Puerto Rico Bankruptcy – 18 public agencies owe a combined $120 billion in bond and pension debt
Did you lose money investing in Puerto Rico bonds at the recommendation of your broker? If so, the attorneys at The White Law Group may be able to help you recover your losses by filing a FINRA Arbitration claim against the brokerage firm that sold you the investment.
As we told you in May, The US territory of Puerto Rico is in the middle of messy bankruptcy proceedings. This is the largest government bankruptcy since Detroit, Michigan, with close to $123 billion in debt.
Puerto Rico bonds held by the companies’ many funds are spread across various credits, some in direct competition for recoveries, meaning wins for some investors and huge losses for others.
The island’s biggest creditors are Oppenheimer Funds and Franklin Advisers, with a combined $10.3 billion in Puerto Rican debt.
According to reports, as of April 30, Oppenheimer had about $7.3 billion of total exposure, while Franklin, after offloading some of its Puerto Rico holdings in recent years, had around $3 billion.
Those holdings, based on face value, may not represent exposure for debt bought at a discount, and some of the debt may be insured, shielding the funds from losses.
The biggest fight by far is the $17 billion COFINA debt, which is secured by sales tax.
Currently COFINA creditors are locked in litigation with Go Bond holders for the right to the sales tax revenue.
As of April 30, Franklin and Oppenheimer held $3.2 billion of COFINA, more than twice their combined GO holdings. Franklin has six funds holding exclusively GO debt, with claims worth a combined $276 million.
Overall, the companies held nearly four times as much junior as senior COFINA debt. For example, Oppenheimer’s Rochester Fund Municipals had $384 million of senior debt and just $83 million of the junior tranche.
Smaller players face similar challenges. The Santander First Puerto Rico Family of Funds ran eight funds each with at least $28 million of COFINA debt. Three of those had at least two-thirds invested in the junior tranche; five had 70 percent or more in the senior class.
Oppenheimer, Franklin and Santander have formed an ad hoc bankruptcy negotiating group, attempting to maximize total returns across portfolios, rather than advocate for funds whose debt may be more senior, according to a Reuters analysis of court filings and public statements by the funds and their advisers.
The GO and mutual fund groups have taken opposing sides in a handful of court battles, which could prompt questions from a judge or other creditors as to which side Franklin is more closely aligned with, according to reports.
The judge told the sides to try to resolve the issue internally, and talks continue.
Recovery of Investment Losses in Puerto Rico Bonds
The White Law Group is investigating the liability that brokerage firms may have for improperly selling Puerto Rico Bonds such as COFINA bonds.
Broker dealers are required to perform adequate due diligence on all investment recommendations to ensure that each investment recommendation that is made is suitable for the investor in light of the investor’s age, risk tolerance, net worth, financial needs, and investment experience.
Fortunately, FINRA does provide for an arbitration forum for investors to resolve such disputes and if a broker or brokerage firm makes an unsuitable investment recommendation or fails to adequately disclose the risks associated with an investment they may be found liable for investment losses in a FINRA arbitration claim.
If you suffered losses investing in Puerto Rico bonds, the attorneys at The White Law Group may be able to help you recover your losses by filing a FINRA Arbitration claim against the brokerage firm that recommended the investment to you.
The White Law Group is a national securities fraud, securities arbitration, and investor protection law firm with offices in Chicago, Illinois and Vero Beach, Florida. The firm represents investors throughout the country in claims against their brokerage firm.
For a free consultation with one of the firm’s securities attorneys, please call (888) 637-5510.
For more information on The White Law Group, visit www.WhiteSecuritiesLaw.com.