Puerto Rico general obligation bonds traded higher yesterday in the wake of a report of a tentative deal involving debt that the U.S. commonwealth’s federally created financial oversight board has been trying to void, Reuters reported. More than $6 billion of bonds Puerto Rico issued in 2012 and 2014 had been targeted by the board for allegedly being issued in violation of a debt limit in the Caribbean island’s constitution. As a result, owners of those bonds were assigned low recoveries in a debt restructuring plan the board submitted in September to a U.S. District Court hearing Puerto Rico’s bankruptcy case. The <em>Wall Street Journal</em> reported on Wednesday that competing groups of bondholders and the board reached an initial compromise that would settle a dispute over the 2012 and 2014 bonds. A tentative deal would increase recoveries for the bonds and remove the need to litigate their validity.
