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Robert W Pearce
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Mr. Pearce has tried, arbitrated and mediated numerous disputes involving complex securities, commodities, administrative, contract, commercial, business tort and employment law issues for over 30 years. He has represented hundreds of clients in Federal and state courts (trial and appellate) as... More
My company:
The Law Offices of Robert Wayne Pearce, P.A.
My blog:
The Investor's Rights Law Blog
  • GUAYNABO, PUERTO RICO BOND INVESTORS WILL SOON OWN JUNK BONDS

    We last wrote about UBS Puerto Rico, Santander Securities and Popular Securities brokers recommending that their Guaynabo, Puerto Rico clients get back into the Puerto Rico bond market and we warned you against doing so. We hope you listened because yesterday the Fitch Ratings agency said it may soon strip the heavily indebted Puerto Rico of its investment grade credit rating. Fitch Ratings threatened to tag the U.S. territory with junk bond status. Fitch Ratings said it had placed Puerto Rico's BBB- General Obligation bond rating on negative watch, meaning it was considering a further reduction in the ratings to junk bond status. Undoubtedly, Puerto Rico bond prices will continue to fall, interest rates will continue to rise and the cost of issuing new debt in Puerto Rico will rise as well.

    None of this looks good for Guaynabo, Puerto Rico bond investors because the Puerto Rican economy, where interest rates have risen sharply in the last 3 months amid worries about its finances, appears to be tumbling back into recession. The additional financing costs will only accelerate the economic decline.

    For example, the cost to insure Puerto Rico debt against default has soared as measured by the credit default swaps market. A contract to insure 100 million of Puerto Rico bonds for 5 years is just below its peak last month of 799 basis points that including the 20.4% or $20.4 million in upfront costs to insure $100 million of Puerto Rico's bonds.

    The negative ratings were not limited to Puerto Rico's General Obligation bonds but also attached to the Puerto Rico building authority government facilities revenue bonds, the Puerto Rico Aqueduct and Sewer us Authority bonds and debt issued by the Employees Retirement System of the Commonwealth of Puerto Rico.

    We can clearly see a market decline in the prices for the individual Puerto Rico bonds. However, and perhaps it's because UBS Puerto Rico wants to hide the bad news, we cannot see the immediate effect of the lower ratings on the prices of the UBS Puerto Rico Closed-End Bond Funds. UBS Puerto Rico has not published the most recent valuation of the funds. The last reported valuation on the UBS Puerto Rico website was November 6, 2013 as follows:

    Name of the Fund - NAV

    • Tax-Free Puerto Rico Fund: 5.189
    • Tax-Free Puerto Rico Fund II: 4.614
    • Tax-Free Puerto Rico Target Maturity Fund: 4.432
    • Puerto Rico AAA Portfolio Target Maturity Fund: 7.779
    • Puerto Rico AAA Portfolio Bond Fund: 7.291
    • Puerto Rico AAA Portfolio Bond Fund II: 8.202
    • Puerto Rico GNMA & US Govmt. Target Maturity Fund: 8.108
    • P.R. Mortgage-Backed & US Govmt. Securities Fund: 6.161
    • Puerto Rico Fixed Income Fund: 3.637
    • Puerto Rico Fixed Income Fund II: 4.267
    • Puerto Rico Fixed Income Fund III: 4.047
    • Puerto Rico Fixed Income Fund IV: 5.204
    • Puerto Rico Fixed Income Fund V: 4.648
    • Puerto Rico Fixed Income Fund VI: 5.549

    Think back Guaynabo, Puerto Rico investors and remember what they were telling you last year as the market started to decline. These advisors are only looking for investors to swap out Puerto Rico closed-end bond funds and Puerto Rico bond investments with other investors who have threatened to sue (and rightfully so) for the misrepresentations, unsuitable recommendations, the use of margin or non-purpose loans to buy the bond funds, and/or excessive concentration of their retirement nest eggs in junk bonds.

    The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. Please see our Instablog profile (left column) for ways to contact us and get answers to any of your questions about this blog post and/or any related matter.

    Dec 12 1:07 PM | Link | Comment!
  • TNP SECURITIES AND TONY THOMPSON NAMED IN FINRA COMPLAINT FOR ALLEGEDLY FAILING TO DISCLOSE MATERIAL INFORMATION RELATED TO PRIVATE PLACEMENT OFFERINGS

    Costa Mesa, California-based TNP Securities, LLC along with one of the firm's former Irvine, California-based registered representatives, Anthony Warren Thompson, a/k/a Tony Thompson, was named in a Financial Industry Regulatory Authority (FINRA) complaint alleging that the firm, Mr. Thompson, and an entity conducted a series of private placements of securities to raise capital for the entity through wholly-owned subsidiaries of the entity but failed to disclose or omitted material facts concerning the entity's venture and the guaranteed notes programs during the respective offering periods. The guaranteed note programs included the TNP 12% Notes Program, TNP 2008 Participating Notes Program, LLC, and TNP Profit Participation Program, LLC (the Notes). To allegedly induce investors to fund Mr. Thompson's real estate ventures, the Notes offerings featured an express guaranty of principal and interest by the entity. The complaint alleges that the entity, acting through Mr. Thompson, and the firm continued to sell the Notes without providing potential investors with current material information in the respective offering materials regarding the performance of the entity and the guaranteed notes programs. FINRA found the information material to potential investors, especially in light of the entity's offer of a guaranty.

    In addition, the complaint alleges that the firm failed to establish, maintain, and enforce a system and procedures reasonably designed to supervise the firm's business in private placement offerings of securities. In that regard, the firm allegedly failed to ensure that it and its personnel did not violate the antifraud provisions of the federal securities laws or FINRA rules in connection with the preparation or distribution of offering documents, sales literature, or other communications with the public.

    The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. Please see our Instablog profile (left column) for ways to contact us and get answers to any of your questions about this blog post and/or any related matter.

    Dec 12 12:02 PM | Link | Comment!
  • HATO REY, PUERTO RICO BOND INVESTORS WILL SOON OWN JUNK BONDS

    We last wrote about UBS Puerto Rico, Santander Securities and Popular Securities brokers recommending that their Hato Rey, Puerto Rico clients get back into the Puerto Rico bond market and we warned you against doing so. We hope you listened because yesterday the Fitch Ratings agency said it may soon strip the heavily indebted Puerto Rico of its investment grade credit rating. Fitch Ratings threatened to tag the U.S. territory with junk bond status. Fitch Ratings said it had placed Puerto Rico's BBB- General Obligation bond rating on negative watch, meaning it was considering a further reduction in the ratings to junk bond status. Undoubtedly, Puerto Rico bond prices will continue to fall, interest rates will continue to rise and the cost of issuing new debt in Puerto Rico will rise as well.

    None of this looks good for Hato Rey, Puerto Rico bond investors because the Puerto Rican economy, where interest rates have risen sharply in the last 3 months amid worries about its finances, appears to be tumbling back into recession. The additional financing costs will only accelerate the economic decline.

    For example, the cost to insure Puerto Rico debt against default has soared as measured by the credit default swaps market. A contract to insure 100 million of Puerto Rico bonds for 5 years is just below its peak last month of 799 basis points that including the 20.4% or $20.4 million in upfront costs to insure $100 million of Puerto Rico's bonds.

    The negative ratings were not limited to Puerto Rico's General Obligation bonds but also attached to the Puerto Rico building authority government facilities revenue bonds, the Puerto Rico Aqueduct and Sewer us Authority bonds and debt issued by the Employees Retirement System of the Commonwealth of Puerto Rico.

    We can clearly see a market decline in the prices for the individual Puerto Rico bonds. However, and perhaps it's because UBS Puerto Rico wants to hide the bad news, we cannot see the immediate effect of the lower ratings on the prices of the UBS Puerto Rico Closed-End Bond Funds. UBS Puerto Rico has not published the most recent valuation of the funds. The last reported valuation on the UBS Puerto Rico website was November 6, 2013 as follows:

    Name of the Fund - NAV

    • Tax-Free Puerto Rico Fund: 5.189
    • Tax-Free Puerto Rico Fund II: 4.614
    • Tax-Free Puerto Rico Target Maturity Fund: 4.432
    • Puerto Rico AAA Portfolio Target Maturity Fund: 7.779
    • Puerto Rico AAA Portfolio Bond Fund: 7.291
    • Puerto Rico AAA Portfolio Bond Fund II: 8.202
    • Puerto Rico GNMA & US Govmt. Target Maturity Fund: 8.108
    • P.R. Mortgage-Backed & US Govmt. Securities Fund: 6.161
    • Puerto Rico Fixed Income Fund: 3.637
    • Puerto Rico Fixed Income Fund II: 4.267
    • Puerto Rico Fixed Income Fund III: 4.047
    • Puerto Rico Fixed Income Fund IV: 5.204
    • Puerto Rico Fixed Income Fund V: 4.648
    • Puerto Rico Fixed Income Fund VI: 5.549

    Think back Hato Rey, Puerto Rico investors and remember what they were telling you last year as the market started to decline. These advisors are only looking for investors to swap out Puerto Rico closed-end bond funds and Puerto Rico bond investments with other investors who have threatened to sue (and rightfully so) for the misrepresentations, unsuitable recommendations, the use of margin or non-purpose loans to buy the bond funds, and/or excessive concentration of their retirement nest eggs in junk bonds.

    The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. Please see our Instablog profile (left column) for ways to contact us and get answers to any of your questions about this blog post and/or any related matter.

    Dec 11 3:18 PM | Link | Comment!
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