Michael Lau’s $3B Hedge Fund is Forming a Fund to Buy Puerto Rico Debt
As the commonwealth and the Candlewood Investment Group LP’s agencies
struggle with $73 billion of obligations, the $3 billion hedge-fund
firm run by Michael Lau is planning to form a fund to profit from Puerto
Rico’s debt market.
The
Candlewood Puerto Rico SP fund will target securities including
general-obligation bonds, debt of public corporations and the
monoline-wrapped space, the New York-based firm said in a presentation
obtained by Bloomberg News. Market prices are offering unadjusted yields
of 8 percent to 10 percent and U.S. tax-equivalent yields of 16 percent
to 20 percent, it said.
Candlewood
joins hedge funds including Brigade Capital Management LLC, Fir Tree
Partners, Monarch Alternative Capital LP and Perry Capital LLC in
investing in Puerto Rico as the island seeks to boost its economy, which
has contracted by 20 percent since July 2005. About 45 percent of the
island’s 3.6 million residents live in poverty, according to U.S. Census
data.
Security
selection will be important as certain segments of the market may
retain “significant value” and others may “suffer full impairment,”
Candlewood wrote.
Related to: Hedge Fund Update
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