According to InvestmentNews, even with Puerto Rico heading toward default on its $72 billion in municipal debt, there are a number of funds that continue to hold the U.S. Territory’s bonds in their portfolios, such as the:
· U.S. Oppenheimer Rochester Maryland Municipal (ORMDX)—Morningstar said that as of the conclusion of February the fund had 48.2% of assets in Puerto Rican debt.
· Oppenheimer’s (OPY) Virginia municipal bond fund (ORVAX) reportedly had 40.8% of its assets in the U.S. territory.
· Eaton Vance Oregon Municipal Income (ETORX) had 9.31% of its portfolio in Puerto Rico bonds.
· MainStay Tax-Free Bond (MKINX) had 8.8%.
InvestmentNews also reports that during a conference call on April 7, management for Oppenheimer Rochester said that about half of its funds’ holdings were in COFINA bonds or general obligation bonds, both from Puerto Rico.
On the short time horizon, the Puerto Rico Development Bank may default on its $422 million in debt that is due this Sunday, and the lawmakers on the island are refusing to approve an amended bill that would keep certain government-issued bonds from a debt moratorium. The caucus of senators, who are from Puerto Rico’s ruling party, said the bill is not in line with the $70 billion debt restructuring that the island wants from the U.S. Congress. The amended bill is looking to exempt general obligation bonds and other bonds from a new law that lets Governor Alejandro Garcia Padilla declare a debt moratorium.In related news, Standard & Poor’s (S&P) has reduced the credit rating of Puerto Rico tobacco bonds, which were issued by Children’s Trust, to junk because the agency is included in the debt moratorium law.The securities, slated to mature in ’39 and ’33, saw their ratings reduced to BB, which is two levels under investment grade.
Children’s Trust is a nonprofit that was set up by Puerto Rico to issue debt backed by legal settlement funds received by U.S. states and localities from cigarette companies. S&P expressed concern that bondholder payments could be disrupted. Bloomberg reported that it is unusual to include these bonds in the moratorium law since the cash that investors are paid is not considered to be under the Puerto Rican government’s purview. For now, Governor Garcia Padilla has not stopped any debt payments under the debt moratorium law.
Puerto Rico Closed-End Bond Fraud Cases
For the last three years, our Puerto Rico bond fraud lawyers have been working with investors to recoup their losses. Many investors lost nearly everything when the price of the bonds plummeted in 2013. A lot of these investors were told to invest in Puerto Rico closed-end bond funds by brokers from UBS Puerto Rico (UBS-PR), Banco Popular, and Banco Santander (SAN). Some brokers even suggested that investors borrow money so they could purchase more bonds.
Shepherd Smith Edwards and Kantas, LTD LLP represents investors with Puerto Rico muni bond fraud cases. To request your free case consultation, contact our Puerto Rico closed-end bond fraud law firm today. Our securities lawyers work with clients in Puerto Rico and the U.S.
Oppenheimer, other funds cling to Puerto Rico municipal bond debt as possible default looms, InvestmentNews, April 26, 2016
Puerto Rico’s debts due, Congress stalls, ArkansasOnline, April 27, 2016