A unit of UBS AG has offered to repurchase shares of closed-end municipal bond funds invested in Puerto Rico muni securities from certain clients. The story was first reported Nov. 25 by Investment News.
During this past summer, the market for Puerto Rico’s $70 billion muni debt went south after Detroit filed for bankruptcy in July. UBS Financial Services of Puerto Rico is a huge player in the muni debt market in Puerto Rico, packaging and selling $10 billion in proprietary closed-end bond funds through the end of 2012.
Meanwhile, the net asset value (NAV) of the 14 UBS closed-end funds have plummeted.
Investors purchased the proprietary bond funds for $10 a share. According to the Investment News story, the NAV for the $375 million Puerto Rico Fixed Income Fund was $3.63 at the end of October, down 85% since the end of June. The NAV for the $449 million Puerto Rico Fixed Income Fund III was $4.08 at the end of last month, a decrease in value of 68% since June.
So far, investors who’ve been contacted by brokers have not been told a set price – or given a guarantee – for their shares.