Large Hedge Funds Invested in Puerto Rico Bonds

According to The Wall Street Journal, a number of large hedge funds and other nontraditional buyers got involved in Puerto Rico debt last month during the US Territory’s $3.5B bond sale, buying up to 70% of the deal. Brigade Capital Management, Och-Ziff Capital Management (OZM) LLC, Perry Capital LLC, Paulson & Co., and Fir Tree Partners were among those to purchase over $100M of the bonds. Black Rock Inc. (BLK), which is also a hedge fund, bought in as well. However, the list doesn’t indicate whether the firms still hold the bonds or if they have sold them since. (The Municipal Securities Rulemaking says that investors originally holding the bonds have already sold about $1.7 billion of the bond since it was issued.)

Some of the other buyers that bought into the Puerto Rico bond sale in March were Harvard University, OppenheimerFunds (OPY), a unit of Gannet Co., and a number of banks, insurers, and retail investors. (Also, many investors may not be aware of this but as of the end of last year, David Lerner Associates, the privately held broker-dealer that was the exclusive distributor of the troubled Apple non-traded REITs had invested in a big way in Puerto Rico debt via its Spirit of America Hi Yield Fund.)

Since the bond sale, underwritten by Morgan Stanley (MS), Barclays (BARC), and RBC Capital Markets (RBC), the prices of Puerto Rico bonds have dropped. Prior to the sale the major credit rating agencies had downgraded the bonds to junk status, and many investors who bought into Puerto Rico municipal bonds through firms such as UBS (UBS), Banco Santander (SAN), Banco Popular, and other brokerage firms, were already filing securities fraud claims over their investment losses.

Puerto Rico is burdened with over $70 billion in debt and its economy and population are both shrinking considerably. Now, there are reports that the finance arm of Puerto Rico has retained restructuring lawyers and consultants for possible restructuring, which could result in more bondholder losses. The news of the hiring alone caused the price of the bonds to drop further.

Puerto Rico Bond Lawyers
Please contact our Puerto Rico bond fraud attorneys if you sustained losses in either Puerto Rican bonds or bond funds with Puerto Rican bonds. Already, many investors in Puerto Rico and all around the U.S. have filed complaints contending that the investment recommendations violated regulations and laws.

Shepherd Smith Edwards and Kantas, LTD LLP represents investors in Puerto Rico, the US, and internationally to recoup their securities fraud losses. Contact us today and ask for your free case assessment.



Big Hedge Funds Roll Dice on Puerto Rico Debt, The Wall Street Journal, April 9, 2014

Puerto Rico Lures Hedge Funds for Record Junk Deal: Muni Credit, Bloomberg, March 12, 2014

More Blog Posts:
Puerto Rico Bonds Are at Record Low Prices After FINRA Announces It Is Looking At Transactions, Stockbroker Fraud Blog, March 27, 2014

SEC Says At Least 200 Private-Equity Firms Have Imposed Bogus Fees, Institutional Investor Securities Blog, April 9, 2014

Securities Fraud Lawsuit Seeks to Recover $49M From 96 Independent Broker-Dealers Liable Over Sales of Tenant-In-Common Exchanges, Stockbroker Fraud Blog, December 15, 2010