Hospitals, higher ed and housing
Howard Cure, director of municipal research at Evercore Wealth Management, is asked in this Bloomberg video if Jefferson County, AL and Central Falls, RI are leading indicators of massive defaults in the municipal bond markets. He thinks not. After all, he says, these problems have been known for years. For Cure, the real focus should be on what he calls the “three H’s:” hospitals, higher education and housing. These entities are often heavily reliant on federal funds, which may be reduced in deficit negotiations. Muniland agrees and reminds everyone that there are vast differences in the fiscal and financial strengths of issuers.
Bondholders will win in trashed Rhode Island town
The Wall Street Journal is running a story on the Central Falls bankruptcy entitled “Bondholders Win in Rhode Island.” The story lauds how bondholders are ensured of receiving 100 cents on the dollar, although the bonds are currently valued at 62 cents on the dollar. Meanwhile retirees can expect their pensions to be cut by 34%.
Reading through the comments to a Providence Journal story on the threat to the state’s credit rating from the bankruptcy proceedings, I came across the following comment detailing the abject poverty of Central Falls, the community which is supposed to pay bondholders off at par. It’s shameful that a busted community would impose haircuts on all their creditors except bondholders.
Here is my rant:
I was born, grew up and spent the first 28 years of my life in CF [Central Falls]. I eventually moved out of state (to VT). Coincidentally, on this past Monday, I was back in RI and needed to drive through CF on my way from Cumberland to Pawtucket. It was the first time that I had driven through CF in quite a few years. I can’t tell you how shocked I was, almost to the point of being heartbroken.
I’ve traveled the world and it was truly like driving through a third world country. The mounds of trash lining the roads and the fronts of peoples properties was disgusting. Trash was also strewn around peoples yards. Potholes, boarded up houses, broken street lights, graffiti, the list goes on and on. My only thought was ‘Stick a fork in this city, it’s done’. I couldn’t wait to get out of that god-forsaken place, which I immediately did.
@MillerTabak: widely followed municipal bond index has returned 6.11% so far this year – munis not exactly default central like many predicted
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