Message of Puerto Rico Debt Crisis: Easy Bets Sometimes Lose -
By MICHAEL CORKERY and MARY WILLIAMS WALSHMAY 4, 2017
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.
“I think most funds expected there would have been a consensual agreement by now.”
It does not take long to see why a solution to Puerto Rico’s debt problem has eluded the hedge funds and other investment firms
that own the island’s bonds: Many of the creditors think they are, or should be, first in line for the money.
The unprecedented legal filing came only a few days after hedge funds
and other holders of Puerto Rico’s general obligation debt thought they had cut a deal with the government to avoid bankruptcy.
Hector Negroni, co-chief executive of FCO Advisors, which is invested in Puerto Rico bonds, said the oversight board had failed to honor constitutional protections for bondholders
and to carry out its duty to force the government to tighten spending.