Puerto Rico Junk Bond Gamble Proves Costly 2 Years Later: ChartBy
Puerto Rico issued the municipal-bond market’s biggest junk-rated deal ever two years ago Friday -- a $3.5 billion general-obligation security maturing in 2035 with a whopping 8 percent coupon that was supposed to give the commonwealth time to repair its finances. Snapped up mostly by hedge funds at 93 cents on the dollar, the price tumbled to as low as 66.6 cents after Governor Alejandro Garcia Padilla said in June 2015 that the commonwealth couldn’t afford to repay all its obligations. The bond has been the most frequently traded security in the muni market the past two years, providing a hard lesson to holders who would now garner about 72.1 cents.
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