GOP Tax Plan Puts Billions in Muni Market Savings at Risk

Among the most concerning to local leaders, it would ban governments from issuing what are called advanced refunding bonds. These bonds allow governments to refinance debt earlier than they would have otherwise, ultimately letting governments take advantage of lower interest rates years sooner. The bill also bans issuing tax-exempt bonds for sports stadiums, a proposal that had already been floated this year on Capitol Hill.

It’s unclear exactly how much of the municipal market would be affected by the change, but experts say it would be a significant portion. According to Municipal Market Analytics’ Matt Fabian, up to 20 percent of the $3.7 trillion municipal market is made up of private activity bonds. Making those bonds taxable would dampen future issuance.

When it comes to the advanced refunding bonds, Fabian says between 10 and 20 percent of all annual bond refinancings fall under that category. That means up to one-tenth of the total $386 billion in average annual bond issuance could be attributed to that type of bond.

http://www.governing.com/topics/finance/gov-gop-republican-congress-trump-tax-reform-muni-market.html

While market ponders loss of PABs, one takes center stage

Market participants reacted negatively to the proposal in the tax reform bill to eliminate advanced refundings and private activity bonds, saying it would crimp volume and the savings issuers can get when rates fall. Against that backdrop, strong demand met the Virginia Small Business Financing Authority's $737 million PAB offering in the primary.

In the biggest deal of the week, Bank of America Merrill Lynch priced the Virginia Small Business Financing Authority’s $737 million of senior lien private activity revenue bonds for the Transform 66 P-3 Project. The bonds yield 3.71% with a 5% coupon in 2047, 3.79% with a 5% coupon in 2049, 3.90% with a 5% coupon in 2052 and 4.00% with a

https://www.bondbuyer.com/news/municipals-finish-stronger-as-analysts-ponder-possible-end-to-advanced-refundings

The fallout: With the budget dam broken, what's next for Pa's state government and politics?

Here's what Matt Fabian, a bond market analyst with Municipal Market Analytics, said about the proposed 2017-18 package Thursday:

"Deficit borrowing and gimmicks like fund transfers are bad by almost any measure.

"Were the Commonwealth's ratings already in a much stronger place, its chances of getting by without a (further) downgrade would be better. As it is, the ratings are fairly weak and this revenue budget raises the risk of downgrade above 50%."

Clearly the Wall Street types just don't get the Pennsylvania Legislature.

For the controlling forces here, it's not so much how you solve the budget, as it is can you solve it without raising taxes.

Even when that forces them into weirdly inconsistent policies like voting for new caps on government borrowing for capital projects even as they agreed to borrow to cover this year's deficit.

So by their measure, this budget is a win.

http://www.pennlive.com/politics/index.ssf/2017/10/the_fall-out_with_the_budget_d.html

Market expects SEC to narrow its disclosure proposal

PHOENIX - Muni market participants expect the Securities and Exchange Commission to narrow its proposal to add new material event notice disclosures for bank loans and other alternatives to tax-exempt bonds after receiving many critical comments that it was too broad and would be overly burdensome.

The SEC proposed the amendments to its Rule SEC 15c2-12 in March and took public comments on them until mid-May.

https://www.bondbuyer.com/news/sec-disclosure-proposal-likely-to-be-narrowed

Dan Haar: Hartford troubles could have wide impact

Early this week, the Business Council of Fairfield County will host Hartford Mayor Luke Bronin in Stamford to talk about a possible bankruptcy of the capital city.

Neither the council nor the mayor’s office announced the confab and there are no public events connected with Bronin’s trek down to the much healthier city that passed Hartford in population four years ago. But the gathering will amplify the idea that the pain from an ailing central city in a small state throbs from border to border.

“We’re meeting with him because you can’t have a state in which its capital city goes bankrupt,” said Joe McGee, vice president for policy at the council and a former state economic development commissioner. “There’s got to be an urban strategy and Fairfield County has as much a stake in this as anyone.”

That’s true for lots of reasons, from the simple fact that residents and institutions in this part of the state could well hold hundreds of millions of dollars in shaky Hartford debt, to the more layered idea that state finances — read: stable taxes — depend on functioning cities across Connecticut.

Climbing the ladder of complexity, we have a bond market that may or may not punish municipalities not named Hartford in the event of a capital city bankruptcy — there’s a lot of debate about that among analysts.

http://www.newstimes.com/business/article/Dan-Haar-Hartford-troubles-could-have-wide-impact-12294360.php

Puerto Rico’s Dilemma After Hurricane María: Rebuild or Pay the Debt?

SAN JUAN, PUERTO RICO — Hearing room #3 of the U.S. District Court in San Juan is full—the words heard among the collective murmur are in English. They are pronounced mainly by white men in dark suits who become silent all at once, when a Black woman enters: federal bankruptcy judge Laura Taylor Swain.

It is August 9, forty minutes before the session begins, the third one under Title III of the federal PROMESA Act (Puerto Rico Oversight, Management and Economic Stability Act of 2016), where the government of Puerto Rico’s bankruptcy case is being discussed. Here, you can feel the tension for the legal battle to collect $74.7 billion in debt, the biggest in history for a U.S. jurisdiction, expected to create repercussions on the entire population and people not on the island. This debt is added to the pension system obligations, which reach $49 billion.

The crowd of more than 100 lawyers in this hearing room do not accurately reflect the representation of the majority of the people the case impacts. Many of the people holding government debt do have voices speaking for them. For example, the so-called individual bondholders: rookie investors who trusted their savings to mutual funds such as Franklin Advisers and Oppenheimer Funds, or brokerage houses such as Popular Securities, UBS or Santander Asset Management.

On the contrary, the legal battle for public funds under Title III is carried out by specialized investors: mutual funds companies, hedge funds experts in litigating to collect debt, and bond insurance companies (monolines) responsible for paying their clients’ total debt. Assurers are jointly claiming $21 billion, according to the certified Fiscal Plan.

The litigation by these companies’ lawyers —as large amounts of money are being placed to win or lose on Puerto Rico’s debt— sometimes becomes violent.

http://www.latinorebels.com/2017/10/17/puerto-ricos-dilemma-after-hurricane-maria-rebuild-or-pay-the-debt/

Emanuel to end scoop-and-toss borrowing one year early

Fran Spielman

Chicago will end the costly practice of scoop-and-toss borrowing in 2018 — one year earlier than promised — under a mayoral budget that pleased a taxpayers watchdog group, but not quite as much as Mayor Rahm Emanuel would hope.

Scoop-and-toss is the dubious practice of refinancing existing debt in a way that saddles future generations of taxpayers with borrowing costs instead of paying off the principal.

Emanuel had promised to end the practice in 2019. Instead, it will end next year.

Civic Federation President Laurence Msall said he would be more impressed if Emanuel ended scoop-and-toss at the Chicago Public Schools and stopped several other financial practices at City Hall that are equally troubling.

“A structural deficit still looms over city finances. The pension funds are going to require increasingly large contributions, even with the funding schedule approved by the Legislature. Within five years, very significant increases. And the city does continue to borrow for operational costs, such as [legal] judgments,” Msall said Monday.

“The Chicago Public Schools have also been using scoop-and-toss an extensive amount,” he said. “Borrowing and pushing out your principal when you’re not making payments on your debt has a very expensive impact on the cost of the government. . . . We’ll be impressed when . . . everyone stops doing it, rather than talking about plans to stop doing it.”

Ald. Brian Hopkins (2nd) recalled the debate that surrounded Emanuel’s original plan to phase out scoop-and-toss borrowing over four years.

“If we’re gonna do it, take the Band-Aid off, deal with the short-term pain and get it over with, rather than drag it out,” Hopkins said. “We’re slowly trying to claw back from the depths of junk, but we’re locked into some of these long-term deals at high rates and we’ve got to get out of it.”

https://chicago.suntimes.com/news/emanuel-to-end-scoop-and-toss-borrowing-one-year-early/

Christie betting that lottery can bail out troubled pensions

Geoff Mulvihill, The Associated Press

New Jersey Gov. Chris Christie is betting that the lottery is the ticket to shoring up one of the state's most vexing money problems: ever-growing obligations to the pensions for public employees.

The idea of linking the lottery to pensions has been around for years, but legislation backed by the Republican governor was introduced this week to make the lottery the property of the pension system for 30 years.

Analysts and advocates say the deal — an arrangement that would be unique to New Jersey — probably won't hurt, but there's not a consensus on how much it might help.

"Where it does provide tremendous relief is optically," said Lisa Washburn, managing director at Municipal Market Analytics, a firm that analyzes government bonds. "The numbers look better on a whole lot of levels. Whether or not they're truly better is questionable."

Since Christie took office in 2010, the state has contributed more than $6 billion to retirement funds to which past governors have often skimped on payments — or skipped them entirely. Still, the gap between the money expected to be in the funds and that which is owed to retirees has only grown. By any measure, it's among the biggest unfunded pension liabilities in the country.

Trying to solve the problem makes it harder for officials to expand other government services or make major tax cuts.

http://www.montrealgazette.com/business/christie+betting+that+lottery+bail+troubled+pensions/15131798/story.html

What is Trump's plan for Puerto Rico?

By Natalie Sherman Business reporter, New York

• President Donald Trump has been bellyaching about Puerto Rico's parlous finances, as the US territory struggles to regain its footing after Hurricane Maria.

His focus on the Caribbean island's more than $70bn (£53bn) debt mountain has renewed questions about how it is to be solved.

So what's the plan for Puerto Rico?

The Puerto Rican government can't borrow money on the private market to rebuild due to the debt problems.

Hurricane Maria, which brought economic activity to a halt, has also created an immediate fiscal crisis: the government is running out of money.

Congress has just approved more than $36bn in disaster funding, including a $4.9bn loan to keep Puerto Rico operating.

But the remainder will be divided up among all areas affected in recent storms, including Texas and Florida.

Lawmakers in Congress have said they will consider additional funds for more long-term building efforts, but it's not clear how much that might be.

Moody's Analytics estimates property damage from Hurricane Maria could reach as high as $55bn, with total losses hitting $95bn.

Governor Ricardo Rossello has said the island of 3.4 million people, many of whom live in poverty, faces an "exodus" without a strong aid package.

Already Puerto Rico's population has plunged by more than 10% since 2006 amid a years-long recession precipitated in part by the end to tax benefits for manufacturers on the island.

http://www.bbc.com/news/business-41601864

6 reasоns whу Puertо Ricо slid intо financial crisis

By Alex MIRKOV

On October 9, 2017

Puerto Rico’s attempts to slash its massive debts have taken on greater urgencу after Hurricane Maria devastated the island, leading to President Trump’s comments Tuesdaу that the U.S. territorу’s liabilities should be eliminated.

But the island’s economic crisis has been long in the making.

Although Maria escalated Puerto Rico’s financial chaos into a humanitarian crisis, the island had alreadу been reeling from уears of financial missteps and economic struggles.

“There’s no waу for Puerto Rico to be able to rebuild, let alone recover, unless the debt is canceled,” said Eric LeCompte, executive director of Jubilee USA Network, a religious coalition that’s fighting for Puerto Rico debt relief. “Fortunatelу for Puerto Rico that process is in place.”

The process looks a lot like bankruptcу. Puerto Rico, which filed for the equivalent of federal bankruptcу protection in Maу, owes $74 billion in debts and more than $53 billion in unfunded pensions.

A federal oversight board is aiming to negotiate debt cuts with creditors in a case overseen bу U.S. District Court Judge Laura Taуlor Swain of the Southern District of New York.

Although Trump’s proposal to slash all of Puerto Rico’s liabilities maу not be financiallу or politicallу realistic, it’s increasinglу likelу that financiers and individuals who lent moneу to Puerto Rico will suffer huge losses as political momentum mounts for action.

“Theу owe a lot of moneу to уour friends on Wall Street, and we’re going to have to wipe that out,” Trump told Fox News. “You can saу goodbуe to that.”

After Hurricane Maria obliterated the island’s infrastructure, including power and communications, damage estimates range from $40 billion to $80 billion, according to catastrophe risk modelling software companу AIR Worldwide.

http://usanewsguide.com/2017/10/09/6-reas%D0%BEns-wh%D1%83-puert%D0%BE-ric%D0%BE-slid-int%D0%BE-financial-crisis/

Trump Wants Puerto Rico Debt Handled in Court, Not Wiped Out           

(Bloomberg) -- President Donald Trump wants Puerto Rico’s $74 billion debt to be addressed through the bankruptcy process established under a law passed last year, White House press secretary Sarah Huckabee Sanders said, not eliminated, as he suggested in a television interview.

“There’s a process for how to deal with Puerto Rico’s debt. It will have to go through that process to have a lasting recovery and growth. This is a process that was put in place and set up under Obama,” Sanders told reporters at the White House on Thursday. “The president wants it to go through that process, and that’s the stage we’re at on that.”

Her remarks were another attempt by administration officials to clarify Trump’s intentions regarding the territory’s debt after he rattled the $3.8 trillion municipal bond market on Tuesday with an interview suggesting he wanted the debt eliminated.

“We have to look at their whole debt structure,” Trump said in a Fox News interview. “They owe a lot of money to your friends on Wall Street. We’re going to have to wipe that out. That’s going to have to be -- you know, you can say goodbye to that. I don’t know if it’s Goldman Sachs but whoever it is, you can wave goodbye to that.”

White House officials quickly sought to walk back the statement. Trump’s budget director, Mick Mulvaney, said Wednesday morning -- as Puerto Rico’s bond prices sunk to a record low -- not to take Trump literally.

“I think what you heard the president say is that Puerto Rico is going to have to figure out a way to solve its debt problem,” Mulvaney said.

The price of Puerto Rico bonds rallied after Mulvaney’s comments and were little-changed on Thursday, steadying after the rout triggered by Trump’s remarks. Its general-obligation bonds due in 2035, one of the most actively traded securities, changed hands for about 38 cents on the dollar, roughly where the price closed on Wednesday.

https://app.meltwater.com/dashboard/viewer/555a4a3602a844d6c18b711e/widget_1431980598039_1?editMode=false

'Wipe out' Puerto Rico debt? Hedge funds, residents at risk of losses

Eliminating Puerto Rico’s massive debt would speed the island’s recovery following Hurricane Maria’s devastation, but it could also lead to crushing losses for investors.

The list of losers would range from wealthy hedge funds that made risky bets on the island's debt to Puerto Ricans who are already struggling financially.

Puerto Ricans own about 40% of the island's debt while hedge funds own about 20%, according to Municipal Market Analytics, a Concord, Mass.-based research firm.

Others who could suffer losses include mainland American retirees, mutual fund investors and individuals who snapped up Puerto Rican bonds to take advantage of their tax-free status.

The hodgepodge nature of the U.S. territory's borrowing illustrates the complexity of the ongoing attempt to disentangle the island from its $74 billion debt, which makes rebuilding a nearly impossible task absent a major intervention.

Moody’s pegged Puerto Rico’s Maria losses at up to $95 billion, including the destruction of the island’s electrical grid and massive damages to communications infrastructure, homes, businesses, hospitals and roads.

Momentum is building for a significant cut in Puerto Rico’s liabilities after President Trump suggested Tuesday that they should be axed. Afterward, the island’s bonds tumbled to an all-time low, illustrating the gravity of his remark for investors.

The benefits of Trump's proposal: financial breathing room for Puerto Rico to rebuild.

The downside: losses for companies and people who bet their finances on the island.

"Wiping out Puerto Rico debt is not necessarily the ideal outcome for Puerto Ricans," said Josh Esterov, an analyst who tracks Puerto Rico for independent research firm Credit Sights. "You’re wiping out a lot of their savings. Even if it’s good for the economic profile of the commonwealth going forward, I don’t think that’s the desired outcome."

No one disputes that Puerto Rico needs debt relief to pay for essential services and get back on its feet after Maria.

The question is: Which pot of money will provide that help?

It could come in the form of an injection of money from Washington, though it's more likely aid would be funneled directly into emergency rebuilding.

Trump and lawmakers could apply pressure on Puerto Rico's federal oversight board to push for steep debt cuts negotiated in court, which would mean losses for creditors. But a federal judge would have to sign off on those cuts, and the process could take years.

The last resort is the island's own meager finances.

http://www.thecalifornian.com/story/money/2017/10/05/puerto-rico-bankruptcy-hurricane-maria-investors/735824001/

With Little Cash, How Will Puerto Rico and the Virgin Islands Rebuild?

They both had bleak financial outlooks even before the hurricanes hit.

by Liz Farmer 

In downtown San Juan, Puerto Rico, some buildings have generator-driven lights, as there is no public electricity working anywhere on the island. (TNS/Carolyn Cole)

For financially beleaguered Puerto Rico and the U.S. Virgin Islands, the physical devastation wrought by recent hurricanes has thrown into question the territories' economic futures. How is Puerto Rico's bankruptcy affected, for example, or the Virgin Islands' own debt troubles?

It's still too early to tell. But the one thing that is certain is that because of the territories' already tight finances, the pace of the recovery will be slow.

Since both U.S. territories had such a low financial capacity to deal with a major disaster in the first place, it will take them much longer to rebuild than Houston and the Florida Keys, which were also hit by major hurricanes this year. "It's going to easily be a decade," says Deserai Crow, a disaster recovery expert at the University of Colorado Denver.

That's in part due to the level of devastation brought by the hurricanes. Puerto Rico's entire electric grid was severely damaged following Hurricane Maria in September, leaving the whole island without power and, in most cases, a working water and sewer system. Federal officials say it could take months before power is restored there.

Maria also ravaged St. Croix, the largest of the U.S. Virgin Islands, while St. John and St. Thomas were pummeled by Hurricane Irma just 14 days earlier. All three islands are facing widespread power outages as well. Although, running water is expected to return this weekend.

http://www.governing.com/topics/finance/gov-puerto-rico-virgin-islands-hurricane-debt-finances.html

What GOP Tax Outline Means for Advisors and Clients

The broad outline excludes details but still there are items that advisors should start thinking about

The latest Republican tax reform plan is a mixed bag for advisors’ clients.

Those living in high-tax states such as California, New York and New Jersey could face a net tax hike rather than tax cut if the deduction of state and local income taxes from the federal income tax bill is eliminated, as suggested in what the White House and Treasury Department are calling the “Unified Framework for Fixing Our Broken Tax Code.”

The framework doesn’t specify which deductions will be erased but rather indicates which ones won’t be, although that could change: "In order to simplify the tax code, the framework eliminates most itemized deductions, but retains tax incentives for home mortgage interest and charitable contributions," the framework says.

Given the historical antipathy of many Republicans to the state and local tax deduction, analysts expect it is back on the table.

Traders are expecting companies to invest more under a reformed tax regime. But they may be getting ahead of themselves.

New Jersey taxpayers could be especially affected by this change because it, like other high-tax states, would have difficulty raising taxes, and the Garden State is currently operating with a budget that is “deeply out of whack,” says Matt Fabian, partner of Municipal Market Analytics. (Moody’s has downgraded New Jersey’s debt 11 times since Chris Christie became governor in 2010).

At the same time, many wealthy taxpayers in New Jersey and every other state would no longer be subject to the Alternative Minimum Tax, which has precluded them from deducting state and local taxes, says Matt Sommer, vice president of the Retirement Strategy Group at Janus Henderson Investors, adding that any impact is still uncertain.

The lack of specific information on the plan — it is just a framework — makes it difficult for advisors to recommend any specific strategies yet.

http://www.thinkadvisor.com/2017/09/28/what-gop-tax-outline-means-for-advisors-and-client?&slreturn=1508516890

Puerto Rico Bondholders Face Bigger Loss as Hurricane Toll Grows

Michelle Kaske

Even before Hurricane Maria devastated Puerto Rico, leaving billions of dollars in damage and crippling the electricity system, the island’s government said it could repay less than a quarter of what’s owed to bondholders over the next decade. Now, even that may be optimistic.

Prices of the U.S. territory’s bonds have plunged to record lows, signaling investors expect that there will be even less money available to repay its $74 billion of debt. On Friday, Puerto Rico’s federal overseers, who are in charge of pulling it from a financial collapse, plan to reassess the island’s fiscal plan -- including how much debt it can pay -- in light of the storm, according to a person familiar with the matter.

Bondholders “will have to experience some amount of pain or financial devaluation of their stakes,” said David Tawil, president and co-founder of Maglan Capital LP, which no longer owns Puerto Rico bonds. Tawil estimates some prices will need to drop by as much as 20 percent, given the hit that Maria will deal to tax collections. “I don’t think anybody has any appreciation for how devastating the effects of the storm will be."

Puerto Rico has little financial ability to navigate the disaster on its own, leaving the recovery heavily dependent on how much aid comes from Washington. It began defaulting on its debts two years ago, seeking to avoid draconian budget cuts officials said would deal another blow to an already shrinking economy. With nearly half of its 3.4 million residents already living in poverty, the government filed for bankruptcy protection in May.

Municipal bankruptcies are rare, so it was already difficult for analysts to estimate how much bondholders will recoup, especially given that Puerto Rico’s broke pension fund owes some $49 billion to workers and retirees.

https://finance.yahoo.com/news/puerto-rico-bondholders-face-bigger-215002975.html

Storm Claims Could Top $100 Billion; for Puerto Rico, 'Maria Changes Everything'

Insured losses from Harvey, which flooded Houston and stopped its oil and plastics plants, are estimated at $17 billion, down a bit from earlier projections.

by Joseph N. DiStefano, Philly.com

(TNS) — Far from the wreckage of the Caribbean and the Gulf, the misery of 3.4 million people in powerless Puerto Rico and more in the storm-blasted islands to its east, the damage-counters are estimating that claims from this summer’s hurricanes could top $100 billion — many times the usual season losses, a figure that “focuses the mind,” stock analyst Larry Greenberg writes in a report to clients of Philadelphia-based Janney Montgomery Scott.

Insured losses from Harvey, which flooded Houston and stopped its oil and plastics plants, are estimated at $17 billion, down a bit from earlier projections, as Allstate and Progressive report fewer flooded-car claims than feared. It also helps insurers, but not Texans, that many of the Houston residents whose homes were ruined by water that wasn’t supposed to reach so high weren’t insured.

Irma, which socked Florida and the Caribbean, is expected to cost $30 billion, Greenberg notes. Maria, which smashed Puerto Rico and the neighboring U.S., French, Dutch, British and independent islands a second time, could go as high as $85 billion. Big insurers such as AIG and Chubb will take big hits. Reinsurers should spread much of the loss among international insurers and investors, but the bottom line is that everyone’s property-insurance premiums, which have been “soft” the last few years, are likely to rise.

http://www.govtech.com/em/disaster/Storm-Claims-Could-Top-100-Billion-for-Puerto-Rico-Maria-Changes-Everything.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+emergencymgmt%2FHvhi+%28Emergency+Management%29

Humanitarian crisis takes precedence over Puerto Rico fiscal recovery, debt restructuring

WASHINGTON – Hurricane Maria's and Irma's devastation of Puerto Rico and the resulting humanitarian crisis will wreak havoc with the Commonwealth's fiscal recovery and attempts to restructure its massive debt load, experts said this week.

Given the breadth of the destruction in Puerto Rico, bondholders should expect their interests to be put onto “a deep back burner,’’ said Matt Fabian of Municipal Market Analytics.

“I think that speaking too pointedly about bondholder concerns at this point is probably in poor taste,’’ he added.

Travelers stand in line at Luis Munoz Marin International Airport in San Juan, Puerto Rico, on Sept. 25, 2017. Hurricane Maria hit the Caribbean island last week, knocking out electricity throughout the island. The territory is facing weeks, if not months, without service as utility workers repair power plants and lines that were already falling apart. Alex Wroblewski/Bloomberg

Judge Laura Taylor Swain, who sits on the U.S. District Court for the Southern district of New York in Manhattan, issued an order on Tuesday indefinitely postponing the Title III bankruptcy case's omnibus hearing, which had been scheduled for Oct. 4. She asked stakeholders to submit comments by Sept. 28 on when the hearing should be rescheduled and said that all future hearings will be held in New York.

Swain's order followed a request on Monday by lawyers for Puerto Rico’s Fiscal Agency and Financial Advisory Authority that the omnibus hearing be shifted to Oct. 18 from Oct. 4.

“Despite Puerto Rico’s current circumstances, FAFAA desires to move forward with these Title III cases with as little disruption as possible,” the lawyers said. “FAFAA believes that any significant delay in advancing these Title III cases would place a cloud of uncertainty over these proceedings and potentially undermine the progress achieved to date.”

Meanwhile, several members of the Puerto Rico House and Senate, according to the El Vocero news website, called for the oversight board to stop enforcing the fiscal plan's austerity measures for at least this year and possibly over the next five years.

https://www.bondbuyer.com/news/puerto-rico-humanitarian-crisis-overshadows-everything-else

Assured Guaranty : As Hartford Mulls Bankruptcy, Bond Insurer Offers to Help Postpone Payments -- Update

By Heather Gillers 

Hartford's biggest bond insurer said it had offered to help the city postpone payments on as much as $300 million in outstanding debt, in a move designed to help prevent a bankruptcy filing for Connecticut's capital.

The insurer, Assured Guaranty Ltd., made the announcement before a Monday conference call between Hartford and its bondholders.

During the call Hartford Mayor Luke Bronin said postponement of the city's debt would be inadequate without other fixes such as more revenue from the state, according to a statement released by the city after the call.

"I appreciate Assured's willingness to have constructive discussions," the mayor said, according to the statement, but "this administration is not interested in pushing off this challenge for another mayor or another generation to fix."

Under Assured Guaranty's proposal, debt payments due in the next 15 years would instead be spread out over the next 30 years without bankruptcy or default. The city would issue new longer-dated bonds and use the proceeds to make the near-term debt payments.

Assured Guaranty and another insurer, Build America Mutual, would insure the new bonds, said an Assured Guaranty spokesman.

Assured Guaranty backs 57% of Hartford's roughly $550 million in outstanding general obligation debt and would be on the hook for any shortfall in payments should the city enter bankruptcy. Build America Mutual backs $103 million in Hartford debt. About $163 million in Hartford bonds are held by U.S. mutual funds.

Hartford is in the middle of a fiscal emergency because of a weak tax base and a budget deficit of nearly $50 million. It also has one of the lowest credit ratings in the nation. Making matters worse, Connecticut lawmakers have been unable to reach agreement on a state budget more than two months into the fiscal year, leaving Hartford short of state funding.

http://www.4-traders.com/ASSURED-GUARANTY-LTD-11565/news/Assured-Guaranty-As-Hartford-Mulls-Bankruptcy-Bond-Insurer-Offers-to-Help-Postpone-Payments-Up-25173814/

Is Connecticut to Blame for Hartford's Looming Bankruptcy?

by Liz Farmer | September 20, 2017

The state's way of governing may be causing some of its capital city's financial problems.

As Connecticut lawmakers debate the best way to close a $3.5 billion shortfall over the next two years, its capital city is having a fiscal crisis of its own, and it highlights how the state's parochial way of governing hurts big cities.

Connecticut has long been touted for its wealthy suburbs. The state has one of the highest median incomes in the country. But the departure in recent years of businesses such as Aetna and General Electric to New York City and Boston, respectively, have sent a signal that times are changing: Connecticut doesn't have the vibrant city life that many companies are looking for these days.

The state's small-town mindset was recently on full display when Gov. Dannel Malloy appealed to Amazon to locate its second headquarters there. In his pitch, the governor didn't cite Hartford or New Haven -- two of the state's biggest cities -- as a selling point, but rather the state's proximity to Boston and New York City.

That snub was acutely felt by Hartford, which is now on the precipice of bankruptcy. "I think one of the reasons Connecticut has been slower to recover from the Great Recession is that we long ago missed the boat and failed to recognize the role that cities play in economic development today," says Hartford Mayor Luke Bronin. "If we want to position Connecticut to be competitive, we need to position our cities to be competitive."

http://www.governing.com/topics/finance/gov-connecticut-hartford-bankruptcy.html

So. What's a credit downgrade to your state government mean, anyway?

By Charles Thompson

cthompson@pennlive.com

In some ways, the great Pennsylvania budget battle of 2017-18 has been the year of the credit downgrade.

Almost from the beginning of Gov. Tom Wolf's budget unveiling last winter, we've been treated to regular predictions of a credit-downgrade, as a state, if we did this thing, or did not do that thing.

And that, we've been warned, would be the worst of all things.

Now it's happened. On Wednesday, S&P Global Ratings formally lowered its rating for Pennsylvania's future general obligation bonds to A+ (It's great for school; not so much for impressing Wall Street.)

The sun still shone.

So what should we really make of this news? PennLive is here to help:

1. To your most pressing question, this does not take us out of the running for Amazon's HQ2.

It has been a real worry around the Capitol this week.

"This is not a good story for Pennsylvania. It's not a good story when we're trying to recruit businesses and industries to Pennsylvania as a good place to operate," said Senate Majority Leader Jake Corman, R-Centre County.

But according to Princeton, N.J.-based site selection expert John Boyd, the downgrade is not likely a show-stopper.

How do we know this? Chicago.

It has won more than its share of corporate recruitment battles even as the city (homicide rates) and state of Illinois (budget dysfunction that makes Pennsylvania look like the fiscal equivalent of a Swiss watch) were eviscerated in the media.

http://www.pennlive.com/politics/index.ssf/2017/09/so_whats_a_credit_downgrade_to.html