NEW YORK, Nov 5 (Reuters) - MatlinPatterson hopes to raise $300 million from investors to bet on Puerto Rico’s economic recovery, according to marketing materials seen by Reuters.
The New York-based private investment firm, which specializes in debt, is already among a group of hedge funds and other investors seeking to make money on Puerto Rico, a U.S. commonwealth in the Caribbean facing severe financial problems.
The mandate for the fund, according to the materials, is to “capitalize on the dislocation of securities prices across Puerto Rico’s $72 billion of outstanding debt issuance.”
The Puerto Rico Recovery Fund, led by MatlinPatterson partner Michael Lipsky, will target annual returns of 20 percent to 25 percent by investing in a variety of bonds from the island, according to the materials. The document states that the firm’s Puerto Rico investments produced a 6.15 percent return last year from June to December and is up another 2.19 percent in 2015 through August.
Hedge funds have piled into Puerto Rico’s debt, looking for opportunities as the island approached financial crisis. Puerto Rico defaulted on part of its obligations in August and has been trying to bring creditors to the table to agree to reductions on their debt. Funds could make large profits or losses depending on the price they bought into the debt and the ultimate level at which deals are struck.
A group of bondholders on Thursday finalized a deal with Puerto Rico’s indebted utility PREPA to take a principal reduction of 15 percent. However, negotiations with a different set of creditors to reach a deal on Puerto Rico’s Government Development Bank debt did not result in a deal.
Candlewood Investment Group also established a dedicated Puerto Rico debt fund last year. [ID idUSL2N0RX19020141002]
An external spokesman for MatlinPatterson did not immediately respond to a request for comment. The news was first reported by hedge fund news provider HFMWeek earlier Thursday.
Reporting by Lawrence Delevingne, additional reporting by Megan Davies in New York; Editing by Andrew Hay