When Hurricane Maria landed in Puerto Rico, it caused devastation to the island’s infrastructure, crops, homes and power grid that will take many years to repair. But the damages to Puerto Rico include losses in municipal bonds and the mutual funds that hold them, which were close to default even before the storm.
While the island still struggles to recover, it wasn’t the first catastrophic event to hit the island territory. In 2014, Puerto Rico was already headed for a severe financial crisis, with bond sales from Morgan Stanley brokers as the catalysts.
Morgan Stanley and Barclay’s were responsible for underwriting the island’s $3.5 billion sale in March 2014. This sale was the last major issue by Puerto Rico before declaring bankruptcy on May 3, 2017, for a debt restructuring amounting to $3.8 trillion. The island’s debt stood at $70 million, and it needed to restructure pensions of $49 million. This municipal bankruptcy was even bigger than the city of Detroit’s 2013 restructuring of $18 billion.