(Adds background on Recovery Act)
NEW YORK, July 25 (Reuters) - A group of hedge funds supporting debt restructuring efforts in Puerto Rico has gained 14 new members, bringing the group’s total assets under management to $240 billion, a spokesman for the group said on Friday.
The group of 18 has $4.2 billion tied up in Puerto Rico debt. The majority of its holdings are in general obligation bonds, government development bank debt, sales-tax revenue bonds, and public building authority debt, the spokesman said.
The spokesman declined to reveal the names of the new members of the group, which calls itself the ‘Ad Hoc Group’.
Four hedge funds with $60 billion under management created the group last week. Its founding members were Brigade Capital Management, Fir Tree Partners, Monarch Alternative Capital, and Perry Capital. They said they could provide a source of funding for Puerto Rico as it aims to put its fiscal house in order.
Puerto Rico’s creditors are sorting themselves into interest groups after the U.S. Commonwealth - which is struggling with a sluggish economy and a debt load of more than $70 billion - passed a law in late June allowing it to restructure part of its public corporation debt.
Big holders of corporation debt have sued to have the law annulled, while holders of government and other classes of debt believe restructuring peripheral entities, such as the electric power authority PREPA, will help shore up their own holdings.
About $20 billion of debt is subject to the restructuring law, known as the Recovery Act, leaving a debt pile of more than $50 billion, which the law would not touch.
However, critics of the law, including ratings agencies that cut their view on Puerto Rico’s debt further into junk status after it was passed, say the legislation brings into question Puerto Rico’s willingness to make good on any of its debt. (Reporting by Edward Krudy; Editing by Peter Galloway)