News of a May 1st default on $400 million in debt has put the commonwealth’s fiscal situation back in the spotlight. Here’s what investors need to know.
Entries by Daniel S. Solender, CFA
A White House proposal that would allow the commonwealth to file for bankruptcy drove down prices of Puerto Rico municipal bonds, but the offer likely has little chance of passage in Congress.
The government has the ability to pay interest, but apparently is no longer willing to pay bondholders.
Here’s an assessment of the possible fallout from Governor Garcia Padilla’s statement that the commonwealth will be unable to pay its $72 billion in municipal debt.
Ever wonder where all those attractive tax-free yields come from? If you’re thinking mostly from general obligation bonds, think again. Revenue bonds comprise a much larger portion of the investable universe.
The commonwealth is not out of the woods, but "ring-fencing" may offer bondholders some protections.
While new debt-restructuring legislation does not include the commonwealth itself, muni investors are clearly worried about the direction of the island’s government policy.