The New York Times
NFMA ANNOUNCES ANNUAL AWARDS AT 36TH ANNUAL CONFERENCE
The Industry Contribution Award is given to an individual or organization that provides positive influence on the market to increase transparency or promote market effectiveness. The 2019 award recipient, Matt Fabian, has been a diligent researcher and steady commentator on distressed issuers, creating a bully pulpit to ensure that the voice of the market is heard not just on high profile issues like Puerto Rico and Detroit, but many that fall under the radar like Platte County, Missouri. From the Bond Buyer to CBS News and the New York Times, Mr. Fabian is often sought for comments.
Puerto Rico Seeks to Have $9 Billion in Debt Ruled Unconstitutional
Matt Fabian, a partner at Municipal Market Analytics, a research firm that is not involved in the litigation, said he thought the lawsuits would make it harder for Puerto Rico to negotiate with its creditors. In some cases, he said, the institutions being sued were the same ones that Puerto Rico would seek assistance from in the future, once the current restructuring is finished and the island needs to issue new debt.
Citibank, one defendant, is working as an adviser to the oversight board on the debt restructuring. “How do you sue?” Mr. Fabian asked. “It’s like going in for a root canal and suing the dentist while you’re still in the chair.”
The Bond Buyer
N.J. joins the parade as states test mileage-based fees
Lisa Washburn, managing director at Municipal Market Analytics, noted that future prospects for gas taxes as the main driver for transportation funding are dim because of increased electric and hybrid vehicle use coupled with many politicians reluctant to raise rates. The federal tax rate has not been raised since 1993 and while President Trump endorsed a 25-centfuel hike last year for his proposed $1.5 trillion infrastructure bill, congressional republicans quickly balked at the idea.
“There are a lot or negative views of the gas tax and that makes it hard to raise frequently to address infrastructure needs,” Washburn said. “It’s like a third rail tax.”
Washburn said the mileage-use fee is an idea that has potential to work in northeast states such as New Jersey if drivers can see linkages between their vehicle usage and the importance of improving the roadways on which they travel. Some possible complications would need to be addressed, according to Washburn, such as how to determine mileage-fee program credits for gas taxes and making sure that those with more fuel-efficient or electric vehicles don’t get adversely affected from the change. She added that assurances about privacy concerns with data collected would also be important, especially with trying to attract older participants.
“Looking for an alternative to the gas tax for funding infrastructure is very important,” Washburn said. “We have to find innovative ways to fund infrastructure and this certainly could be a very good way to shore up and make more sustainable revenues for infrastructure.”
Where climate analysis meets municipal bond analysis
A climate analytics business is partnering with a municipal bond research firm in an effort to get a better handle on the risk climate change creates for municipal debt.
“Climate change is a burning fuse and no one knows how fast it is burning and where the explosives are,” said Thomas Doe, president of Municipal Market Analytics. “Market participants are beginning to assess how to incorporate that into their decision making.”
Troubled Municipal Borrowers Can’t Hide From Matt Fabian
The $3.8 trillion U.S. municipal bond market is home to more than 50,000 individual issuers. That’s almost 10 times the number of corporations that sell debt. Yet muni issuers, which range from a tiny California school district to an economic powerhouse such as New York City, aren’t beholden to the same reporting requirements that companies must follow. Matt Fabian, a partner at Concord, Mass.-based research firm Municipal Market Analytics Inc., scours their often haphazard filings for signs of troubled borrowers. His database tracks events such as issuers dipping into reserves or skipping payments, informing his weekly reports to clients.
This labor-intensive undertaking has yielded surprising insights into where defaults cluster and may offer investors a road map. Fabian, based in Westport, Conn., joined MMA in 2006 after working at a ratings company, bond insurer, and investment bank. Here, he talks about his process, his bleak outlook for the U.S., and the implications for investors.
Preston Hollow v. Nuveen breaks open high-yield muni world
Preston Hollow lays out its claims in eye-popping detail. It accuses Nuveen of unlawful and strong-arm tactics in its effort to thwart its business opportunities by wielding its power and cash to run interference with broker-dealers. The firm takes on not just Nuveen but its prominent head of municipals, John Miller.
“This comes at a time when there is intense competition for product and so this is reflective of the competition that exists in the industry,” Thomas Doe, president of Municipal Market Analytics, said of conflicts laid out in the litigation. “You are fighting for any product and any opportunity you can find.”
Does the case drive a change in market behavior or is it one-off dispute between two firms? “It’s too early to tell,” Doe said.
Could New York City Go Bankrupt? The Muni Market Doesn’t Think So.
It wasn’t quite “Headless Body in Topless Bar.” A New York Post column published online last weekend blared: “New York City is edging toward financial disaster, experts warn.” But that is news to the municipal bond market.
“New York City could go bankrupt, absolutely,” the Post quoted an economist as saying—yet that didn’t even happen during the fiscal crisis of the 1970s. And as for how the muni market is viewing the Big Apple’s credit quality, it sees it more as gilt-edged than junk. (Barron’s and the New York Post are both...
MTA bond buyers are like New York commuters waiting for a train
The plan would raise money from electronic tolling in streets south of 61st Street, a step studies have shown could raise about $1 billion a year that could be leveraged into $15 billion in municipal bond sales. Money from a new Internet sales tax in the city and a tax on the yet-to-be-legalized marijuana would also help infuse cash into the system.
The additional money would come after annual debt service bills have consumed a growing share of the agency’s revenues since 2015, according to Moody’s Investors Service figures.
It "gives some relief to the credit," said Matt Fabian, a partner at Municipal Market Analytics. "At the same time, it’s not going to change the direction. This is probably going to be a slow and redundant process to allocate new revenue from the state and the city to the MTA."
MTA leadership has said it needs $40 billion over the next decade to get the system up to 21st century standards. And the MTA faces declining ridership, threats from ride-sharing applications, and inefficiencies with how it spends money on capital projects, said Evercore’s Cure, who rides the 6 train to work each morning.
The Bond Buyer
Puerto Rico Tests the Trump Strategy to Wipe Out Debt
Matt Fabian, a partner with Municipal Market Analytics, put it more bluntly to Kaske: “The courts generally allow the debtor to act as they please, so even a logical inconsistency this glaring probably won’t get in the way of plan implementation.” He agrees that there might be a stronger argument that Cofinas violated the debt limit.
The rest of the muni market would probably appreciate it if Puerto Rico’s restructuring resolved some lingering questions— specifically, how G.O. bonds should fare in cases of extreme distress. Connecticut is a ways away from such a scenario, but it nevertheless raised red flags last year when it issued a new class of securitized bonds that effectively pushed its outstanding full faith and credit debt into a subordinate position. Chicago has issued new, higher-rated securities through the Sales Tax Securitization Corp., which is set to sell more taxable obligations this week.
How PG&E's California woes may impact high-yield munis
The financial woes of investor-owned utility PG&E could indirectly cheapen municipal high-yield debt, according to a municipal research firm.
PG&E could face billions in liabilities related to its alleged role in sparking some of the massive forest fires that have plagued the state over the last two years.
…possibly widening spreads,” said Matt Fabian, a partner with Municipal MarketAnalytics. “Muni yield prices are indirectly ..
Municipal Market Insights For 2019: Tactical Moves Will Guide Investors through Market Uncertainty
PRINCETON, N.J., Jan. 9, 2019 /PRNewswire/ -- MacKay Municipal Managers™, the municipal bond team of fixed income and equity investment management firm MacKay Shields LLC, today published its top five insights for the municipal bond market in 2019.
Municipal financing with embedded real estate risk underperforms.
We anticipate the market will penalize sectors and credit structures exposed to real estate market values. Financings tied to selected commercial real estate, raw land housing development and continuing care retirement centers, in our opinion, will come under pressure as peaking market values recede. These same sectors also historically experience higher default rates (source: Municipal Market Analytics Inc.). By contrast, we believe that financings dependent on assessed valuations of existing developed real estate (e.g. general obligation debt) will find favor in the market as debt coverage remains strong.
The Bond Buyer
Q4 2018 Credit Commentary And A Look Ahead To 2019
The number of issuers seeking multiple ratings has declined since the financial crisis. Until the crisis, issuers often had debt ratings from two or more rating agencies. According to data collected by Municipal Market Advisors (MMA), issuers that were triple-rated (by Moody's, S&P and Fitch - data on Kroll is not able to be queried yet) declined steadily from 55% in 2007 to 34% through 2017. Viewed another way, by the end of Q3 2018 there were 1.91 ratings assigned per dollar par issued, down from 2.29 ratings assigned per dollar par issued in 2007. The par value of bonds that are rated by just one rating agency has grown to 25% from 21% in 2007. The trend is likely a function of municipalities' looking to reduce costs. Additionally, in the recent low-interest-rate environment with narrow credit spreads, fewer ratings on bonds have been sufficient to gain market acceptance, especially as investors chase yield. If credit spreads were to widen, a differentiation in yield might become visible among bonds with just one rating compared to those with two or more ratings, and this development could reverse the trend.
Connecticut's new governor faces tough choices, unpleasant options
One day after his election as Connecticut's governor, Ned Lamont acknowledged the steep challenges that await after his Jan. 9 inauguration.
"I need everybody rowing in the same direction," Lamont told reporters.
…improving the fiscal health of the pension systems," Municipal Market Analytics said in a commentary. "Contributing assets that are …
BondLink Partners with Municipal Market Analytics to Deliver Innovative Market Insights for Its Issuer Clients
MMA's research and analysis will be available in client portals, offering detailed weekly overview of market conditions.
BondLink, the sole provider of investor relations (IR) software solutions in the $4 trillion municipal bond market, today announced a partnership with Concord, Mass.-based Municipal Market Analytics (MMA) to deliver exclusive bond market research and insights to BondLink issuer clients.
The weekly Market Conditions Index (MCI) report from Municipal Market Analytics (MMA) is available exclusively to BondLink's issuer clients.
The new MMA Market Conditions Index (MCI) gives issuers a concise read of current conditions in the municipal bond market, providing them valuable perspective during the period they are accessing capital by issuing bonds. The elements comprising the MCI are MMA-curated market factors that have historically influenced bond yield movement and investors' perception of value.
"BondLink was founded to help public sector CFO's and finance directors improve how they issue bonds," said Colin MacNaught, BondLink co-founder and CEO. "We empower them with technology and tools they've never had access to before. Through our new partnership with MMA, they can access valuable insight into key market indicators. I know first-hand the quality of MMA's research, and we are excited to partner with them on this premier resource for the betterment of our issuer clients and the market."
MMA is a leading strategic research firm providing expert municipal sector analysis and commentary. Led by industry veteran and thought leader Tom Doe, MMA is a trusted voice across the municipal market. This partnership will further amplify MMA's voice through BondLink's fast-growing platform.
U.S. Cities Look to Shed Ratings While Taking On More Debt
U.S. cities and counties are using fewer ratings to assess the risks of the bonds they sell, providing investors with just one opinion on an increasing amount of new debt.
Roughly 25% of all municipal debt issued this year carried a single grade from one of the major ratings firms, according to Municipal Market Analytics data as of Oct. 3. If that percentage holds through the end of the year, it would be the highest since the research firm began tracking the data in 2006. For the riskiest debt, the single-grade ratio was 37%.
Municipal officials and advisers said fewer ratings help cities trim expenses and save time when they borrow money for everything from school construction to sewer repairs. Bond issuers typically pay rating firms to issue a report. But some analysts said opting for one grade from a single firm puts smaller investors at a disadvantage as less information circulates through the $3.8 trillion municipal market.
"Mom-and-pop investors and small asset managers without their own research staff are at a disadvantage," said Matt Fabian, a partner with Municipal Market Analytics.
3 Ways Tax Reform Has Impacted the Muni Market
Overall, Municipal Market Analytics' Matt Fabian is predicting that total bond issuance this year will be around $320 billion -- down about $100 billion from 2017. While he and other analysts thought that governments would find a way to replace the savings opportunity with other types of bonds, that hasn't happened. "The dominant response," he says, "has simply been to not [refinance] the bond."
This ‘Insanity’ May Be the Muni-Bond Market's Next Big Thing
It’s a "considerable risk," a "bad idea," or, as one expert put it, "insanity." And it may be the next big pitch Wall Street bond underwriters make to states and cities desperate to cover ballooning health-care costs.
Dearborn, Michigan, the 94,000-resident city that’s home to Ford Motor Co., tested the waters this week by selling $35 million of bonds to chip away at the $161 million it needs to cover the medical bills of workers who will retire in the years ahead. The city is betting that by investing the proceeds it will earn more than it will pay in interest, with the profits helping to cover health-care expenses.
Dearborn paid yields of 4.6 percent or less on the bonds it issued this week, well below the 7 percent or more that pension funds typically expect to earn each year on their investments. The injection of cash will bolster a health-care plan that was already about 29 percent funded as of fiscal 2016, bond documents say. That’s higher than the statewide average for localities that offer such benefits, James O’Connor, director of finance and treasurer for the city, said in an email.
"Unlike most municipalities in the state, the city of Dearborn has been prefunding its OPEB Trust Fund for some time," he said. The bond sale is part of an effort to reduce the liability that includes closing the plan to new hires, he said.
Municipal Market Analytics said in a report this month that it’s possible that more cities could follow Dearborn, in part because Wall Street underwriters will be looking for ways to drum up business given the lackluster pace of bond sales.
But the company said that -- like pension bonds -- they’re "a bad idea, maybe worse."
The Week in Public Finance: Kansas City Suburb Headed Toward Default
Platte County, Mo., is being punished for its resistance to bailing out a retail center that opened during the recession and has struggled to make bond payments.
County officials argue that taxpayers shouldn't have to pick up the tab. But the downgrades, says Municipal Market Analytics’ Matt Fabian, are already costing taxpayers. That’s because it will now be more expensive for the county to borrow money the next time it issues general obligation bonds in the municipal market. And Platte County is also extremely unlikely to find future buyers for any revenue debt that depends on an annual appropriation from the government.
“It hardly seems worth it when just restructuring the debt could have been an easy fix,” says Fabian. “From an economic development perspective, you’re now a non-investment grade county walking away from a bond. It’s hard to talk companies into moving there if that’s your debt profile.”
Muni-Bond Defaults Show Risk Clustered in Midwest, Southeast
To find the distress in the municipal-bond market, look to the Southeast and Midwest.
That’s the conclusion from Municipal Market Analytics, a research firm that examined state and local government bond defaults by using Bloomberg data and disclosure filings from issuers.
Such lapses are extremely rare, accounting for a minuscule share of the nearly $4 trillion market. But counties in the Midwest and Southeast are home to about 37 percent and 22 percent, respectively, of outstanding bonds that are in default for failing to make adequate payments or for violating elements of the debt contracts. Excluding bankrupt Puerto Rico, about $19 billion of the $31.8 billion in defaulted and impaired bonds are in those two regions.
That share is notable considering the areas together have issued only about one-third of all outstanding bonds.
Years of economic decline contribute to the distress in the Midwest, said Matt Fabian, a partner at MMA. The Southeast, meanwhile, has been home to speculative projects that have less of a cushion when they go downhill, he said.
Wall Street billionaire says he's eyeing move to Puerto Rico to avoid taxes
"It's the only place a U.S. citizen can go and literally avoid, legally, all their taxes," Paulson said at the Beryl Elite investment conference in Manhattan on Monday, according to Bloomberg News.
In 2012, hoping to rebrand itself as a "global investment destination" like its counterpart in the Cayman Islands, the island passed Act 22, legally making it the only place in the country where passive income from financial instruments like capital gains, interest and dividends go federally untaxed. Under the act, would-be Puerto Rico residents, possibly like Paulson, are only subject to taxes levied by the island, like sales tax and license fees, said Matt Fabian, a partner at Massachusetts-based Municipal Market Analytics. Even property tax has a 90 percent exception under the law, Fabian said in a telephone interview Tuesday with CBS News.
The act, officially dubbed the Act to Promote the Relocation of Investors to Puerto Rico, is not available to current island residents.
"You're sort of above it all," Fabian said. "It's a very lucrative tax package so as to attract 'richies' like Paulson."