On the Puerto Rico debt crisis impacting American retirees, talk about money you don't know you owe to someone.
Puerto Rico has entered a debt crisis deeper than it has ever before and for the first time in its history, the U.S. territory has defaulted.
A report by Fox Business warned that the Puerto Rico debt crisis could impact millions of American retirees "who are unaware they are invested in that debt."
How can this happen?
The report explained that a huge number of American retirees have investments in "muni-bond funds" such as the Oppenheimer Rochester Fund Municipals and the Goldman Sachs High Yield Muni.
Morning analyst Beth Foos was cited writing that the Oppenheimer fund and Franklin Templeton Investments are some of the largest holders of the debt of Puerto Rico.
"... Half of U.S. open-ended municipal-bond funds hold some exposure to [the] debt of the commonwealth... funds collectively own more than $11.4 billion of the islands debt or just over 15% of its outstanding issuance," Foos wrote as reported by Fox Business.
But this can be lessened if certain conditions occur.
The report further noted Moody's Investors Service issuing an analysis last month which explained the expected recovery rate investors - some of them, American retirees - might take should the U.S. territory enters a default.
Now that Puerto Rico has just defaulted on its debt crisis, the report said the bonds which are considered highly speculative "have and expected recovery rate between 35 and 65 cents on the dollar."
A bankruptcy protection from a U.S. Congress legislation is the condition from which investors can lessen the harmful impact, the report said.
"Pressure is growing in Washington D.C. for Congress to pass legislation which would grant Puerto Rico chapter 9 bankruptcy protection," Fox Business said. "Without it, Treasury Secretary Jack Lew says a Puerto Rico default, '...has the potential to further harm retiree investment portfolios across the country.'"
Oppenheimer funds reportedly issued an earlier statement saying, "We have been managing investments in Puerto Rico for more than 20 years, and remain steadfast in serving the long-term interests of our shareholders."
On Monday, Puerto Rico's debt crisis came to its most crucial phase after the commonwealth reportedly just paid $628,000 out of its $58 million debt due that day to creditors.
"The debt is mostly owned by ordinary Puerto Ricans through credit unions," CNN Money reported.
