Puerto Rico’s $72 Billion Mess Reunites Lehman Foes

For the hedge funds and money managers that pick over the credit market’s scrap heaps, Puerto Rico has become the new ground zero.

Some of the same distressed-debt buyers that started battling seven years ago over the remains of Lehman Brothers Holdings Inc. are now girding for a rematch over the U.S. territory’s $72 billion of debt. That’s likely to pit investors such as Fir Tree Partners -- among firms that snapped up $4.5 billion of bonds the island has to pay before other obligations -- against creditors including Angelo Gordon & Co. and Knighthead Capital Management. Those firms are part of a group that owns a majority of the more than $8 billion of borrowings by the U.S. territory’s power agency.