds. By contrast, the commonwealth’s constitution guarantees payment on general obligations before anything else. Read more.
In related news, Puerto Rico’s government is struggling to pay its bills, but mall owners and retailers are betting that consumers on the island will keep on spending, the Wall Street Journal reported today. Fast-fashion retailer Hennes & Mauritz AB’s H&M plans to open its first store in the U.S. territory this year, at the 631,000-square-foot Mall of San Juan. Opened in March, it was the largest new mall on U.S. soil in 2015, according to real estate firm CoStar Group. Nordstrom Inc. and Hudson Bay Co.’s Saks Fifth Avenue made their island debuts at the Mall of San Juan last year, and other retailers are coming to the island or expanding operations. Retail landlords have invested tens of millions of dollars to upgrade their properties. Read more. (Subscription required.)
The December episode of "Eye on Bankruptcy" was devoted to Puerto Rico, featuring remarks by Rep. Pedro Pierluisi, Judge Steven Rhodes and an analysis of the coming Supreme Court argument on whether the Recovery Act was pre-empted by the Bankruptcy Code.
Join experts in San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium, Feb. 4-6, 2016. Click here to register!
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
