There is another Greece situation that was actually closer to the U.S. and may have more directly exposure to the U.S. than Greece. The inevitable bankruptcy of Puerto Rico has finally arrived, sort of. After years of wrangling with creditors, the island protectorate will now likely be facing even more years in court as the largest U.S. government entity is in federal bankruptcy court. Insurers of issuer debt have felt a pinch around insuring Puerto Rico’s municipal bonds. Roughly $12 billion of the island’s $73 billion was insured.

24/7 Wall St. took a look at some of the key muni-bond insurers and others with exposure to see which have taken it on the chin. Surprisingly, these bond insurers are just now down as much as many investors might have expected versus if this event had taken place closer to the great recession. More than $10 billion of which is insured, and the commonwealth is now insolvent by most classical (or logical) metrics. The commonwealth has a poverty rate of about 45%, and its pension system and healthcare systems are nearly insolvent.

One issue which may have helped shield the stocks of the muni-bond insurers with risks in Puerto Rico is that partial defaults by Puerto Rico had already started. A partial list of defaults was provided by Franklin Templeton: Puerto Rico General Obligation Bonds, Puerto Rico Public Building Authority Bonds, Puerto Rico Infrastructure Finance Authority, Public Finance Corporation, and Government Development Bank.

Ambac Financial Group, Inc. (NASDAQ: AMBC) has already challenged Puerto Rico’s debt restructuring and it could face several billion dollars of exposure to the Puerto Rican debt it insures. Their drop on Wednesday was 1.9% to $18.43 on Wednesday, but on just 368,000 shares. Its market cap is $833 million and its 52-week range is $14.76 to $27.25. Ambac’s share price last Friday was $19.43, and Wednesday’s drop was the fifth straight day its stock has dropped. Ambac was a $22.50 stock at the end of 2016. Ambac has challenged the restructuring plan according to Dow Jones and Reuters reports.

Assured Guaranty Ltd. (NYSE: AGO) was down just 0.2% at $37.93 on Wednesday. It is the larger of the three muni-bond insurers with a $4.7 billion market cap, and this was a $38.13 stock last Friday. Its shares have not slid daily like MBIA and Ambac shares — and it was a $37.77 stock as of the end of 2016.

MBIA Inc. (NYSE: MBI) was down 0.9% at $7.99 on Wednesday, down from $8.40 last Friday and marking a six-day losing streak. MBIA was a $10.70 stock at the end of 2016 and its market cap is currently almost $1.1 billion.

Two more insurers with exposure to Puerto Rico are National Public Finance Guarantee and Financial Guaranty Insurance Company. Other holders with current and future claims against Puerto Rico are mutual funds, hedge funds, and distressed investors.

One key ETF with exposure to junk bonds in Puerto Rico is the SPDR Nuveen S&P High Yield Muni Bond ETF (NYSEMKT: HYMB). Its exposure to Puerto Rico is estimates to be more than 8%, but it has so far not been hammered over that exposure. This ETF closed up 2-cents at $56.80 on Wednesday, versus a 52-week range of $54.00 to $59.93.

Franklin Templeton Investments, part of Franklin Resources, Inc. (NYSE: BEN), was up 0.2% at $42.73 on Wednesday. The fund manager’s more detailed announcement from May 1 included the following:

For over 30 years, Franklin Templeton has been an investor in Puerto Rico bonds… In 2012, we began reducing exposure to Puerto Rico-related bonds due to the weakening financial conditions on the island. We retained those investments that we believed were in the strongest position and felt had significant legal and constitutional protections by their indentures and the Puerto Rico constitution itself.

The ongoing debt and restructuring saga in Puerto Rico may be years away before the outcome is known or completed. Stay tuned.

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