Hedge Funds Get Rid of Puerto Rico General Obligation Bonds After Hurricane Maria

Reuters reports that Senator Investment Group, Monarch Alternative Capital, and Stone Lion LP—all hedge funds—have gotten rid of hundreds of millions of dollars of Puerto Rico general obligation bonds in the wake of the devastation caused by Hurricane Maria. Similarly, another hedge fund, Varde Partners, no longer has $136M of its COFINA debt. Investors have been hoping that the island’s bonds would rebound after the territory filed for bankruptcy earlier this year. Now, however, recovery for Puerto Rico is expected to take longer after the storm. Debt prices have dropped to drastic lows, while Maria has caused tens of billions of dollars in damages.

Meantime, in the U.S. mainland and on the island, investors continue to fight to recoup their losses sustained when Puerto Rico’s bonds and closed-end bond funds plunged in value more than four years ago. Our securities fraud lawyers have been working with investors to get their funds back. Many investors were not properly apprised of the risks involved in investing in these bonds. Quite a number of them should never have invested in these securities at all.

Still, brokers from Banco Popular, UBS Puerto Rico, Santander Securities, and other brokerage firms continued to tout these investments as low risk and profitable. Some financial representatives even encouraged investors to borrow funds so that they could invest more, resulting in further devastating consequences.

PREPA CEO Resigns
In other recent Puerto Rico securities-related news, the CEO of the Puerto Rico Electric Power Authority, known locally as PREPA, has stepped down. Ricardo L. Ramos helmed the beleaguered electrical company for most of this year. Ramos came under government review after PREPA awarded Whitefish Energy Holdings, a Montana company, a $300 million contract that included paying electrical linemen $319/hour to repair the territory’s broken electrical grid. The average employee salary on the island is $19/hour.

Puerto Rico has had electrical blackout issues since the hurricane struck. Now, Whitefish Energy has stopped working on Puerto Rico’s power problems. Whitefish claims that the island owes it $83 million. The company said that because PREPA is late on payments owed, it has not been able to pay hundreds of workers, as well as a subcontractor.

PREPA is tied to $9 billion of the $74 billion of debt Puerto Rico owes investors. PREPA investors were told that municipalities were paying cash for electricity, which made it seem as if the utility company was liquid enough to pay back its bonds. The truth of that representation is now significantly in question. As a result, the U.S. Securities and Exchange Commission is probing whether securities fraud took place when such disclosures were made.

Contact our Puerto Rico bond fraud and closed-end bond fraud attorneys today and ask for your free case consultation. Shepherd Smith Edwards and Kantas LTD, LLP can help you determine whether you have grounds for a securities fraud claim. We can guide you on how to proceed.

Hurricane changes the game for Puerto Rico bond investors, Reuters, November 21, 2017

C.E.O. of Puerto Rico Power Authority Resigns, NY Times, November 17, 2017

Whitefish charged Puerto Rico unusually high $300 per hour for workers, NY Daily News, November 13, 2017

More Blog Posts:
After Hurricane Maria, Mutual Fund Company Franklin Resources Sells Hundreds of Millions of Dollars of Puerto Rico Bonds, Stockbroker Fraud Blog, October 27, 2017

California Extends Sanctions Imposed Against Wells Fargo Following More Bad Practice Disclosures, Stockbroker Fraud Blog, October 23, 2017

Massachusetts Accuses Investment Adviser of Venture Capital Fraud, Stockbroker Fraud Blog, October 20, 2017