Hedge Funds Reveal How Much Puerto Rico Sales-Tax Debt They Hold

  • Cofina bondholders fighting in court to protect recovery rate
  • Decagon Holdings manages $911.2 million of the Cofina debt

How Did Puerto Rico Go Bankrupt?

A group of hedge funds that hold about $3 billion of Puerto Rico sales-tax bonds released court documents showing how much of the commonwealth’s debt that each manages.

The disclosure is part of Puerto Rico’s record bankruptcy. The island is seeking to cut $74 billion sold by the commonwealth and its agencies that helped fill budget deficits as its economy shrunk in the past decade. Numerous agencies sold the bonds, which are repaid from various revenue pledges.

Bondholders are now fighting over those different revenue sources. A key issue of Puerto Rico’s bankruptcy is which type of debt should receive a better recovery rate: $13.3 billion of general obligations, which have a constitutional guarantee of repayment, or $17.6 billion of bonds, called Cofinas, backed by a dedicated portion of the island’s sales-tax receipts.

The Cofina structure has a junior-lien component, meaning those securities are repaid after the senior-lien bonds. While the pool of bondholders designates itself as the senior Cofina group, some members hold junior sales-tax bonds.

The amounts that each firm manages, as of July 21, are as follows:

The firms hold a combined $2.5 billion of senior Cofinas and $602 million of junior sales-tax debt.


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