Puerto Rico Bond Prices Plunge Below Venezuela's On Moratorium Fears

Which is worse - from a bond market perspective - Socialist utopia Venezuela or debt-bloated Puerto Rico?

Of course, comparing price is not a fair comparison in bond land...

Nevertheless, the collapse in Puerto Rico bond prices - to new record lows - comes as Bloomberg reports Puerto Rico is considering suspending debt-service payments for five years, a lead lawyer for the territory’s federal oversight board said, in the first indication of how the devastation caused by Hurricane Maria will affect the restructuring of the island’s debt.

A moratorium may be included as part of Puerto Rico plan to cut its debts in bankruptcy, Martin Bienenstock, a partner at Proskauer Rose LLP who represents the panel, said at a court hearing Wednesday in Manhattan.

“It stands to be seen whether in five years they can stand back on their own feet,” said Matt Dalton, chief executive officer of Rye Brook, New York-based Belle Haven Investments, which manages $6.5 billion of municipal bonds, including insured Puerto Rico debt.


“If it takes them three months to get power back on in the island, saying that they can make debt payments in five years seems aggressive.”

It wasn’t immediately clear how much of the $74 billion of debt would potentially be affected by such a step.