Puerto Rico set up a registry of investors to foster two-way communication with all of its bondholders, making it easier for them to take "collective actions," which may include debt restructuring votes.
The Government Development Bank for Puerto Rico said in setting up the registry it is seeking to keep its bondholders informed about Puerto Rico's fiscal and economic crisis, according to a GDB press statement. Skeptics said the registry may be a tool to persuade investors to accept a smaller return on their bonds, as the government seeks to resolve the island's $70 billion debt crisis.
"My take away is that Puerto Rico is trying to organize and identify retail bondholders to intimidate them on an exchange offer, potentially before PROMESA is signed into law," said Michael Ginestro, director of municipal research at Bel Air Investment Advisors, referring to the U.S. Congress bill that would appoint a control board for Puerto Rico and potentially allow a debt restructuring.
According to the press statement, GDB and the Puerto Rico Fiscal Agency and Financial Advisory Authority have worked for the last six months the with Bondholder Communications Group to put together the registry of 500,000 beneficial owners of bonds of Puerto Rico, its public corporations, and its instrumentalities.
Puerto Rico and its representatives have contacted about 300 brokerages and banks, which have provided contact information for about 60% of the beneficial holders of outstanding bonds. By the end of June the financial institutions will be transmitting letters to all remaining investors holding outstanding bonds and inviting them to register.
"Given the numerous and varied investors in Puerto Rico, the commonwealth believes it is vital to ensure that all investors are able to receive relevant updates and information regarding developments in Puerto Rico," the GDB said in the statement.
"Bondholders recorded in the registry may be better able to actively and timely participate in bond holder votes and other bondholder actions by removing the need to act through third-party intermediaries and facilitating direct communication with the issuers."
Information in the registry is to be kept confidential, the GDB said. Participation in it is not expected to affect bondholders' communications preferences for other investments.
Ginestro said setting up the registry is "a dodgy move by the commonwealth to try and get retail holders to identify themselves, particularly when many of the holders that are receiving the letters don't hold Puerto Rico debt."
Height Securities analyst Daniel Hanson said that Puerto Rico couldn't guarantee that the registry would be private because of the Freedom of Information Act.
