Investors in Puerto Rico’s public agencies could feel like victims of a “bait and switch” if the corporations were permitted to file for bankruptcy, Assured Guaranty Ltd. Chief Executive Officer Dominic Frederico said.
U.S. Congress should carefully consider the consequences of a bill, introduced by Pedro Pierluisi, Puerto Rico’s nonvoting congressional delegate, that would allow such a move, Frederico, said on a call today with analysts. Assured guarantees bonds of the junk-rated Caribbean commonwealth.
“A huge number of people bought Puerto Rico debt with the understanding that bankruptcy was not permitted,” Frederico said. “Credit integrity is a cornerstone for accessing the market, which is critical to Puerto Rico’s future.”
Puerto Rico warned in a quarterly filing Thursday that it could place a moratorium on debt servicing or use income from its public corporations to repay obligations in the next fiscal year if the government can’t enact spending cuts or generate more revenue.
The commonwealth of 3.5 million and its agencies owe $72 billion. Assured had about $6 billion of exposure to Puerto Rico bonds as of March 31, financial documents show.