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Puerto Rico Lures Franklin as Equity Funds Buy Junk: Muni Credit

Franklin Resources Inc. is leading money managers in adding junk-rated Puerto Rico bonds to mutual funds that focus on equities or other asset classes, even as the island’s main power utility moves to restructure.

The companies bought general obligations as prices on Puerto Rico securities set record lows this year on speculation the U.S. territory and its agencies would be unable to repay $73 billion of debt. The firms join hedge funds and other non-traditional buyers of municipal bonds who are purchasing the securities for their higher yields.