Muni holders get a lifeline

JUN 15, 2013
By  MFXFeeder
Detroit's financial mismanagement has devolved into a political morass, but the latest move by Michigan Gov. Rick Snyder is a ray of hope for its municipal bond investors. The governor's plan to install a temporary emergency manager to try to fix the mess is good news to those with real skin in the game. “For bondholders, this stabilizes the situation and also averts the possibility of an immediate bankruptcy filing,” said Eric Friedland, head of municipal credit research at Schroder Investment Management North America Inc. For muni market wonks, the appointment of an emergency manager is the last and best option for a city with $15 billion worth of long-term pension liabilities and a swelling $327 million deficit. “It's not great for a city government to have its power taken away,” Mr. Friedland said. “But they have had chances to fix it.” Each state has its own laws about using emergency managers. In Michigan, the ability of the state to appoint emergency managers for struggling local governments dates to 1988. A half-dozen cities operate under some form of oversight from Lansing, the state capital. Although there are plenty of opponents, it is worth noting that many holders of muni debt are praising the state for stepping in where other states simply have let matters escalate to bankruptcy and default. Just ask the citizens of places such as San Bernardino, Calif., or Jefferson Country, Ala., where the states didn't step in, if they think some sort of intervention could have helped. “Certainly no other state has been challenged in the way Michigan has, and remarkably, Michigan has had no municipal bankruptcies, which is a credit to the way the state is handling matters,” said Richard Ciccarone, chief research officer at McDonnell Investment Management LLC. [email protected] Twitter: @jeff_benjamin

Latest News

Maryland bars advisor over charging excessive fees to clients
Maryland bars advisor over charging excessive fees to clients

Blue Anchor Capital Management and Pickett also purchased “highly aggressive and volatile” securities, according to the order.

Wave of SEC appointments signals regulatory shift with implications for financial advisors
Wave of SEC appointments signals regulatory shift with implications for financial advisors

Reshuffle provides strong indication of where the regulator's priorities now lie.

US insurers want to take a larger slice of the retirement market through the RIA channel
US insurers want to take a larger slice of the retirement market through the RIA channel

Goldman Sachs Asset Management report reveals sharpened focus on annuities.

Why DA Davidson's wealth vice chairman still follows his dad's investment advice
Why DA Davidson's wealth vice chairman still follows his dad's investment advice

Ahead of Father's Day, InvestmentNews speaks with Andrew Crowell.

401(k) participants seek advice, but few turn to financial advisors
401(k) participants seek advice, but few turn to financial advisors

Cerulli research finds nearly two-thirds of active retirement plan participants are unadvised, opening a potential engagement opportunity.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today’s choppy market waters, says Myles Lambert, Brighthouse Financial.

SPONSORED Beyond the dashboard: Making wealth tech human

How intelliflo aims to solve advisors' top tech headaches—without sacrificing the personal touch clients crave