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Articles Tagged with UBS Puerto Rico

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Puerto Rico Investors in Puerto Rico bonds – in particular, retail investors located in the U.S. Territory who invested in various proprietary closed-end funds (“CEFs”) structured and marketed by firms including UBS Puerto Rico, Santander Securities, and Popular Securities — have suffered massive losses since late 2013 when Puerto Rico’s bond prices witnessed significant deterioration following years of recession and ballooning municipal debt.  Now, in the wake of Hurricane Maria, these huge losses are deepening as institutional investors with large Puerto Rico bond holdings seek to exit their positions.

As recently reported in the Wall Street Journal on October 25, 2017, Franklin Resources Inc. (NYSE: BEN), one of the largest creditors of Puerto Rico debt (the company sponsors approximately 200 mutual funds under the Franklin Templeton moniker) sold hundreds of millions of dollars of Puerto Rico debt in recent weeks.  Franklin Resources and other large institutional investors, including hedge funds and Oppenheimer Holdings Inc. (NYSE: OPY), have collectively determined that holding Puerto Rico debt is untenable in light of the island’s anticipated debt restructuring (a process initiated in 2016) and, more recently, the massive devastation to Puerto Rico due to Hurricane Maria.

Before the hurricane hit Puerto Rico, its General Obligation (“GO”) Bonds maturing in 2035 were already trading at a significant discount to par, priced at around $0.60 on the dollar.  Following Maria, these same GO bonds cratered even further, losing approximately 50% of their pre-hurricane value.

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New Research Indicates Investors Already Lost Billions in Puerto Rico Bond Funds

Investment fraud lawyers continue to investigate claims on behalf of investors who have suffered significant losses in UBS Puerto Rico closed-end municipal bond funds. Allegedly, UBS Puerto Rico has engaged in questionable sales practices related to certain closed-end bond funds, including leveraged fixed income funds. New research has indicated that investor losses now amount to billions of dollars.

According to InvestmentNews, 19 of these bond funds lost a total of $1.6 billion from January to September of last year alone. Reportedly, the funds that caused the most significant investor losses were the ones underwritten by UBS with large municipal bond holdings. Around $10 billion in closed-end bond funds were sold by the Puerto Rican unit of UBS Financial Services from 2002 to 2012.

The Puerto Rican economic downturn has caused the value of the funds — as well as the value of other funds not underwritten by UBS that purchased Puerto Rican debt — to significantly decline. Municipal market weaknesses and rumors regarding interest rates have led to illiquidity and value declines for these products. In many cases, the risks associated with these investments reportedly were not properly disclosed to clients prior to their sale.  In these circumstances, some UBS Puerto Rico customers may have claims for unsuitable recommendations, over-concentration and/or improper use of leverage.

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