Wells Fargo Muni Expert Says Puerto Rico Default Could Prompt Reforms

Puerto Rico’s debt default earlier this month may lead to government reform on the island nation, which still faces a major cash shortfall and more debt payments due in the months ahead. ‘They have a liquidity crisis, they don’t have enough money,’ said Natalie Cohen, Managing Director and Head of Municipal Research at Wells Fargo Securities. ‘The pension plan is out of money. So they are paying people as they get cash in, it’s been from hand to mouth essentially. I don’t think that’s been talked about enough.’ The U.S. territory is seeking to restructure its $72-billion of debt, which is widely held by U.S. municipal bond investors because of the debt’s tax-free status. ‘Many investors have sold out but there’s still a lot of money that’s in retail hands, there’s still money in mutual funds,’ said Cohen, who believes the muni market will weather any continued problems in Puerto Rico. Cohen spoke at Camp Kotok, an annual gathering held in Maine for economists and others in the financial industry.