Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: Jim McMannis who wrote (201677)	5/11/2009 2:13:40 PM
From: Elroy Jetson	Read Replies (2) \| Respond to of 306849

The payment of Muni bonds in Chapter 9 bankruptcy depends upon the source of revenue pledged to the bond. General Revenue bonds have a full lien on future tax receipts. The payments may be postponed, but must be repaid. Recovery of other types of Muni bonds depend upon the value of the pledged revenue streams. The following is interesting. Especially for folks at places like Fidelity who have their "core account" stuck into Munis. publicbonds.org Defaulted municipal bonds have a fairly high recovery rate of 68.33 percent based on the number of defaults The borrower may get out of the default situation by making full debt service payments or collateral securing the bonds may be liquidated. Most issuers, particularly providers of essential services such as water and sewer, resume paying debt service. These types of securities are backed by physical assets that are public property. Thus they are never pledged to bondholders. In such cases, bondholders maintain a lien on revenues, which often enables full recovery. Industrial development bonds and multifamily housing bonds, the two sectors with the highest default rates, are often backed by collateral leading to higher than average recovery rates. In 1988, a study by Enhance Reinsurance Co. looked at historical patterns of municipal defaults from the 1800s to the 1980s and concluded that municipal defaults usually follow downswings in business cycles and are also more likely to occur in high growth areas that borrow heavily. Following the 1873 Depression, when more than 24 percent of the outstanding municipal debt was in default, the greatest number of defaults occurred in the South, the fastest-growing region at the time. Factors that caused defaults included fluctuating regional land values, commodity booms and busts, cost overruns and financial mismanagement, unrealistic projections of the future, and private-purpose borrowing. see also uscourts.gov .

To: Jim McMannis who wrote (201677)	5/11/2009 2:28:14 PM
From: Elroy Jetson	Read Replies (2) \| Respond to of 306849

"The study found that the 16 to 23 year history for tax-backed and traditional revenue bonds showed less than a 0.25 percent default rate. Industrial revenue bonds had a cumulative default rate of 14.62 percent, multi-family housing 5.72 percent, and non-hospital related healthcare 17.03 percent. These three sectors accounted for 8 percent of all bonds issued but 56 percent of defaults. Education and general-purpose sector bonds accounted for 46 percent of issuance but only 13 percent of defaults. publicbonds.org During the Great Depression (1929-1937), roughly 16 percent of municipal debt fell into default, compared to a default rate over the past few decades of less than 1 percent. What is interesting, however, is that almost all of the bonds that defaulted during the Great Depression recovered shortly thereafter and investors were made whole. Indeed, 99.5 percent of municipal debt during the Great Depression made all principal and interest payments. During the Great Depression, Arkansas was the only State to file for bankruptcy. findarticles.com In California, general obligation bonds enjoy a lien on state revenue second only to spending on education. And in the extreme, a bankruptcy judge can compel issuers to raise taxes or use other funds to fulfill obligations. moneywatch.bnet.com .