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Komfie Manalo, Opalesque Asia:

Hedge funds which bought Puerto Rico's distressed debt bonds are facing the prospect of a long road ahead to recover their investments as the Caribbean island is attempting to use a U.S. Congress-approved rule that allows it to exploit a bankruptcy-like proceedings to have some of its $70 billion debt written off in court.

This latest development has caught many hedge funds which started buying Puerto Rico's general-obligation bonds and sales-tax debt in 2013 by surprise, reported Bloomberg.

Maglan Capital LP was one of those funds which bought the bonds in 2013 but has had the foresight to sell them before things went bad. Maglan president and co-founder David Tawil told Bloomberg, "It's been a really long trade. I don't think when they first got into this they bargained for this type of length of trade. There's been a lot more twists and turns and not to any substantial progress point between then and now."

To save their investments, the bondholder and insurance companies are trying to negotiate a restructuring deal through mediation. However, they have to finish the negotiations in time because the temporary hold that is protecting Puerto Rico from the impact of creditors lawsuit is scheduled to expire on May 1.

If a deal is not reached before the deadline, Puerto Rico Governor Ricard......................

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