The Senate for the Commonwealth of Puerto Rico has approved a bill authorizing the sale of at least $3 billion in bonds. The legislation is geared toward assisting the US territory from defaulting on its $70 billion of debt and boost the Government Development Bank’s liquidity. Wall Street investment banks Morgan Stanley (MS), Barclays (BCS), and RBC Capital Markets are going to handle the bond sale, which is expected to happen in March.
Among the issues that still must be resolved is where, if the Commonwealth defaults on the new issuance, the US Territory can be sued. Currently, Puerto Rico has sovereign immunity and therefore can only be sued in Puerto Rico under its own laws. However, US investors who will be needed for the sale to complete want the Commonwealth to agree to waive sovereign immunity and instead agree to be sued in New York courts if there is any dispute.
Since August of last year, Puerto Rico bonds have suffered significant losses. Recently, all three major ratings agencies downgraded Puerto Rico’s general obligation bonds, along with many other Puerto Rican issuances, to “junk” status. Many investors in the United States and in the Commonwealth have lost significant money on their Puerto Rico municipal bonds that were sold to them by UBS (UBS), Banco Santander (SAN), Banco Popular, and other brokerage firms.
While Puerto Rico’s bonds have stabilized in the last month or two and even risen in some instances, as some institutional investors have been taking on greater risk to get the higher yield, many customers were unable to withstand the large movements in their bond portfolios over the last few months (especially if leverage was used in the account).
If you or someone you know lost money on Puerto Rico bonds, contact our Puerto Rico bond fraud law firm today for a free, no obligation consultation. Shepherd Smith Edwards and Kantas, LTD LLP is currently representing dozens of investors in Puerto Rico and the US.
Puerto Rico bonds do the unexpected: Rally, Reuters, February 27, 2014
Puerto Rico Senate Approves Sale of $3.5B in Bonds, ABC News/AP, February 28, 2014
More Blog Posts:
Hedge Funds Interested in Upcoming Puerto Rico Bond Offering Want The Territory to Borrow Money To Last Two Years, Stockbroker Fraud Blog, February 17, 2014
OppenheimerFunds Increases Its Exposure to Puerto Rico Debt Despite Downgrade by Moody’s, S & P, and Fitch to Junk Status, Stockbroker Fraud Blog, February 14, 2014
Hedge Funds Are Moving in on Municipal Debt, Including Puerto Rico Debt, Institutional Investor Securities Blog, November 15, 2013