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Washington Post - Bloomberg

Puerto Rico Debt Donnybrook Kicks Off With Default Squabble (1)

Emma Orr, Steven Church and Michelle KaskeMay 11, 2017 9:31 am ET

(Bloomberg) -- Dealing with Puerto Rico’s crushing debt has started to resemble a circular firing squad.

Simply put, the bankrupt island can’t pay everything it owes, so creditors are taking aim at each other as they squabble over who will get what’s left. But the debt’s size and the tangled process invented to rescue Puerto Rico mean there’s no established rule book to shape what comes next.

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Tim HollerPuerto Rico
Governing

Chicago Public Schools May Fall Short on Upcoming Pension Payment

"The district doesn't have any good choices," said Matt Fabian, a partner at Concord, Mass.-based Municipal Market Analytics.

"Arguably, their biggest problem this year was relying on the state to help them in any way," Fabian said. "Their fundamental problem is they spend too much money they don't have, but really in fiscal year 2017, it's been relying on the state to fill that gap."

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Tim HollerPuerto Rico
Nasdaq.com

Puerto Rico's Bankruptcy a 'Dramatic Reshaping' of Muni Risk

Municipal Market Analytics' Matt Fabian puts it in pretty start terms in his Default Trends report Friday. Here's his summary of his report:

Assuming all remaining Puerto Rico bonds end up in payment default, as now appears likely, the municipal market's total for bonds in default will have roughly doubled to $74B, with Puerto Rico issuers accounting for 85% of that total. This would also roughly double the municipal market's current default rate from 1.02% to 1.93% (versus 0.30% excluding Puerto Rico bonds). This is a dramatic reshaping of the industry's overall risk profile and will doubtless drive at least somewhat more conservative investor behavior in the future, in particular as regards large distressed governments like IL, NJ, CT, KY, and Chicagoland credits.

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Legal Insurrection

Puerto Rico Declares “Bankruptcy” Due to $123 Billion in Debts

Municipal Market Analytics analyst Matt Fabian said, the pensioners could “still fare better than investors” since they “are more politically empathetic than Wall Street creditors and bond insurers.”

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CNBC

Message of Puerto Rico debt crisis: Easy bets sometimes lose

When some of Wall Street's savviest hedge funds piled into Puerto Rico's debt in 2014, it seemed like an easy bet: Buy up the island's bonds at a discount, pocket the high interest and persuade politicians to make decisions that would raise the value of their investments.

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MSN.com

Why you can't ignore Puerto Rico's bankruptcy

Puerto Rico's bankruptcy is poised to threaten the livelihood of American citizens who planned their retirement on the island's promises, bludgeon investors and undermine state governments.

The bankruptcy may also provide hope of fiscal sustainability and improved services for Puerto Rico, as the U.S. territory attempts to dig out of $74 billion in debt and $49 billion in pension promises.

But the ripple effects remain shrouded in uncertainty as the U.S. judicial system runs, for the first time, a debt-cutting legal process known as Title III of a 2016 law dubbed the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA).

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Bloomberg

Even Buying Puerto Rico Bonds Near Record Lows Isn't a Sure Thing

Matt Fabian, a partner with Municipal Market Analytics, said even though he thinks prices will fall further, he doesn’t know how anyone would calculate what final recoveries will be. Municipal bankruptcies are extremely rare, and Puerto Rico’s is rarer still, relying on a special, tailor-made procedure that Congress included in its emergency rescue law.

"I don’t know how to model it. I don’t think that Puerto Rico’s recovery is model-able," Fabian said in a telephone interview. "There’s so much uncertainty over what final recoveries will be, not the least of which is time. Bondholders are likely to be left with certificates when this is done. I don’t know how you price recovery, but based on what the commonwealth believes it can pay, prices are too high."

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Washington Post

Puerto Rico Collapse Shows Debts Seen as Ironclad May Not Be (2)

(Bloomberg) -- Puerto Rico’s decision to use a U.S. court to escape from its debts cast few ripples in the state and local bond market, where prices rose Wednesday. But the action -- once inconceivable for a territory that didn’t have authority to file for bankruptcy -- sets a precedent that could resonate with struggling states in the decades ahead.

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USA TODAY

Puerto Rico declares bankruptcy. Here's how it's going to unfold

Facing mountainous debt and population loss, the board overseeing Puerto Rico filed Wednesday for the equivalent of bankruptcy protection in a historic move that's sure to trigger a fierce legal battle with the fate of the island's citizens, creditors and workers at stake.

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USA TODAY

Stakes are high in Puerto Rico’s ‘bankruptcy’

Ripples will extend far beyond its shores

“Puerto Rico can no longer fully pay its debt and pay for government services.” Oversight board

Facing mountainous debt and population loss, the board overseeing Puerto Rico filed Wednesday for the equivalent of bankruptcy protection in a historic move that’s sure to trigger a fierce legal battle with the fate of the island’s citizens, creditors and workers at stake.

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Washington Post

Hedge Funds That Flocked to Puerto Rico Bonds Face Long Road Out

Michelle KaskeApr 24, 2017 9:20 am ET

(Bloomberg) -- Hedge funds first starting buying Puerto Rico debt in the summer of 2013 because they liked what they saw: A government that was paying high, tax-free yields that couldn’t go bankrupt.

Nearly four years later, the Caribbean island has defaulted on most of its bonds and Governor Ricardo Rossello, who took office in January, says it can pay less than a quarter of what’s owed over the next decade, assuming he can slash the budget and increase the island’s revenue. Some of the securities are trading near record lows. And, thanks to the U.S. Congress, Puerto Rico and its federal overseers can use bankruptcy-like proceedings to have some of its $70 billion debt written off in court, something investors once assumed it couldn’t ever do.

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Tim HollerPuerto Rico