NABL Changes Its Focus

mckinney-kathy.jpg

WASHINGTON — What a difference a year makes. At this time last year, the municipal market was being tossed about in the throes of an historic financial maelstrom that ultimately swallowed up the likes of Lehman Brothers, Bear Stearns & Co., and muni bond insurers’ triple-A ratings.

Twelve months and a stimulus law later, the economy shows signs of stabilizing, a number of muni bond-related tax law restrictions have been eased and the municipal market has a slew of new tools to work with, including the groundbreaking Build America Bonds program and billions of dollars in tax-credit bond authority.

The National Association of Bond Lawyers’ focus has shifted from addressing concerns spawned by the crisis to providing technical advice on the American Recovery and Reinvestment Act programs, most of which will expire on Dec. 31, 2010, as well as on solid-waste rules and other regulatory ­projects.

Kathleen McKinney, a shareholder at Haynsworth Sinkler Boyd PA, in Greenville, S.C., who is slated to become NABL’s new president tonight, said in an interview last week that while the muni market and the economy are not out of the woods yet, things are looking up.

“I think there are credit issues and bank stress in lots of places, and that’s going to be a deterrent to getting a lot of projects ... up and running. But I don’t sense at all the sense of panic that I think we all felt last year,” she said.

Although the ARRA contained various provisions designed to provide a boost to municipal bonds, McKinney said the market is still “a little bit out of balance.”

“We have a lot of new good bond tools to work with, but we have to have willing investors as well,” she said.

As Congress begins to weigh which of the ARRA-created bond provisions and programs merit an extension, McKinney said NABL will not advocate for any particular program, but rather ensure that they work properly.

“I don’t think NABL’s role is to propose different types of bonds, but NABL’s role is if bonds are proposed, that they work well from a legal standpoint,” she said. “I think that’s a fine line, and not going over that line has served NABL well over the years.”

McKinney said that while BABs have received the lion’s share of the spotlight in recent months, another set of ARRA provisions has made it much easier for small issuers to sell debt to banks and also deserves accolades.

One provision modified the 2% de minimis rule for financial institutions to include banks so they are able to deduct 80% of the cost of buying and carrying tax-exempt bonds, to the extent that their tax-exempt holdings do not exceed 2% of their assets. Another provision expanded to $30 million from $10 million the small-issuer limit for bank-deductible bonds. Banks can now deduct 80% of the cost of buying and carrying the tax-exempt bonds sold by issuers whose annual bond issuance is less than $30 million.

The law applied that $30 million limit to borrowers in conduit deals, so that a single issuer can issue bonds for several borrowers and the bonds will all be bank-qualified as long as each borrower does not receive proceeds from more than $30 million of them.

Expanding bank-qualified bonds has been “a really brilliant move to bring some stability to the market, and I think it’s been much utilized,” McKinney said, adding they have “given smaller issuers some relief, maybe a safe spot in the harbor for the time being.”

Issuers have sold roughly $26.3 billion of bank-qualified bonds thus far in 2009, compared to only $12.4 billion during the same period in 2008, according to Thomson Reuters.

NABL also plans, along with American University’s Washington College of Law, to co-sponsor a conference Nov. 9 on the future of infrastructure financing.

The conference, which is to be held at the university in Washington, D.C., will feature a number of academics, public officials, and attorneys who will discuss the future role of public finance as state and local governments attempt to finance ever-growing infrastructure needs.

Speakers will include Pennsylvania Gov. Edward Rendell and House Ways and Means Committee chief tax counsel John Buckley. McKinney said the conference should “give us a chance to pause and see where we are in the financing of infrastructure in this country and to see where it could be going.”

The conference is not the only joint project NABL is pursuing. At the Bond Attorneys’ Workshop, which is being held here today through Friday, NABL will release a 153-page document detailing interest rate swaps for the general practitioner, which it put together with the International Swaps and Derivatives Association.

NABL also plans unveil a new Web site for its members early next year. McKinney said the group is considering replacing some of the teleconferences it hosts throughout the year to discuss ongoing legal matters with “webinars,” saying that they are “a more effective communication tool.”

She added that she is considering asking several prominent attorneys to contribute to a NABL blog. The new Web site also will periodically feature discussion forums for members to discuss specific topics, such as BABs or interest rate swaps.

McKinney has served as bond counsel for a number of hospitals across South Carolina, in addition to universities, continuing care retirement centers, and cultural centers. She graduated cum laude from the University of South Carolina School of Law in 1978, and received her bachelor’s degree from USC in 1975, graduating summa cum laude. She has been a NABL member since the early 1980s.

Andrew Ackerman contributed to this story.

For reprint and licensing requests for this article, click here.
Washington
MORE FROM BOND BUYER