Four Lessons For Investors from Puerto Rico And Toys R Us Defaults

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Rupert Hargreaves
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The defaults by Toys R Us and Puerto Rico were remarkably similar, even though corporate debt and sovereign debt are quite different. This article highlights three lessons that can be taken from both and one lesson that highlights a key difference between corporate and sovereign debt. [klarman] Deteriorating Slowly but Defaulting Suddenly Both Toys R Us and Puerto Rico followed Ernest Hemingway’s description of going bankrupt “gradually, then suddenly.” For years both had limped along in financial distress, but investors continued to buy their debt. There’s a false comfort in the non-default of stressed borrowers; investors can start to assume…

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Sign up now and get our in-depth FREE e-books on famous investors like Klarman, Dalio, Schloss, Munger Rupert is a committed value investor and regularly writes and invests following the principles set out by Benjamin Graham. He is the editor and co-owner of Hidden Value Stocks, a quarterly investment newsletter aimed at institutional investors. Rupert owns shares in Berkshire Hathaway. Rupert holds qualifications from the Chartered Institute For Securities & Investment and the CFA Society of the UK. Rupert covers everything value investing for ValueWalk