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Puerto Rico to get spotlight from Jones Day 

By Michelle Kaske and Steven Church Jan 16, 2014

Jones Day, the law firm shepherding Detroit through bankruptcy, is extending its restructuring skills to Puerto Rico with a seminar on the $70 billion market for commonwealth debt.
The firm plans to brief investors today in New York on Puerto Rico’s fiscal outlook and the “possible paths going forward,” according to an invitation to the event. The seminar follows similar meetings last year with investors to assess the benefits and risks of Puerto Rico securities.
The three major rating companies grade Puerto Rico one step above junk, with a negative outlook. Moody’s Investors Service Dec. 11 warned that it may cut the island to speculative grade within 90 days. Puerto Rico officials plan to sell bonds this month or in February.
“There are a number of clients and friends of the firm that are interested in the topic,” Bruce Bennett, a Jones Day attorney who is helping lead Detroit’s $18 billion bankruptcy, said in an interview. The briefing “is forward-looking and not in response to any near-term developments,” he said.
Puerto Rico’s fiscal health affects the $3.7 trillion municipal market because 70 percent of U.S. local-debt mutual funds held commonwealth securities as of Jan. 9, according to Morningstar Inc. The funds own about $14 billion of the debt sold by the U.S. territory and its agencies, according to Morningstar. The securities are tax-exempt nationwide.

Below Grade

Puerto Rico debt trades below its investment-grade ratings.
Tax-free general obligations maturing in July 2041 traded today with an average yield of 8.59 percent, data compiled by Bloomberg show. That exceeds the 6.7 percent yield on a Standard& Poor’s index of high-yield munis with an average maturity of 20 years.
While the commonwealth isn’t eligible to file for bankruptcy, a default could surpass Detroit’s record bid for Chapter 9 protection in July.
Along with Bennett, Jones Day partner Beth Heifetz and Timothy Coleman, head of Blackstone Group LP’s restructuring and reorganization group, are scheduled to speak at the meeting, according to the invitation.
Governor Alejandro Garcia Padilla, who took office a year ago, has said the island of 3.6 million people will repay its obligations on time and in full. Puerto Rico’s 14.7 percent jobless rate in November was higher than in any U.S. state.

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“We made significant progress in implementing our fiscal and economic development plans in 2013, and are determined to continue that progress in 2014,” Jose Pagan, interim president of the Government Development Bank, and Treasury Secretary Melba Acosta said in a statement regarding reports of today’s meeting. “Puerto Rico will take every step necessary to continue honoring its obligations.”
Commonwealth officials aren’t involved in the Jones Day meeting and didn’t call for it, according to the statement.
In November, Cadwalader, Wickersham & Taft LLP, a New York-based law firm that advises on distressed munis, held a conference on Puerto Rico, said a person who attended.

Full story on Bloomberg