LOS ANGELES — Common Bond Capital Partners LLC, a five-month-old San Diego-based firm targeting distressed municipal bonds, has hired a public finance expert who specializes in structured financing to round out its team.
Emad Mirgoli specializes in government, utility and infrastructure development financings and has more than 15 years of experience with public bond underwriters, including Stone & Youngberg, UBS Securities and RBC Capital Markets.
Mirgoli started work as a director at Common Bond May 7.
Though the firm is scouting opportunities nationally, it has zeroed in on California and Florida, the states that had the highest issuances of land-secured bonds at around $20 billion and $7 billion, respectively, said co-founder William Huck.
The veteran public finance banker teamed with real estate lawyer and developer Todd Anson in January to form Common Bond, with the objective of providing capital, financial know-how and real-estate development expertise to help resolve defaults in the complex land-secured municipal bond sector.
They plan to work to resuscitate distressed residential real-estate projects that included a bond component in their development financing.
Mirgoli has vast experience doing financial modeling aided by computers on highly structured deals, an area the firm needed more expertise in, according to Huck.
“I worked right next to him at Stone & Youngberg for 10 years, so I was familiar with his expertise,” he said.
Mirgoli spent more than eight years as a member of Stone & Youngberg’s capital group, which specialized in the workout of defaulted, land-secured municipal bond projects. As part of that team, he handled workouts of defaulted projects in California’s Palmdale, Ione and Moreno Valley.
Mirgoli will also create customized solutions for municipal renewable energy projects.
Bonds supported by special district taxes often go into default when the developments aren’t completed or the developer ends up in financial distress.
Huck and Anson believe they know how to get the issuances “unstuck.” Their firm will provide capital and apply financial and real-estate development expertise to resolve default problems.
Huck estimates that about $5 billion of land-based bonds issued in the last decade are in default nationally.
Florida and California represent the firm’s biggest opportunities. Florida has a 25% default rate, while California only has a 1% default rate, though it leads in issue volume, Huck said.
The firm is getting ready to close deals in California and Florida, he said.
In the last decade, local governments issued nearly $30 billion of land-secured municipal bonds to finance the public infrastructure projects needed to build new communities in many of the nation’s fastest-growing states, according to a release from Common Bond.
A significant minority — approximately 200 bond issues totaling over $5 billion — have defaulted or will default in the next few years because of high delinquency rates in the special taxes or assessments used to pay bond debt service, according to the release.
“Common Bond Capital Partners proposes a strategy that aligns interests of key parties,” Huck said in the release.
“Most land-secured bonds are owned by sophisticated institutional investors with just as much cash, and typically more municipal-bond sector experience, than the private-equity opportunists who sometimes low-ball bids on distressed bonds,” he said.
“We believe the Common Bond collaborative approach will have significantly greater appeal to existing bondholders,” Huck said. “Even so, we also intend to be a source of liquidity for bondholders, as needed.”
