Asset Protection Alert – Puerto Rico

Puerto Rico Governor Padilla announced on 6/27/15 that Puerto Rico is in a “death spiral” and cannot pay $73B in debt. Puerto Rico has more muni bond debt per capital than any US state. Puerto Rico bonds has 8 times the face value of debt of Detroit Bonds (remember what happened to Detroit).

The hidden issue is that Puerto Rico debt is widely held by individual investors in the US thru mutual funds and other investment vehicles. As a commonwealth, Puerto Rico is not entitled to file for bankruptcy. So, creditors and bond holders face an uncertain limbo (i.e. the debts cannot be repaid, the bond holders receive no income, but the creditors cannot be discharged in a bankruptcy).

What to do if you are an investor? Contact your financial advisor and request an explanation from them as to your mutual fund or other investment fund holdings, specifically do any funds hold Puerto Rico bonds? If so, how much of the funds assets are comprise of Puerto Rico bonds? And finally, if the Puerto Rico bonds default, how much are the projected losses (per investor)?

Asset Protection requires constant vigilance. If you are an investor in Puerto Rico bonds, you need to “know the score”. Investors lose $ in many ways i.e. IRS tax audits, lawsuits or bad investments. IRS Audits and Lawsuits are out of your control. You can control your investments. Time to take charge.

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