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Alternative Market Briefing

Hedge fund DoubleLine Capital acquires $20m of junk-rated Puerto Rico bonds

Thursday, April 23, 2015

Komfie Manalo, Opalesque Asia:

DoubleLine Capital, an investment management firm based in Los Angeles, bought $20m of junk-rated Puerto Rico bonds, according to reports. DoubleLine’s $2.26bn Income Solutions Fund purchased $20m of the commonwealth’s general obligations as of Feb. 27.

Puerto Rico securities, which were issued in March 2014, have traded at distressed levels for more than a year and lost 0.72% so far this year through April 21, its worst start since 2011, says Bloomberg. Investors believe Puerto Rico will not be able to repay its $73bn debt. But hedge funds and distressed-debt buyers, unlike mutual funds, have been buying more of Puerto Rico’s bonds.

Jeffrey Gundlach, DoubleLine’s CEO and CIO, commented, "I do think they are going to make it to the goal line." He added that the yield on the debt is "unbelievably high," especially for residents of high-tax states such as California.

Separately, in a letter to leading lawmakers, including Governor Alejandro Padilla, Puerto Rico's top finance officials said a financing deal that could potentially salvage the government's finances currently looked unlikely to succeed, reported Reuters. It warned of laying off government employees and reducing publ......................

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