Hedge Funds May Bail Out Puerto Rico

Jan 22 2014 | 12:47pm ET

Hedge and private-equity funds may ride to the rescue of a debt-ridden Puerto Rico—but at a huge price.

The U.S. territory is struggling to show that it can still borrow money while dealing with high unemployment and a huge debt load, and it may be forced to turn to the alternative investments industry. With the municipal bond market shying away from the island, Morgan Stanley has begun to drum up interest from about a dozen hedge funds, private equity firms and other investors to provide as much as $2 billion in financing.

That money would not come cheap: Puerto Rico could pay yields of up to 10%, twice the going rate in the muni market for highly-rated governments, The New York Times reports. The newspaper noted that the talks remain fluid.

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