General Obligation bonds Tag Archives

According to The Wall Street Journal, three hedge funds that own Puerto Rico general obligation (GO) bonds have set up their own committee in an effort to get paid back the money they are owed. Court records indicate that GoldenTree Asset Management, Monarch Alternative Capital, and Whitebox Advisers, which collectively own about $800 million of GO debt, want to distinguish themselves from the other bondholders whose claims have recently come under question.

Their committee formation comes just weeks after Puerto Rico’s fiscal oversight board,known as the Financial Oversight and Management Board (the “Board”), raised questions about whether $6 billion in general obligations are valid. The bonds at issue were sold after March 2012, including $3.5 billion of high yield general obligations that the island sold in 2014. Monarch, Whitebox, and GoldenTree purchased their GO bonds prior to March 2012.

Puerto Rico Continues to Owe Over $70 billion in Debt.

A group of hedge funds, including Oaktree Capital Management LP and Glendon Capital Management LP, has filed a lawsuit against the federal government in the U.S. Court of Federal Claims. The hedge fund group are Puerto Rico bondholders who could suffer losses from bonds that were issued in 2008 to help the island’s retirement system, the Puerto Rico Employment Retirement System (ERS), stay afloat. Unfortunately, beginning in 2013, the ERS investments faltered, leading the pension system toward bankruptcy.

The hedge funds’ complaint comes after PROMESA, the federal oversight board that was appointed to help the island of Puerto Rico address its $73 billion of debt, placed the Commonwealth’s biggest public retirement fund under bankruptcy protection to help restructure $3 billion in pension obligation bonds (commonly called POBs).

The ERS’s bonds can be paid for by pension contributions that public employers make toward the retirements of their employees. The hedge fund plaintiffs thought that these payments would go to them first. However, in June, the federal oversight board approved legislation to transfer these employer contributions beyond the pension system and away from these creditors. Now, the hedge funds want a court order determining that the move was illegal. They are seeking $3.1 billion in principal plus interest on the ERS bonds.

Articles Tagged with General Obligation bonds

Hedge Funds That Own Puerto Rico General Obligation Bonds Continue to Fight for Repayment

Hedge Funds Sue The U.S. Government Over Puerto Rico Bonds