In the latest bit of UBS Puerto Rico news, Business Insider highlights the competing interests fighting over Puerto Rico’s future in an article entitled “Billionaire hedge fund managers to Puerto Rico: Close schools to pay us back”. The injection of hedge fund money into Puerto Rico was initially helpful to provide a cushion and time to develop a plan to resolve the bigger debt problem as well as to provide a bigger voice for bondholders in the debt debacle.
Frighteningly Self Centered Hedge Funds Exacerbate Issue
However, as pointed out by Business Insider, we are now seeing the downside of hedge fund involvement in that hedge funds are frighteningly focused on their own best interest at the expense of what is in the best interests of Puerto Rico. After realizing that experts are advising Puerto Ricans that a solution to the debt problem will require hedge funds to accept debt restructuring, several hedge funds – including Fir Tree Partners, Davidson Kempner Capital Management and Aurelius Capital— commissioned a study which now alternatively recommends education cuts, tax increases, and sale of government-owned property, all of which will have long-term negative impacts.
Seems to be No Way Out
This debate over how to fix the problem – by cheating bondholders or cheating Puerto Rico’s future – reveals that there is no way out of Puerto Rico’s debt crisis without leaving a trail of victims caused by the banks, investment companies, and government officials responsible for creating the debt problem in the first place.