Puerto Rico was already facing a catastrophe before Hurricane Maria imperiled its citizens’ lives, leaving a vast majority without electricity and clean water more than two months after the hurricane hit on September 20, 2017. At that time, the island commonwealth was already reeling from a $74 billion bankruptcy.
Mismanagement, corruption and Puerto Rico’s near-colonial status hurt its economy. But hedge funds that own about 20 percent of the debt also bear some responsibility for the current mess. For years, they played hardball. They convinced the Commonwealth — which already had a 45 percent poverty rate — to impose extreme austerity measures. They engaged in massive lobbying efforts to stop Puerto Rico from getting Congressional approval to file for bankruptcy, which ultimately failed. And they continue to bicker among themselves about who is entitled to what. All of these efforts have worsened both the island’s finances and the bondholders’ own potential for recovery.
“It made Puerto Rico less resilient to a shock like this,” says Hans Humes, the CEO of $1.3 billion Greylock Capital Management.
For the full story, please read “How hedge funds hurt Puerto Rico.”