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Hedge fund Baupost owns $911 million in Puerto Rico debt
October 4, 2017 / 5:54 PM / 2 months ago

Hedge fund Baupost owns $911 million in Puerto Rico debt

BOSTON, Oct 4 (Reuters) - Baupost Group, one of the world’s biggest hedge funds, owns nearly $1 billion in Puerto Rican sales tax debt, a spokeswoman confirmed on Wednesday as the island’s debt tumbled in the wake of suggestions from President Donald Trump that it may be erased.

Baupost, which invests $30 billion for endowments and other wealthy investors, owns roughly $911 million in Puerto Rico’s so-called COFINA bonds, which are backed by a chunk of the island’s sales-tax receipts, spokeswoman Diana DeSocio said.

Investors’ prospects of recouping their money dimmed after Trump on Tuesday toured the hurricane-ravaged island and said the debt would have to be “wiped out.” White House Budget Director Mick Mulvaney later backed away from that statement.

Most hedge fund investors’ identities were revealed in July as part of the island’s bankruptcy proceedings, but Baupost’s name came to light only this week. The Boston-based fund, run by Seth Klarman, made its bets through a Delaware-based corporation called Decagon Holdings, thereby shielding its name.

“Baupost Group is a holder of COFINA bonds through the Decagon entities. Baupost regularly makes investments through subsidiary holding entities,” DeSocio said in a statement.

Baupost’s identity was first reported by online publication The Intercept.

Two months ago, the group of hedge funds that hold about $3 billion of CONFINA bonds detailed who owns how much with Decagon Holdings being listed as the largest owner.

GoldenTree Asset Management, Tilden Park Capital Management, and Canyon Partners were the next biggest owners.

Investments in Puerto Rico have long been risky. In May the U.S. territory filed a form of bankruptcy under the federal 2016 rescue law known as PROMESA as it struggled to repay more than $70 billion of debt. Its problems were compounded when two hurricanes raked the island in the past weeks, with Hurricane Maria knocking out power to the island’s 3.4 million residents.

Puerto Rican bonds on Wednesday tumbled after Trump visited the island and saw the devastation firsthand.

“We’re going to have to wipe that out,” he told Fox News in reference to the debt owned to Wall Street as well as Main Street investors. “You can say goodbye to that. I don’t know if it’s Goldman Sachs, but whoever it is, you can wave goodbye to that.”

Baupost’s DeSocio declined to comment on Trump’s remarks. (Reporting by Svea Herbst-Bayliss; Editing by Jonathan Oatis)

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