Articles Tagged with Municipal Bonds

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with unscrupulous financial advisors selling municipal bonds and municipal bond funds

One of the most prominent trouble spots for investors have been mutual funds and single bonds issued by Puerto Rico, which was slammed by a long-standing debt crisis in recent years in addition to a devastating hurricane and breakdown of its infrastructure.  The island’s government, which issued the bonds, filed for bankruptcy, which triggered a negotiation with bondholders to negotiate its outstanding debt. That meant that bondholders will receive pennies on the dollar. A deal reached earlier this year slashed $8 billion in debts by 40%, according to Bloomberg News.

To date, the Puerto Rican collapse is the largest governmental bankruptcy in U.S. history, involving $129 billion in debts, reports The New York Times. The crisis was first noticed in 2012, when Moody’s downgraded the island’s bonds to near-junk status, which sunk prices of those debt securities. Since the bonds carried constitutional guarantees, investors were led to believe that they were secure. The bankruptcy was triggered since the island’s government was unable to pay back its debts. Investors, who were not fully informed of the fiscal debacle early on, got burned.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from risky municipal bonds. One of the most troubling investments for investors has been bond mutual funds and single municipal bonds issued by Caribbean territories like Puerto Rico. The island was devastated by Hurricane Maria and a debt crisis. The island’s government, which issued billions in municipal bonds, filed for bankruptcy, which forced bondholders to take losses. Like Puerto Rico, the neighboring Virgin Islands may be facing a debt meltdown of its own.

The U.S. Virgin Islands, also severely damaged by two hurricanes in recent years, is also dealing with an ongoing debt crisis. With only about 100,000 inhabitants spanning three Caribbean Islands, the U.S. protectorate had been issuing high-yield municipal bonds in recent years to fund essential government services such as a power utility. The government owes more than $6.5 billion to creditors, which averages some $19,000 per resident. In addition, the islands have billions in unfunded pension and healthcare obligations. That’s one of the highest per-capita debt loads in the Western Hemisphere.

The debt explosion in the Virgin Islands has gone from bad to worse. Three years ago, credit ratings agencies slashed the ratings on government bonds to junk status. While that made the bonds’ yields more attractive (they rose), it also indicated a higher risk of default. As a result, prices on those issues dropped.

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