Hedge funds first starting buying Puerto Rico debt in the summer of 2013 because they liked what they saw: A government that was paying high, tax-free yields that couldn’t go bankrupt. Nearly four years later, the Caribbean island has defaulted on most of its bonds and Governor Ricardo Rossello, who took office in January, says it can pay less than a quarter of what’s owed over the next decade, assuming he can slash the budget and increase the island’s revenue, Bloomberg News reported. Some of the securities are trading near record lows. And, thanks to the U.S. Congress, Puerto Rico and its federal overseers can use bankruptcy-like proceedings to have some of its $70 billion debt written off in court, something investors once assumed it couldn’t ever do. Read more.
In related news, the Financial Oversight and Management Board for Puerto Rico responded to an inquiry to Sens. Thom Tillis and Tom Cotton. Click here to read the letter.
