| NEW YORK, March 29
NEW YORK, March 29 Puerto Rico's benchmark 2035
general obligation bonds traded as low as 60.7 cents in light
trading on Wednesday, their lowest price since the $3.5 billion
issue was sold in 2014, according to Thomson Reuters data.
The bonds, which had not traded since March 22, later
recouped some value, trading at 62 cents.
The debt has been in default since last year when the U.S.
Congress passed a rescue law known as PROMESA that created a
debt restructuring process for Puerto Rico. Defaulted debt
trades more like an equity and is not typically quoted with a
The U.S. territory is facing an economic crisis marked by
$70 billion in debt, a 45 percent poverty rate and rampant
emigration, with creditors expected to take cuts to repayment as
part of a looming restructuring.
The 2035 bond has plummeted since opening at 73 cents on
March 13, the day Puerto Rico's federally appointed financial
oversight board approved a turnaround blueprint for the island
that contemplated only $800 million a year to pay debt, a
fraction of what Puerto Rico owes.
Hector Negroni, whose private equity firm, Fundamental
Credit Opportunities, holds Puerto Rican GO debt, downplayed
recent price drops.
"Prices move for lots of reasons, but they don’t reflect the
value of my priority or the reality of the fiscal picture,"
Negroni said in an interview.
In Puerto Rico's case, a sizable portion of the heavily
distressed bonds are held by hedge funds, and trade lightly.
Prices reflect dwindling confidence among some traders about the
island's ability repay GO debt, which is guaranteed by its
But whether and how much GO debt Puerto Rico can pay may
ultimately be decided by courts. Under PROMESA, the territory
has until May 1 to negotiate a consensual debt restructuring
with creditors without facing lawsuits.
After that date, creditors can sue the island, or it could
commence a court-supervised restructuring process akin to U.S.
(Reporting by Nick Brown; Editing by Daniel Bases and David