In an effort to tap institutional investors' demand for information about Puerto Rico's tumbling debt, San Juan-based financial advisory firm REOF Capital LLC started a research division dedicated solely to municipal bonds issued by the commonwealth's key players.

The initiative is a response to the lack of information on and coverage of Puerto Rico debt in the municipal market, according to Antonio Sosa Pascual, managing director of REOF and head of the research division.

"We have seen a great need for information on local credit and we are committed to filling that gap with independent and objective analysis targeted at institutional investors," he told The Bond Buyer.

Efforts by the Gov. Alejandro Garcia Padilla administration to cure budget deficits and boost weak revenues have failed to stem sharp price declines on Puerto Rico paper in the secondary market this year. The Standard & Poor's Municipal Bond Puerto Rico Index fell 18.44% year to date, while the rating agency's P.R. General Obligation Index is down 18.41% year to date.

The government's revenues rose 18% in September from a year earlier and were up 4.4% in the first quarter of this fiscal year, the commonwealth's Treasury Department reported last week. In August, however, the the Economic Activity Index compiled by the Government Development Bank of Puerto Rico. fell 0.4% from July and 5.4% from August 2012.

The weak economy and sluggish sales tax revenue growth prompted Moody's Investors Service earlier this month to downgrade $6.8 billion of Puerto Rico Sales Tax Financing Corporation's senior bonds to A2 from Aa3 and change its outlook to negative from stable.

REOF this week released its first research report, on the Puerto Rico Electric Power Authority, to subscribers who signed up at www.reofcapital.com.

In the future, Pascual said his team of up to five bilingual analysts will provide research via five yearly reports, as well as quarterly bond research on the commonwealth's key issuers, and information on Puerto Rico's market conditions, regulatory landscape, and cultural issues.

Research will focus on municipal bonds backed by public funding commitment or revenue guarantee by the Commonwealth of Puerto Rico and any of its municipalities and public corporations.

In two weeks, REOF plans to publish its own report on the sales tax bonds, followed by additional research through year end, according to Pascual. It will begin publishing its quarterly reports in 2014.

Pascual said his firm's local presence, and keen understanding of the commonwealth's government, its entities, and its language and culture will enable it to provide information faster to the English speaking business community.

"As we move forward with our plans, and as the market trusts us and sponsors our products, we plan to look at corporate bonds and other relevant credits, if necessary," he said.

REOF was founded in 2010 and provides asset management, financial advisory, planning, and consulting, as well as global strategy and research, and financial intermediation services, with a focus on the distressed debt, equity, real estate, and corporate finance markets. The firm has a presence in New York and St. Louis, Mo., through affiliate firms.

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