Hedge Funds and Private Equity Firms Helping Puerto Rico to Battle Financial Crisis
Hedge funds and private equity firms are planning to help Puerto Rico, which is battling a financial crisis, is under pressure to show investors and credit-rating agencies that it can still borrow money from the capital markets.
Bankers at Morgan Stanley have been reaching out to about a dozen hedge funds, private equity firms and other large investors to gauge their interest in providing up to $2 billion in financing to Puerto Rico, according to people briefed on the discussions.
The talks are fluid, but one of these people, who spoke on the condition of anonymity, said the debt could carry yields as high as 10 percent, more than double what a highly rated city or state pays to borrow in the current municipal debt market.
The proposed financing shows just how dire Puerto Rico’s situation has become. “It’s unprecedented,” said Robert Donahue, managing director at Municipal Market Advisors. “It’s a reflection of the increasing realization that Puerto Rico has exceeded the risk appetite of the traditional municipal bond market.Source: New York Times