NEW YORK (Reuters) - Steven Tananbaum, chief investment officer and founding partner of roughly $24 billion asset manager GoldenTree Asset Management, said Thursday that he was bullish on Puerto Rico general obligation (GO) and COFINA bonds, as well as Brazil and Argentina’s debt.
Tananbaum said that a bet on Puerto Rico’s GO bonds in particular was his favorite trade heading into next year. He said he liked the policies of new Governor Ricky Rossello, who was elected Nov. 8, and that the U.S. commonwealth could flourish with the right amount of debt.
“We feel that there is a path to hopefully get a restructuring done within a year, and we think the restructuring would be at levels and values that are materially higher than where some of these securities trade,” Tananbaum told the Reuters Global Investment Outlook Summit in New York, in reference to the benefits that Puerto Rico’s debt restructuring poses to the U.S. territory’s bonds.
Puerto Rico faces a lingering financial crisis, with $70 billion in total debt, a decade of economic contraction, a shrinking population, and a 45 percent poverty rate. It is now under the oversight of a federally appointed board that will conduct restructuring talks with Puerto Rico’s creditors.
Tananbaum said he was also bullish on directory businesses, citing Yellow Pages Limited (Y.TO) as an example. He said valuations of the companies would rise since growth trends were better than any newspaper trend in North America and that the companies had a lot of free cash flow.
Tananbaum also said he was bullish on bonds of mortgage servicers, including Walter Investment Management Corporation WAC.N, on the view that they would benefit from rising rates. He also said his firm, which specializes in credit, was bullish on shorter-duration bonds of Brazil and Argentina since both of the countries’ administrations were pro-growth.
“We feel like those countries are in the hope stage,” he said. “They’re doing the right things, and represent good relative value.”
Tananbaum said he was bearish on bonds of hospital companies since they were vulnerable to changes in Obamacare. Republican President-elect Donald Trump vowed on the campaign trail to repeal President Barack Obama’s 2010 national healthcare reform law.
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Reporting by Sam Forgione; Editing by Bernard Orr, Jennifer Ablan and Chizu Nomiyama