Local governments turn to the special tax consulting experts at NBS for support in setting up and managing all types of Special Financing Districts, including:
·
Special Assessments
·
Maintenance Districts
·
Special Taxes
·
Fees and Charges
February 2008
Material Event Notifications Due To Bond Insurer Rating Changes
Some of you may have heard about the considerable unrest in the bond markets, particularly in the area involving bond insurers. The major rating agencies (Standard & Poors, Moody's Investors Service and Fitch Ratings) are conducting a broad review of all bond insurers after they recently posted record losses. Because many local government municipal bond issues are insured by these insurers, a rating change may trigger the need for a Material Event Notification to be disseminated to bondholders. The recent ratings changes include:
Moody's Investors Service:
- Ambac Financial Group: Still AAA, but being reviewed for downgrade
- MBIA: Still AAA, downgrade avoided
- Financial Guaranty Insurance Corporation: Downgraded to A3
- XL Capital Assurance: Downgraded to A3
Standard and Poors:
- Ambac: Still AAA, downgrade avoided, remains on negative watch
- Financial Guaranty Insurance Corporation: Downgraded to A
- MBIA: Still AAA, downgrade avoided, negative outlook
- XL Capital Assurance: downgraded to A-
Fitch Ratings:
- Ambac Financial Group: Downgraded to AA
- Financial Guaranty Insurance Corporation: Downgraded to AA
- MBIA: Still AAA, downgrade avoided
- XL Capital Assurance: Downgraded to A
An initial email from the SEC's Office of Municipal Securities indicated that no Material Event Notice needed to be filed due to the widespread press coverage regarding this issue. However, on February 7, 2008, SEC staff provided additional guidance on downgrades of insured bonds to the National Association of Bond Lawyers which indicates that specific action may be necessary including the filing of a Material Event Notice involving a change in rating to any of the bond insurers. Any required action would be based on the requirements of the pertinent continuing disclosure agreement.
After discussion with various legal counsels, the most prudent course of action may be to proceed with a Material Event Notification for bond issues insured by bond insurers that have been downgraded. While being mindful of not creating a precedent for future extraordinary events, NBS is actively reviewing all the Continuing Disclosure certificates for the bond issues for which we provide disclosure services. We will be filing notices regarding these specific downgrades to ensure full disclosure to the secondary marketplace. Please contact us by the end of the week if you would like to discuss this further.
NBS provides continuing disclosure services for numerous and various types of municipal bond issues. If we can be of assistance, please don't hesitate to call your regular NBS contact, Tim Seufert, or
Respectfully,
NBS | Local Government Solutions
P 800.676.7516 | F 951.296.1998
dketcham@nbsgov.com | www.nbsgov.com
NBS |
Toll free: 800.676.7516
contactnbs@nbsgov.com
www.nbsgov.com