Puerto Rico is poised to exit bankruptcy and begin paying bondholders again, a milestone that’s likely to boost not only the value of commonwealth debt but also other risky state and local securities, Bloomberg News reported. Puerto Rico stopped paying debt service in 2016 and then fell into the biggest bankruptcy ever in the $4 trillion municipal bond market the following year. Now Puerto Rico’s financial oversight board is set to execute a restructuring plan, approved by a court last month, that will slash $18.8 billion of commonwealth-guaranteed debt down to $7.4 billion. Prices on the newly restructured Puerto Rico securities are expected to increase following the debt exchange. That could help the high-yield municipal-bond market rebound from declining as yields have increased on anticipation that the Federal Reserve will raise interest rates. Below-investment-grade municipal securities and unrated state and local debt has dropped 3.5% this year and high-yield Puerto Rico debt has declined by 3.1%, according to Bloomberg Barclays Indexes.
