Puerto Rico Bonds

DallasCowboysFan · May 1, 2016

Puerto Rico is scheduled to default on their bonds Monday. They have a $422M debt payment they owe on a $70BN total debt load. That is a lot of money for a population of 3.47 MN people.

I read that the May bonds are yielding 1600 percent.

I was wondering what they were being priced at .....10 cents ...5 cents on the dollar ?

They might default but they will have to pay them eventually, it's illegal for them to walk away.

I predict some kind of bail out, it's an election year. Even if Puerto Ricans cannot vote in the presidential election, there are a lot that live in New York and Florida. Hungry politicians will pander to them.

Where can I find bond rates ? I tried Zacks, yahoo, CNBC a few others....bond rates aren't as easy to find as stocks and options.

It would be interesting to see how they are valued Monday morning and again on Tuesday.

PR gets the short end of the stick with federal funding.....

https://en.wikipedia.org/wiki/Puerto_Rican_government-debt_crisis

http://www.csmonitor.com/USA/Politi...s-come-and-go-Puerto-Rico-s-debt-crisis-grows

FCXoptions · May 1, 2016

I tried looking up a bit on them awhile back, but really wasn't too familiar with it all then. Are there any specific bonds you are looking at? Supposedly quite a few hedge fund/vulture funds were taking part in some of the action. Not sure what kind of discounts everything is trading at currently

DallasCowboysFan · May 1, 2016

FCXoptions said:
I tried looking up a bit on them awhile back, but really wasn't too familiar with it all then. Are there any specific bonds you are looking at? Supposedly quite a few hedge fund/vulture funds were taking part in some of the action. Not sure what kind of discounts everything is trading at currently

No, not really. Just anything issued by Puerto Rico.
I wanted to know what how much they were being discounted by and see how much they move this week.

It seems like a low risk investment.....as much as low risk can be when you invest in defaulted bonds......lol

If they default tomorrow and they will, they will eventually pay them off next year and the bond prices will rise much higher.

piezoe · May 17, 2016

Have you seen the ads on TV. A women who has here retirement savings in Island bonds is depicted pleading for a bailout. I wonder if it is being sponsored by the hedge funds that bought up bonds at huge discounts either assuming their will be a bailout, or else counting on Court intervention, since Puerto Rico's Constitution makes their bond debt senior to everything else.

The Island government is hopelessly corrupt and incompetent. Nepotism in government is rife. The whole place is one god awful' mismanaged mess, and there are a lot of hands in the till..

Sig · May 17, 2016

DallasCowboysFan said:
No, not really. Just anything issued by Puerto Rico.
I wanted to know what how much they were being discounted by and see how much they move this week.

It seems like a low risk investment.....as much as low risk can be when you invest in defaulted bonds......lol

If they default tomorrow and they will, they will eventually pay them off next year and the bond prices will rise much higher.

I'd look at PREPA debt, the Puerto Rican power company which is govt owned. Power's a pretty inelastic demand curve and once you start pricing it at market at least PREPA has a revenue stream that's pretty steady.
On IB's demo you can type in Puerto Rico in the "contract" area and it will come up with a bunch of bonds you can at least see the last price on. The random one I pulled up was 4.9 Jul01'20 closing at $68.750, which seems pretty high given the situation. Of course the devil's in the details with debt.

DallasCowboysFan · May 18, 2016

Sig said:
I'd look at PREPA debt, the Puerto Rican power company which is govt owned. Power's a pretty inelastic demand curve and once you start pricing it at market at least PREPA has a revenue stream that's pretty steady.
On IB's demo you can type in Puerto Rico in the "contract" area and it will come up with a bunch of bonds you can at least see the last price on. The random one I pulled up was 4.9 Jul01'20 closing at $68.750, which seems pretty high given the situation. Of course the devil's in the details with debt.

I tried IB, but I think you have to be registered. I used the link below and found some bond prices. Somehow I don't think they are accurate. Most of the bonds were paying 5 - 10 percent and the highest I saw was 61 percent. A 5- 10 percent yield seems to be low considering the circumstances. But, even though the state defaulted, maybe the individual agencies within the state have done a better job of managing their finances, so they have a lower risk. I don't know.

How can a bond have a -34 percent yield ? I see where it was priced at 5.1 percent and it costs 103, but paying more than 100 percent on any bond reduces the yield and generally keeps it in line with other bonds relative to the risk. Is it -34 percent because this particular bond has defaulted ? If that was true, it would not be costing 103.

Any ideas ?

@piezoe
Have you seen the ads on TV. A women who has here retirement savings in Island bonds is depicted pleading for a bailout. I wonder if it is being sponsored by the hedge funds that bought up bonds at huge discounts either assuming their will be a bailout, or else counting on Court intervention, since Puerto Rico's Constitution makes their bond debt senior to everything else.

The Island government is hopelessly corrupt and incompetent. Nepotism in government is rife. The whole place is one god awful' mismanaged mess, and there are a lot of hands in the till..

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It's illegal for a state to default on their debt. Their debt payments may lapse but they will eventually get paid.

Everyone wants a bailout. It's an election year, so some kind of restructuring may happen.
But it's tough in PR. 70BN is a lot of money for 3.5 MN people. Especially with a 12% unemployment rate. They have gone so far down the rabbit hole, it's going to be tough for them to dig out.

I saw something a week or so ago that illustrated how they got here, I wish I could find it. Cronyism was part of it, but so was not reducing their overhead and reducing services. They have more people leaving the state than entering. The population has dropped every year for several years. Crime is outrageously high and the infrastructure is falling apart.

One of their problems is that they don't have any natural gas or oil and all the fuel for utilities they use has to be shipped in from the states. It's called the Jones Act / Cabotage Law. All goods (maybe air travel too ) have to originate from the states . So, if they want bananas from Costa Rica or Venezuela or Jamaica, they have to come to Miami? offload the cargo, put them on US flagged carriers and sent to PR.

It's complicated. Maybe it's time they became a state. Then they would representation in Congress and perhaps the federal govt would buy out at least a percentage of their debt.
If it became a state, I don't doubt that their real estate and lifestyle would become immediately attractive to a lot of sun worshiping mainlanders.

But it's an election year. If they want some kind of resolution to their problem, now would be the time to do it. The Dems and the Repubs would love to engineer statehood for PR, take credit for the success and have 2 new Senators and 2 new congressmen added to their political families.
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http://puertorico.municipalbonds.com/bonds/recent/