Municipal Bond Forum
What happens in a restructuring
Q
I hold Puerto Rico munis with a 15-to 25-year maturity timeline. What exactly happens if Puerto Rico munis were to be restructured? Would a restructure automatically involve all munis issued by the Commonwealth, or could revenue bonds stay outside of a restructure? By revenue bonds, I’m referring to COFINA (sales tax), PRASA and PREPA (utilities) bonds.
A
James A. Klotz responds:
Good questions, but the details of any restructuring would not be determined unless or until such an event occurs.
As we saw in Detroit, the water and sewer system bonds were held to be a dedicated stream of revenue and thus exempted from the bankruptcy settlement.
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