The Investor’s Watchdog

The Investor's Watchdog

Puerto Rico Defaults on Public Finance Corporation Bonds

Tuesday, August 25, 2015

If have lost money in Puerto Rican bonds, we may be able to help you recover your losses.  Contact ChapmanAlbin today at 1-877-410-8172 for a free no-obligation consultation

Puerto Rico recently defaulted on its Public Finance Corporation Bonds after only paying $628,000 of the $58 million due to its creditors.  ​Given the tiny payout, “Moody’s views this event as a default,” said Emily Raimes, vice president at the U.S. credit giant.  Puerto Rico’s outstanding debt of $72 billion is much larger than Detroit’s $20 billion bankruptcy a couple years ago, but unlike Detroit, Puerto Rico can’t declare bankruptcy under U.S. law.  Congress has been working on proposals to allow Puerto Rico to file for bankruptcy, but talks have stalled.  Even worse, there is nobody to bail out Puerto Rico like the International Monetary Fund did for Greece.

Goldman Sachs recently said that it expected Puerto Rico’s crisis to have minimal spillover effects on the U.S. economy and other municipal bonds because it’s widely viewed as an anomaly. However, many others, including this writer believe Puerto Rico’s default will have major implications for U.S. investors both on the mainland and those who are Puerto Rican residents. “The signal from breaking a seven-decade streak of bond payments may imply more defaults are looming,” Daniel Hanson, an analyst at Height Securities, said in a note.

One of the largest participants in issuing Puerto Rican debt is UBS Financial Services. The list of UBS Puerto Rico Bond Funds include the following:

  • Puerto Rico AAA Portfolio Bond Fund I & II, Inc.
  • Puerto Rico AAA Portfolio Target Maturity Fund, Inc.
  • Puerto Rico GNMA & US Government Target Maturity Fund, Inc.
  • Puerto Rico Mortgage-Backed & US Government Securities Fund, Inc.
  • Puerto Rico Fixed Income Fund I-VI, Inc.
  • Puerto Rico Investors Tax-Free Fund I-VI, Inc.
  • Puerto Rico Investors Tax-Free Target Maturity Fund I & II, Inc.
  • Puerto Rico Investors Bond Fund I
  • Tax-Free Puerto Rico Fund I & II, Inc.
  • Tax-Free Puerto Rico Target Maturity Fund, Inc.

If more defaults occur, investors could face significant losses in their mutual fund and bond portfolios.  Such concerns have already caused prices of other Puerto Rican bonds that are not yet in default to plummet.  The S&P Municipal Bond Puerto Rico Index already dropped 10.8% for this year resulting in a market loss of $6.9 billion.

Brokers can be held liable for selling unsuitable investments like Puerto Rican bonds to their clients.  Brokerage Firms can be held liable for failing to supervise these sales or for failing to conduct sufficient due diligence into products they are offering, such as Puerto Rican bonds.  If you lost money in Puerto Rican bonds, we may be able to help.  Since 1998, the experienced attorneys at ChapmanAlbin have been fighting for victims of investment fraud and broker misconduct.  Call us today at 1-877-410-8172 for a free consultation.  You will speak directly to an attorney who will fight for you.

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