Puerto Rico bonds soared as much as 30 percent after the island reached a debt restructuring deal with owners of its sales-tax backed securities, marking a significant milestone in the government’s record bankruptcy, Bloomberg News reported. The U.S. territory’s subordinated sales tax bonds due in 2039, the most actively traded, jumped to about 53 cents on the dollar from 41 cents Wednesday, while senior-lien bonds due in 2040 jumped to as much as 89.5 cents from 81.7 cents. The sales-tax bonds were the most actively traded municipal securities yesterday, according to data compiled by Bloomberg. Governor Ricardo Rosselló said the preliminary deal with bondholders and insurers would reduce Puerto Rico’s sales-tax-backed debt — known as Cofina — by about a third and save $17.5 billion. If enacted, it would allow owners of bonds with the highest claim on the funds to recoup 93 percent of their investment, with 56 percent recoveries seen for owners of subordinated securities, according to a term sheet released by the island. That’s more than investors had expected. It is the second major agreement for Puerto Rico in as many weeks, coming on the heels of the one struck with its power company’s bondholders July 30. The deal will need to be sent to bondholders for a vote and win approval from the judge overseeing the bankruptcy before it takes effect. Read more.
While Puerto Rico attempts financial recovery in bankruptcy court, many thousands of ordinary people on the island have found recovery — financial and otherwise — remains elusive, Bloomberg News reported. Just this week, key stretches of its rickety power grid failed once again; the U.S. Army had to send 13 soldiers to help deal with a backlog of corpses at the island’s morgue. And the economy remains mired in a decade-old recession that’s sent hundreds of thousands fleeing to the mainland, including many young and educated workers. Read more.
