Coronavirus-related disclosures increase by over 1,000 in one week

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Coronavirus-related disclosures surged past 4,500 filings, an uptick of over 1,000 in the past week and more are expected as states and local governments respond to the pandemic.

Meanwhile, a growing number of issuers are missing bond payments, missing deadlines for filing annual financials and the Roman Catholic Church of the Archdiocese of New Orleans is at least the first notice of a bankruptcy partially blaming COVID-19 affecting $41 million of bonds.

Changes made this week to the MSRB's disclosure summary show its commitment to market transparency, said Chief Operating Officer Mark Kim.

In a weekly report released by the Municipal Securities Rulemaking Board, issuers filed 4,516 COVID-19-related primary market and continuing disclosures since the beginning of the year.

In the week ending on May 3, COVID-19 related primary and continuing disclosures totaled 3,584, marking a 26% increase week over week.

A continued high volume of disclosures caused the MSRB to reevaluate the structure of its reports. Originally disclosure filings were in a PDF format and have now been shifted into Excel to make them more searchable and sortable.

“We changed it around a little bit, in part, because of the volume of disclosures that have been filed under COVID-19,” said Mark Kim, MSRB chief operating officer. “We used to put it all together in one report and last week, the size of that report exceeded 100 pages.”

The uptick in disclosures likely are a knock-on effect from a recent statement made by the Securities and Exchange Commission that detailed the kinds of COVID-19 disclosures municipalities should be making.

“I’m sure that we’re going to continue to see issuers respond to the SEC’s request for these types of disclosures and if they’re not required, the SEC asked that issuers provide them voluntarily,” Kim said. “So I would expect the MSRB to continue to receive more of these disclosures going forward.”

Meanwhile, the Roman Catholic Church of the Archdiocese of New Orleans was the first to disclose a bankruptcy filing though COVID-19 was referenced in the filing, the main cause of the bankruptcy was due to clergy abuse settlements, Kim said.

“The move was necessitated by the growing financial strain caused by litigation stemming from decades-old incidents of clergy abuse as well as ongoing budget challenges,” they wrote in the filing. “The unforeseen circumstances surrounding COVID-19 have added more financial hardships to an already difficult situation.”

The Louisiana Public Facilities Authority loaned the Archdiocese the refunding revenue bonds of $41.8 million, all of which will be affected from the bankruptcy. Fifteen bonds in total are affected with maturities ranging from 2020 to 2037.

Over the past week, Puerto Rico missed two bond payments on interest payments that were due on May 1. The Employees Retirement System of the Government of the Commonwealth of Puerto Rico gave notice of bondholders of its Senior Pension Funding Bonds, Series A totaling $7.9 million; $4.3 million worth of Series B; and $1.5 million worth of Series C.

The Puerto Rico Fiscal Agency and Financial Advisory Authority also missed its interest bond payment due on May 1 in the aggregate amount of $872,933 on the interest of Series 2008 and Series 2012 bonds.

One issuer over the past week failed to file an annual financial report. Watonga, Oklahoma did not provide audited financial statements for its fiscal year ending June 30, 2019 by April 30, 2020 for $1.7 million worth of general obligation hospital bonds issued in 2012.

“Due to the COVID-19 pandemic, the issuer’s auditor was unable to complete the 2018-2019 audit by the April 30th deadline,” they wrote in the filing. “The unaudited financial statements were filed on April 30, 2020.”

The MSRB also responded to the National Federation of Municipal Analysts request for better organization in COVID-related disclosures, including creating a separate category for credit-related COVID-19-related disclosures and publish guidance on examples of how and where to file.

“These continuing disclosures are made in accordance with a contractual agreement between issuers and their bondholders,” Kim said. “Neither the SEC nor the MSRB has the regulatory authority to mandate that issuers submit notices in certain categories and provide that information.”

Under SEC Rule 15c2-12, dealers have to ensure that issuers enter into agreements to provide certain information to the MSRB on an ongoing basis.

“The NFMA appreciates that the MSRB does not have the ability to mandate that issuers file voluntary COVID-19 disclosures or to categorize those made in a certain way,” said Lisa Washburn, NFMA industry and media liaison on Tuesday. “But, the MSRB can provide guidance and leadership on how such disclosures should be classified on the EMMA system as the organization did for the filing of bank loan disclosures before the SEC amended Rule 15c2-12.”

Kim said the MSRB is committed to market transparency.

“The efforts we made this week to continue to evolve this report are just evidence of the MSRB’s commitment to market transparency and trying to leverage technology in the absence of that regulatory authority to provide the industry with the information that it finds relevant and valuable,” Kim said.

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