Coronavirus disclosures up 25% in the past week

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Coronavirus-related continuing disclosures increased 25% over the past week as more municipalities disclose financial distress due to the pandemic.

Since last week the number of continuing disclosures referencing the impacts of COVID-19 increased to 2,637 since the beginning of the year, the Municipal Securities Rulemaking Board found in a weekly COVID-19 disclosure report released Tuesday.

This comes as the SEC released a statement late Monday detailing the kinds of COVID-19 disclosures municipalities should be making.

Mark Kim, MSRB chief operating officer, predicted that because of the SEC’s statement, there will be more disclosures in the near future.

“I think with the SEC's statement yesterday encouraging more voluntary disclosures by state and local governments, we may experience an even greater number of disclosures over the coming weeks and months,” Kim said.

Mark Kim, MSRB chief operating officer, expects more COVID-19 related disclosures in the coming months.

Under Securities and Exchange Commission Rule 15c2-12, dealers have to ensure that issuers enter into agreements to provide certain information to the MSRB on an ongoing basis. Included are events such as rating changes, bankruptcy and unscheduled draws on debt service reserves reflecting financial difficulties.

During the week ending May 3, there were 2,637 disclosures compared to 2,095 the week prior, marking that 25% increase. Quarterly/monthly financial information saw big upticks to 214 as of Jan 1, when last week there were just 138 of those disclosures.

Failure to provide annual financial information as required increased to 24 disclosures total, up from 17 last week. Some of those failure to file notices were caused by business or resource disruption due to stay at home orders and social distancing, depending on financials from other organizations and evaluating the legislative impacts on filings, according to the MSRB.

A college-preparatory school in Phoenix, Arizona was the first issuer to file a COVID-19-related disclosure under investment/debt/financial policy — a document governing investment activities, debt incurrence or other financial matters.

Empower College Prep participated in the Small Business Administration’s Paycheck Protection Program authorized under the Coronavirus Aid, Relief and Economic Securities Act. The maximum aggregate principal amount of the loan was $851,400, which will accrue an interest rate of 1% and mature on April 14, 2022.

The PPP program provides loans to businesses to help with payroll and other costs. So far there have been two rounds given out, with the most recent being in late April.

Empower College Prep was financed with the help of the Arizona Industrial Development Authority. The Authority has two sets of bond issues totaling to $17.27 million in education facility revenue bonds series 2019 maturing in July 2027 and July 2049. Those bonds are being used to finance costs of its facilities among other costs at the preparatory school, according to the official statement.

“It is our intention to maximize the forgiveness potential of the PPP loan, but there can be no assurance that all or a portion of the PPP loan will be forgiven,” school officials wrote in the filing. “The CARES Act and PPP are subject to continuing regulatory guidance and amendments from the Federal Government on an ongoing basis, which may impact the ultimate use and disposition of PPP loan proceeds.”

Texas, California and Florida continue to have municipalities filing the most financial disclosures. Texas has had 440 COVID-19 related disclosures since Jan. 1, followed by 396 in California and 296 in Florida.

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