Hedge Funds Flock To Puerto Rico Debt

Mar 13 2014 | 12:49pm ET

Puerto Rico spent months attempting to lure hedge funds to participate in a crucial debt offering—and did such a good job that it had to turn some away.

Hedge funds and others flocked to Wednesday’s $3.5 billion offering, Puerto Rico’s largest ever. And interest in the bonds continued after the deal, with prices surging both yesterday and today.

Puerto Rico’s underwriters received $16 billion in orders. Fund managers did well to get half of what they sought, The Wall Street Journal reports, while other investors got just 10% of what they ordered.

The U.S. territory has been struggling under a massive debt load, and was under pressure to show that it could still tap the credit markets. And while the 8.73% yield the new debt will pay is extremely high for municipal bonds, it is still less than the 10% or more that was rumored in January.

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