Puerto Rico’s general-obligation bonds issued in March rose to 93 cents on the dollar for the first time in a month, giving investors including hedge funds a chance to buy or sell the securities at their initial price.
The bonds, with an 8 percent interest rate, traded yesterday at an average price of 91.25 percent, data compiled by Bloomberg show. The last trade of the day was a $200,000 sale to a customer at 93 cents, the highest since July 23.
Puerto Rico bonds are poised to rally for a seventh consecutive week, the longest stretch since May 2013, S&P Dow Jones Indices data show. The island’s cash-strapped electric agency won a reprieve from restructuring assets last week. It delayed bank loan payments until March and agreed to name a chief restructuring officer next month.
Investors in the $3.7 trillion municipal-bond market have been speculating that the Puerto Rico Electric Power Authority would be the first public corporation to use the island’s new debt-restructuring law to reduce obligations. It would be the largest restructuring ever in the state and local debt market.
Hedge funds, which bought the bulk of the $3.5 billion March offering, stand to gain from the rising prices. While the rally could provide an exit opportunity for some, others have pledged to help the U.S. commonwealth navigate its fiscal distress.
A group led by New York-based Brigade Capital Management, Fir Tree Partners, Monarch Alternative Capital LP and Perry Capital LLC has offered Puerto Rico financing. The 27-member investor coalition’s $4.5 billion of Puerto Rico holdings consist mostly of general obligations, sales-tax debt and securities issued by the Government Development Bank and Public Buildings Authority.