As we all know, PR has been in crisis for past 2 years. Approximate chance on Default on those bonds have risen to 86%. Any cost effective idea on how to short them? It has been a struggle for lot of traders on the STREET and worldwide. Lets figure it out WSO!
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I'm looking at essential service bonds trading for 25 cents on the dollar, and you want to short?
good luck bro
Indeed, methinks you be late to this party, senor...
HEY I JUST READ THIS ARTICLE IN BARRON'S SAYING PUERTO RICO IS IN BIG TROUBLE. HOW DO I SHORT THEIR DEBT?? PLEASE RESPOND PROMPTLY I THINK THE TRAIN MIGHT BE LEAVING THE STATION SHORTLY. MANY THANKS!!!!1!
Train has just arrived and there are few who have recognized impact on GO and Revenue debts. We still have time to find an instrument to use it. Credit default Swaps are easy way to do it but transaction cost on it is expensive.
Looking at PR Economy- Majority is based upon Manufacturing ( ~45%) and Finance (~20%)
Service Sector has been allocating to mainland steadily for new jobs. State Tax close to 11% and Public debt is close to 65%.
Hit it where it hurts the hardest, it safe to assume Regional banks such as Ticker: FBP, First BanCorp would be good starting point.
Please add your logic as well so we can come up with most efficient solution!
Thank You!
The muni bond insurer's equities are also somewhat correlated with Puerto Rico's fortunes as some of them are quite heavily exposed.
Puerto Rico: Too Big to Fail? (Originally Posted: 05/06/2017)
Hello monkeys,
Recently Puerto Rico filed for the largest municipal bankruptcy with liabilities totaling a staggering $123 billion, with $73 billion in bond indebtedness and $50 billion in unfunded pension liabilities.
It wasn’t even a close call. The runner-up - Detroit - owed $9 billion when it entered bankruptcy in 2013. Puerto Rico and its agencies owe more than nine times as much!
Of course, by declaring bankruptcy, Puerto Rico can avoid any disruption to their daily lives. With a poverty rate of over 45%, there is no way that they can pay back this debt.
What do you think the implications are to these bondholders? And to the government of the United States if they decide to bail them out / help them in any way? There is definitely the issue of moral hazard, who's to say that they're not going to do this again?
Source: Article
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