Investor Jeffrey Gundlach of DoubleLine recently increased his holdings of Puerto Rico's debt, but that's no reason for the average investor to think about jumping in, a municipal bond expert said Tuesday.
Investing in Puerto Rico junk debt is "not for the faint of heart," said Alexandra Lebenthal, CEO of the municipal bond franchise Lebenthal & Co. "It is a scary time," she added.
Last week, Standard & Poor's downgraded Puerto Rico's debt to CCC+, putting the embattled U.S. territory's credit on par with Greece's.
"The government may be shut down, so we may be looking at potential default across every issuer in Puerto Rico," Lebenthal said in an interview with CNBC's "Power Lunch." "Restructurings are more than likely coming, and some defaults are definitely coming, too."
As for investors who are already in the Puerto Rico debt market, she said there is a bright side. "So many of these bonds are insured, and that is the silver lining," Lebenthal said. "Those insured bonds, even in default, the insurance company will pay interest on time and will pay principal on time."
Gundlach increased his holdings of junk-rated Puerto Rico general-obligation bonds to $45 million as of March 31. That's up from $20 million in February, according to a Bloomberg report.