Analista asegura bonos del ELA ya son chatarra

{Comienzan las investigaciones en Boston y pronto en el Congreso sobre irregularidades en los Bonos de Puerto Rico. La cosa va de mal en peor. A las Casas Acreditadoras le pasó como a los electores, no creían lo que se decía de AGP, hasta que lo conocieron, y entonces entendieron que es peor de lo imaginado.}

Analista asegura bonos del ELA ya son chatarra

10 de octubre de 2013 – Negocios, Puerto Rico, – Carlos Antonio Otero, EL VOCERO
La situación fiscal de Puerto Rico, tras una recesión profunda de ocho años, no da muestras de recuperación en el corto plazo

EL VOCERO / Archivo
Al tiempo en que el gobernador de Puerto Rico, Alejandro García Padilla, divulgaba ayer un mensaje positivo ante la situación crediticia del Estado Libre Asociado (ELA), diversas publicaciones especializadas en Estados Unidos reiteraron la precariedad de la economía local, y algunos analistas afirmaron la condición chatarra de los bonos del gobierno.

Kyle Bass, fundador y principal de la firma Hayman Capital Management, cin sede en Texas, dijo en entrevista con CNBC que a pesar de la fe de algunos inversores en bonos municipales respecto a la deuda del ELA y la reafirmación de Moody´s Investor en la calificación de los principales créditos de Puerto Rico, un peldaño por encima del grado especulativo, “está claro que son completamente basura”.

“Uno mira sus finanzas y dice: ‘No tengo ni idea de cómo pueden seguir existiendo por mucho tiempo más”, agregó Bass en la entrevista, y de paso comparó a la Isla con Grecia.

La situación fiscal de Puerto Rico, tras una recesión profunda de ocho años, no da muestras de recuperación en el corto plazo, mientras la especulación sobre la fragilidad de la economía local acrecienta y la caída en el valor de los bonos locales asciende a niveles alarmantes.

De hecho, Bloomberg publicó el miércoles un artículo donde compara el rendimiento de la deuda de Puerto Rico a 10 años con los bonos de Venezuela, y señalo que están un 12.6% por encima de deuda a términos comparables del país Suramericano en el mercado de Estados Unidos. Tras la muerte del presidente venezolano Hugo Chávez, las dificultades económicas del país han aumentado y se especula si podrán cumplir con el servicio de su deuda.

De otro lado, Reuters reseñó que el estado de Massachusetts, comenzó una investigación a casas de inversiones para estimar el nivel de riesgo al que fueron y están expuestos inversores residentes al haber adquirido participación en bonos del Puerto Rico. Diversas firmas legales especializadas en casos de valores han anunciado en los últimos días diferentes investigaciones o han iniciado demandas contra casas de corretaje en la Isla, principalmente contra UBS, ante cuestionamientos en la asesoría a clientes para que invirtieran en bonos locales a pesar del cuadro económico prevaleciente. Las perdidas para inversores ante la caída en valores ya se estima en cientos de millones.

Puerto Rico borrowing costs hit record high | Emerging Markets

Puerto Rico borrowing costs hit record high

09/10/2013 | Lucien Chauvin

The self-governing US commonwealth has jumped into the spotlight because of its debt crisishttp://www.emergingmarkets.org/images/516/IMF13/Pierluisi-PA-17717914-250px.jpg

Puerto Rico’s borrowing costs have hit a record high, bringing the island country on the international radar screen as the government tries to address a growing debt crisis.

The self-governing US commonwealth has around $87 billion in debt that it is finding much harder to service. Local authorities are talking with President Barack Obama’s administration about potential solutions, but the island could become a major casualty of the partial government shutdown. Congressman Pedro Pierluisi told Emerging Markets that “the territory can stabilize the fiscal and public finance situation in the short run with the right policies and meaningful federal government guidance.”

He said, however, that the shutdown is compounding the problem. “Over 10,000 individuals who reside on the island work for the federal government and roughly half of them have been furloughed.”

He said that Governor Alejandro Garcia Padilla’s government needs to reconsider tax hikes that have not generated the expected revenue and have kept the economy from growing. The Garcia government has implemented a new corporate tax and sales taxes as part of its effort to balance the $9.8 billion budget for the fiscal year that started in July.

Joseph Rosenblum, director of municipal credit research at AllianceBernstein in New York, agreed with Pierluisi’s assessment. He told Emerging Markets that while the Garcia government has been undertaking reforms, it is not going to meet targets. “They have taken steps to address the pension issue, but they have not always met expectations,” he said.

Rosenblum said the same thing was true with hikes in taxes and on fees. Tax revenue in the first quarter was $1.68 billion, falling slightly short of the forecast. It was, however, higher than the same period the previous year.

“Puerto Rico is in a unique situation. It is a major issuer of debt with yields widening out significantly for all its paper. The amount of debt has people worried,” said Rosenblum. The problem extends beyond Puerto Rico. Pierluisi said “70% of [US] municipal bond funds own Puerto Rico bonds, meaning that Puerto Rico’s problems could have broader ripple effects.”

Resolving the issue is complicated by Puerto Rico’s political status. It cannot file for chapter 9 bankruptcy, an option open to US municipalities, because states and territories are not given that option. The most recent example is Detroit, Michigan.

Bankruptcy for municipalities has been a possibility since the 1930s, with slightly more than 600 local governments using this mechanism. Turning to the federal government is an unlikely option, given the crisis in Washington and the partial government shutdown.

Governor Garcia and members of his team have been shuttling between home and Washington to talk with policymakers, but there are few options. Rosenblum said it was “hard to envision them getting any major assistance given the federal budget struggle”.

Pierluisi, who met administration officials at the White House on 9 October, said the “federal government has been closely monitoring the situation. They must provide specific guidance and clear counsel to help the Puerto Rico government better manage the fiscal situation … to maintain access to capital markets.”

http://www.emergingmarkets.org/Article/3265041/News/Puerto-Rico-borrowing-costs-hit-record-high.html

Galvin asks fund managers for info on Puerto Rico bond sales – Boston Business Journal

Oct 9, 2013, 5:24pm EDT

Galvin asks fund managers for info on Puerto Rico bond sales

Matthew L. Brown Reporter- Boston Business JournalEmail | Twitter
State securities regulators have kicked off an investigation into the sale of Puerto Rican municipal debt obligations by asking Fidelity Investments, Oppenheimer Funds and others about how much information they gave buyers of the shaky bonds.

Secretary of State William Galvin said he’s beginning an inquiry into how the debt obligations were sold to Massachusetts investors. He wants to know the extent of Massachusetts’ investors’ risk exposure, if Bay State investors were made aware of the risks, and when funds like those sold by Fidelity and Oppenheimer became aware of the risks associated with Puerto Rican debt.

Puerto Rican municipal debt obligations were popular for their yield and because they are tax exempt. However, Puerto Rico is nearly insolvent, making the associated risks very high.

Galvin said he has sent his first set of inquiry letters to Fidelity, Oppenheimer Funds (a unit of Massachusetts Mutual Life Insurance Co.), and UBS Financial Services.

http://www.bizjournals.com/boston/blog/mass_roundup/2013/10/galvin-investigates-puerto-rico-bonds.html?s=print

Nothing to do but duck and cover if US defaults: Kyle Bass

http://www.cnbc.com/id/101099110

Bass also weighed in on Puerto Rico, which has a debt crisis of its own that has it on the financial brink.

«You look at their finances and you say, ‘I have no clue how this can continue to exist for very much longer.'»

Despite other municipal bond investors’ faith in the commonwealth’s debt and Moody’s reaffirmation of a rating just above investment grade, «Clearly they’re completely junk,» he said.

«When Puerto Rico has its crisis, which it looks like we’re on the precipice of, the write-downs have to be 80-90 percent on these bonds,» he said.

US funds investigated over Puerto Rico bond strategy

Published: Wednesday, 9 Oct 2013 | 9:57 PM ET

Jessica Rinaldi | The Boston Globe | Getty Images
Secretary of State William Galvin gestures outside of the Massachusetts Archives Building in Boston, May 22, 2013.
U.S. mutual funds that loaded up on Puerto Rico bonds, including OppenheimerFunds, are now the target of an investigation by a state securities regulator, who says investors may not have been aware of their exposure to the island’s fiscal crisis.

The probe by Massachusetts’ top securities regulator could spark other investigations because many other state-specific municipal bond funds include Puerto Rico debt in their portfolios, according to analysts. The bonds are exempt from federal, state and local income taxes in all U.S. states, making them attractive to mutual fund managers across the country.

William Galvin, the Massachusetts Secretary of the Commonwealth, said he is investigating three large fund managers, Fidelity Investments, OppenheimerFunds, a unit of MassMutual Life Insurance and UBS Financial Services , to determine how they sold mutual funds with heavy concentrations of Puerto Rico debt and how they disclosed the risk.

(Read more: No, people won’t buy bonds on a default: BlackRock)

«Puerto Rican bonds are like sugar in a bakery product. They are always included. Now the question is just how much and what were investors told,» Galvin told Reuters.

The three funds companies were the first to receive inquiry letters from Galvin’s office, though other fund companies put Puerto Rico bonds in their mutual funds. Fidelity and UBS declined to comment on Galvin’s investigation.

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OppenheimerFunds, in a statement, said its Puerto Rico investments are disclosed and discussed at length in the funds’ public disclosures. The company also said it is cooperating fully with Galvin’s inquiry.

Galvin said the companies have a few weeks to respond on how they disclosed the risks associated with Puerto Rico debt.

Puerto Rico bond prices have been in a free fall amid renewed fears about the island’s chronic deficits, free spending and high unemployment. The S&P Municipal Bond Puerto Rico Index is down 19 percent in 2013. The index is badly under-performing the S&P National AMT-Free Municipal Bond Index, which is down only 3.6 percent this year.

(Read more: 4 top bank picks for earnings season from Oppenheimer)

OppenheimerFunds’ Rochester municipal bond funds have been among the most aggressive in the industry with their heavy concentration of Puerto Rico debt. The $69 million Oppenheimer Rochester Massachusetts Municipal Fund, for example, has nearly 17 percent of its assets in Puerto Rico debt, according to Lipper, a unit of Thomson Reuters.

Galvin’s investigation centers on determining the extent Massachusetts’ investors were adequately made aware of the risks associated with their investments, Galvin said in a press release. The debt obligations were typically sold through a mutual fund, he said.

«Puerto Rico is currently on the verge of insolvency and many of its obligations are at or near junk rating, thus the risks associated with its municipal debt obligation are disproportionately high,» Galvin said in a statement.