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Ratings Stability Despite the Coronavirus Crisis Vis-à-vis Puerto Rico, Moody’s continued to note in its report: “Puerto Rico, although a US Territory, reinforces one pattern we have seen elsewhere, which is that a bankruptcy or bankruptcy-like proceeding may not only affect recoveries differently across separate debt classes but may also not impair all debt classes to begin with.” In other words, these proceedings may affect debt classes differently with differing levels of severity. Catholic dioceses, the PG&E utility and the Boy Scouts of America. Regarding the one Moody’s-rated default, triggered in early May by the Archdiocese of New Orleans’ bankruptcy, the report noted that the filing, apparently preemptive and defensive, illustrated a new trend, with other examples of such being actions by nearly 20% of all U.S. Once again, an important “observation” noted in this year’s report was that over the 50-year study period: “ny one default may only reflect the idiosyncrasies of that individual credit, and not be representative of a general sector trend.” While there were municipal ratings downgrades during the year, global corporates’ ratings’ downgrades were more frequent. (Indeed, during the period of significant market stress during 2020 resulting from Covid, there were only two municipal defaults and neither were virus related.) Second, muni bonds continue to be highly rated compared to corporates.
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First, while they may have become more common over the last 10 years, municipal defaults and bankruptcies still remain rare overall. In addition to emphasizing their resilience in the face of the COVID-19 (“Covid”) pandemic, the report continues to affirm two hallmark benefits offered by muni bonds. The Battle of Cleveland: Public Interest Challenges Corporate Power (1979).This article was originally published on .īy Michael Cohick, Senior ETF Project Manager, VanEck.Īt the beginning of July, Moody’s Investors Service released its annual municipal bond market snapshot, US municipal bond defaults and recoveries, 1970-2020, with updates through 2020. Cleveland was the first major city since the Depression to default on its loan obligations.
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1979, and the following year he put together an acceptable 3-year $36.2 million refinancing plan to pay off the $14 million in notes. VOINOVICH) replaced Kucinich as mayor in Nov. Voinovich (see MAYORAL ADMINSTRATION OF GEORGE V. 1979 when voters approved an increase in the city income tax from 1% to 1-1/2%. The situation remained unresolved until 27 Feb. The mayor's plan to guarantee payment of the notes was rejected by the Cleveland Trust Bank (See CLEVELAND TRUST CO.), who regarded it as a stop-gap solution to the city's long-term financial problems, and Cleveland was forced into default. 1978, Cleveland was unable to pay off $15.5 million in short-term notes, of which $14 million were held by 6 local banks (the remaining $1.5 million was held by the city). KUCINICH), elected mayor in 1977, continued the practice, and when $50 million in bonds were unaccounted for in July 1978, the bond-rating agencies downgraded the city's credit rating. Dennis Kucinich (see MAYORAL ADMINISTRATION OF DENNIS J. Using an approved procedure, $17.8 million was borrowed from Water Dept. The city's fiscal problems had became acute during the administration of Mayor Ralph Perk, 1972-77, when general expenditures increased about 45% and revenues were unable to cover the shortfall. The default meant that investors in the national bond markets would not risk buying the municipal bonds Cleveland needed to finance improvements, and that Cleveland must submit to financial supervision by the State of Ohio. 1980) occurred when Cleveland was unable to repay $14 million in loans owed to 6 local banks, and was subsequently unable to market its bonds for almost 2 years.