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The bad news doesn't mean investors are giving up.
Two bands of mostly hedge fund bondholders continue to put pressure on local officials. They still hope to come up with a deal that gives Puerto Rico the money it needs to fund its operating budgets and, at the same time, provide a profit for investors. The negotiations are now more urgent giving looming deadlines: a total of $1.9 billion in various bond payments, including general obligation debt, are due on July 1, according to a market participant.
The largest band of investors owns different types of government-backed bonds.
A year old, the so-called Ad Hoc Group is made up of 35 members and represents $4.5 billion in Puerto Rican debt holdings such as GO bonds, seen as having the best chance of a full payment. Not all the investors in the group are disclosed, but its steering committee—those that actively negotiate with the government—are Fir Tree Partners, Centerbridge Partners, Davidson Kempner Capital Management, Stone Lion Capital Partners, Brigade Capital Management and Monarch Alternative Capital.
There was no comment Monday or Tuesday, but the group wrote in a letter on June 24 that it wanted to meet with government officials and "be part of the solution to the Commonwealth's fiscal challenges." The Government Development Bank for Puerto Rico, which represents the other side, declined to comment.
The other investor alliance is holders of bonds from the Puerto Rico Electric Power Authority, or PREPA. Also called an ad hoc group, it includes hedge funds Knighthead Capital Management, Marathon Asset Management, Goldman Sachs Asset Management, D.E. Shaw Group, BlueMountain Capital Management, Angelo, Gordon & Co. and large mutual fund investors Franklin Templeton and OppenheimerFunds.
Together the group holds about 40 percent of the utility's bonds, or around $3 billion worth. Insurers such as MBIA and Assured Guaranty also have significant exposure to PREPA bonds and their stocks were hammered this week as a result.
Read MorePuerto Rico worries pummel bond insurer stocks
The group negotiated with PREPA officials Monday, according to a person familiar with the situation, but no solution had been reached. PREPA owes about $400 million in a bond payment Wednesday, and a short-term deal could push the negotiating deadline forward in the hopes of a more comprehensive restructuring. Past extensions have been for 30 days.
A spokesman for PREPA bondholders declined to comment, and a representative for PREPA did not respond to a request.