Two sources told Bloomberg that hedge funds looking to join the planned bond offering of the Commonwealth of Puerto Rico are requesting that the latter secure sufficient capital to be able to meet its needs for two years. In addition, they are also asking Puerto Rico to relinquish its sovereign immunity so that bondholders will be able to file cases in New York instead of the commonwealth's courts. The people spoke on the condition of anonymity as the talks with the underwriters are confidential, the report said.

The requests showcased how the perception of Puerto Rico's risk has increased as the Caribbean island's economy declined 14% since 2006. In December, its jobless rate was pegged at 15.4%, a figure that is more than two times the national average, the report said.

Puerto Rico has plans of offering $2 billion worth of general obligation debt by the middle of next month to bring its budgets in balance. However, lawmakers are working on legislation that will allow the Caribbean island to borrow up to $3.5 billion, the report said.

On February 4, Standard & Poor's reduced Puerto Rico's rating to BB+, a grade that is a step below investment grade because of its limited ability to gain entry to capital markets. Downgrades were also given by Moody's Investors Service and Fitch Ratings, the report said.

The sources said that the talks are still informal at this stage since the offering documents still have to be released. The Government Development Bank, the regulator that manages the commonwealth's bond sales, said that Barclays Plc, Morgan Stanley and RBC Capital Markets are the underwriters for the sale, the report said.

As of June 30, the commonwealth and its agencies have a debt load of $70 billion. Citing Bloomberg data, the report said the general obligation sale would be the commonwealth's first borrowing since August when debt was sold by the Puerto Rico Electric Power Authority.