Standard & Poor’s Ratings Services (S&P) has slashed its ratings on Puerto Rico bonds to junk status. Bond ratings reflect the perceived risk of a bond defaulting. S&P cited to Puerto Rico’s significant cash needs and its limited liquidity. We expect this latest negative news about Puerto Rico’s finances to cause significant additional investment losses, including losses for investors in UBS Puerto Rico bond funds.
S&P has kept Puerto Rico on watch for further downgrades. And the other two leading bond- rating agencies, Moody’s Investors Service and Fitch Ratings, also are considering downgrades to junk status. Any additional downgrades likely would spell further financial disaster for Puerto Rico bond investors and UBS Puerto Rico bond fund investors.
Puerto Rico’s economy is in shambles. The island has $70 billion in debt and plans to sell another $2 billion in bonds to raise money to help finance budget needs. Of course, the junk status of Puerto Rico bonds would require Puerto Rico to pay a very high interest rate on any new bond issuance, placing even greater pressure on its already high debt service obligations.
UBS recently issued a report warning of a potential rating downgrade, but it was too little too late for thousands of UBS Puerto Rico retail customers. Many UBS Puerto Rico customers were sold enormous amounts of UBS Puerto Rico closed-end bond funds that held massive concentrations of Puerto Rico bonds. Many investors were told that the bonds and bond funds were safe, when UBS should have been aware of the enormous risk as a result of Puerto Rico’s years-long declining economy. Many investors in UBS Puerto Rico bond funds already have lost 50% or more of their portfolios and the recent downgrade likely will lead to even further losses. Adding insult to injury, investors generally cannot sell their UBS Puerto Rico bond funds because there is no secondary market for the funds. Instead, investors have been, and will continue to be, forced to helplessly watch as they lose more and more money.
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We believe that UBS Puerto Rico misled investors about the safety of its Puerto Rico bond funds and sold unsuitable concentrations of these bond funds to many investors. We have received written permission from the Supreme Court of Puerto Rico to represent Puerto Rico residents and we currently represent dozens of Puerto Rico citizens and businesses who have lost millions of dollars in these risky UBS Puerto Rico bond funds. We have filed numerous FINRA arbitration claims in an effort to recover these investment losses.