Monday, February 10, 2014



Puerto Rico Junk Grades Spur Barclays Index Shakeup: Muni Credit
By Brian Chappatta Feb 10, 2014

Puerto Rico’s downgrade to junk by a second ratings company is set to realign $13 billion of debt in Barclays Plc (BARC) indexes that serve as benchmarks for most municipal mutual funds.
Fitch Ratingswhich assigns the self-governing commonwealth the lowest investment grade, said in November that it may drop it to junk by June 30. Speculative grade begins at BB+ for Fitch and S&P, and at Ba1 for Moody’s.

Puerto Rico and its agencies have $70 billion of debt, according to the island’s Government Development Bank, which handles bond sales. In a 2013 Moody’s study of state debt loads, onlyCalifornia and New York had more gross tax-supported obligations. The burden, coupled with an economy that contracted in six of the last seven years, has fueled concern that the island won’t be able to repay investors.

Moody's drops Puerto Rico Electric Power bonds to junk
NEW YORK Mon Feb 10, 2014 10:44pm
Feb 10 (Reuters) - Moody's Investors Service confirmed on Monday it had cut the rating of the Puerto Rico Electric Power Authority to junk status, saying the island's shrinking economy and population will hurt the already cash-strapped authority's ability to invest.

(Ahora perteneceremos a Venezuela, Brazil, Panama, etc.....mj)
Puerto Rico Inks Private Financing Deal Through RBC

by Clayton Browne - February 10, 2014
Financial news outlet Caribbean Business is reporting today that the Commonwealth of Puerto Rico has obtained a $2-$2.5 billion private-financing deal through Royal Bank of Canada (NYSE:RY) (TSE:RY). The sources for the article mentioned that deal involved up to a half dozen Latin American banks, including Venezuela’s Banesco, Espíritu Santo Bank from Brazil and an unnamed Panamanian bank.

If Your Adviser Didn’t Warn Of Puerto Rico Risk, Replace Him – MMA
By Michael Aneiro - February 10, 2014
Matt Fabian of Municipal Market Advisors today underscores how widely the muni market had expected Puerto Rico’s downgrade to junk status by calling out any financial advisers who didn’t see it coming and warn their clients:

Puerto Rico’s downgrades provide an excellent opportunity for individual investors to assess the quality of their market professionals. Managers or financial advisors who failed to brief their clients on the potential for PR to be downgraded, whether or not they believe a downgrade was warranted, should be considered for replacement. This was a widely discussed risk that affects many thousands of individual investor accounts across the country. Noting the level of post‐downgrade retail bids wanteds and selling, we assume that many investors were simply unprepared for what occurred. The problem, as always, is that most municipal bonds in individual accounts are ultimately overseen by non‐specialist advisors who have only a poor understanding of the risks and granularities involved in municipal lending.