Seeking Alpha

Puerto Rico is not Detroit

  • "The principal difference between Detroit and Puerto Rico is that Detroit wanted to default and Puerto Rico doesn't want to default," writes Christian Herzeca. Puerto Rico cannot file for Chapter 9 and has no desire to face creditors in a restructuring outside of a court-supervised process.
  • Puerto Rico clearly faces issues, but its pension reform concluded earlier this year shows the territory not only needs public finance markets, but - unlike Detroit - places a good deal of importance on continued access to them.
  • Bond insurers Ambac (AMBC), Assured Guaranty (AGO), and MBIA (MBI) have all taken a hit of late over Puerto Rico worries. Might there be an opportunity?
  • See also: Puerto Rico concerns are overdone, and the panic may be helping the bond insurers.
Comments (4)
  • rsd57
    , contributor
    Comments (205) | Send Message
     
    PR relies on market access. Their willingness to pay is very high. Detroit probably values market access too- not the Tea Party Governor and his flunky emergency manager who are going to cost the state taxpayers of Michigan a ton of money in the long run in permanently higher interest on their debt.
    12 Sep 2013, 05:29 PM Reply Like
  • Hungry for Knowledge
    , contributor
    Comments (352) | Send Message
     
    "Puerto Rico is not Detroit"
    And "Italy is not Greece", and "Spain is not Portugal" said they're respective heads of state/central bankers......yet look how they're turning out....
    12 Sep 2013, 07:38 PM Reply Like
  • Davephd
    , contributor
    Comments (700) | Send Message
     
    Here are some quotes from the latest 9/23 Forbes magazine on Puerto Rico (Do You Own the Next Detroit?) : Only 1/4 of the residents have jobs and 27% of those are government jobs. Private sector employment is 647,000 , equal to 1/2 the people on food stamps. The tax holiday for US pharmaceutical companies ended in 2006. Their unfunded pension liability is over 1.5 times that of Illinois. In March S&P lowered them to BBB- . Since June a lot of longer term PR bonds have fallen from par to about 60 to 65 cents on the dollar.

     

    Yes, this all sounds like something the Tea Party probably did.
    12 Sep 2013, 08:00 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8294) | Send Message
     
    Great opportunity for MBIA and AMBC longs.
    13 Sep 2013, 09:46 AM Reply Like
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