Coronavirus-related disclosures down again from months prior

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The number of coronavirus-related disclosures, despite a slight increase over the past week, is still well below levels seen since the pandemic began to impact state and local government municipal issuers and the investors they sell to in March.

On Tuesday, in a Municipal Securities Rulemaking Board report released weekly, COVID-19-related disclosures for the week ending July 12, reached to just over 600 filings. Just less than a month prior, issuers then filed 1,200 weekly disclosures.

For the week ending July 5, COVID-19 related disclosures were just above 200.

Market analysts had some thoughts on why there has overall been a slight decrease in disclosures for the month of July.

Many municipalities have fiscal years that end on July 1, so issuers may be focused on and distracted by closing their books for the year, said Patrick Luby, senior municipal strategist at CreditSights.

Patrick Luby, senior municipal strategist at CreditSights said issuers have a lot going on and want to be careful about what they are saying to the market if they don't have all of their complete information.

In addition, as the pandemic continues, Luby said issuers are making sure they have complete disclosures.

“The nature of public finance doesn’t lend itself well to continuous streams of data,” Luby said. “So financial disclosures from government units will be built around the fiscal year and the fiscal quarters. So my expectation would be that the data is kind of lumpy.”

Local governments are also waiting for income tax receipts to come in on July 15 to give them a better understanding of what to disclose, Luby said.

The decrease in disclosures could be for a variety of reasons, said Joseph Krist, publisher of the Muni Credit News, but it will pick up once there is more clarity on how the pandemic affects them.

Krist referenced school districts as an important indicator of how the economy will be impacted by the virus this fall.

“If I had to guess, it will be slow during the summer and then after Labor Day,” Krist said. “I would suspect it would pick up mostly because people would know what’s going on with the schools. To me, the schools are the most important driver of what’s going to happen outside of the obvious one of, could we make the virus disappear.”

School districts nationwide are deciding whether to open up their buildings to students or continue with online classes amid rising numbers of COVID-19 cases.

“If you’re a school district, what are you supposed to tell people?” Krist said. “You don’t know if you’re going to be able to open, you don’t know how you’re going to be able to open.”

Uncertainty on the federal level may also cause less frequent issuers to not want to make mistakes in their disclosures, Krist said.

Senate Majority Leader Mitch McConnell committed to enacting another coronavirus stimulus package later this month that will include funding to help reopen schools, jobs and healthcare.

More federal aid to state and local governments may also be considered.

Also in the MSRB report released on Tuesday, the first disclosure of a tender offer in secondary market purchases was filed. The Harris County Cultural Education Facilities Finance Corporation offered to tender its Series 2013A, Series 2014A and Series 2016A hospital revenue bonds.

In the filing, the issuer referenced COVID-19 and said healthcare providers have canceled or delayed non-urgent appointments and procedures, adversely affecting revenues.

“Although restrictions on elective procedures were lifted in the obligated group’s service area, more limited restrictions were recently re-imposed, and further restrictions on elective procedures may be re-introduced to the extent that COVID-19 patients threaten system capacity,” the issuer said.

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