COVID-19 disclosures climb to near record highs

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The second week of August saw municipal market disclosures related to the coronavirus pandemic reach almost record level highs of around 1,200 filings.

That comes from a Municipal Securities Rulemaking Board weekly report released Tuesday, which details filings made by issuers since the start of the pandemic. For the week ending June 28, there were just over 1,200 COVID-19-related disclosures.

Gregg Bienstock, CEO and co-founder of Diver by Lumesis, said increased COVID-19 related filings could be because issuers are getting more data and are updating their annual financials to reflect them.

Gregg Bienstock, CEO and co-founder of Diver by Lumesis — a municipal market software and data company — said levels could be attributed to increased filings associated with disclosures in new offerings and annual disclosures. Those steadily increased as the market sees increased issuance. As of Aug. 12 year-to-date issuance is up 21% to $264.4 billion from $219.1 billion in the same period last year, according to BofA Global Research statistics.

Interim financial documents increased over the past week to 11 filings from just two in the first week of August. Annual financial statements mentioning the coronavirus more than doubled over the past week to 697 filings from 314 in the first week of August.

“This may be a function of, as municipalities get their hands on new data they are updating financials to reflect the same,” Bienstock said about the increase in interim financial documents.

The spike in annual financial statements makes sense since June 30 is the end of many municipalities fiscal year, said Lisa Washburn, industry and media liaison at the National Federation of Municipal Analysts.

“You’re starting to see information trickle in from the annual reports and the quarterly reports,” Washburn said. “They are just going to reference COVID whether or not they talk about it or give you information.”

Washburn cautioned that though filings increased, it doesn’t mean there are more municipalities being impacted by COVID-19. The MSRB is searching for anything that has COVID or something similar in a filing, she said.

“Yes, the numbers are up, but that means that there are more notices being filed that have the word coronavirus, COVID, pandemic in them,” Washburn said. “It doesn’t mean that there are more COVID impact notices that are being filed. I suppose there are, but it’s not clear from just looking at the aggregate number of filings.”

For example, COVID-19-related rating changes increased to 53 filings as of Aug. 16, but some of them are not actions. Montgomery County, Alabama filed a rating change though it was really Moody’s Investors Service assigning Aa1 on its general obligation limited tax rating. The filing did mention COVID-19.

“We regard the coronavirus outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety,” Moody’s wrote. “The coronavirus crisis is not a key driver for this rating action. We do not see any material immediate credit risks for Montgomery County. However, the situation surrounding coronavirus is rapidly evolving and the longer-term impact will depend on both the severity and duration of the crisis.”

In almost every rating report issued, the word COVID-19 will show up, though it’s not necessarily that there has been an action related to COVID-19, Washburn said.

“Every rating report that gets put out is going to say coronavirus, COVID, something because that’s a risk today and they’re going to have to address it,“ Washburn said. “But if you’re looking to see if this was a COVID-related action, you can’t assume that every posted rating report is about an action taken related to the pandemic’s impact.”

Issuers are getting a better idea of how the pandemic is affecting them, said Joseph Krist, publisher of the Muni Credit News. Issuers will receive more revenue data since the deadline for federal income tax returns was pushed back to July from April.

“There will start to be data on what tax collections were in comparison to last year,” Krist said. Last week, the National League of Cities forecast tax revenues could fall as much by 13% in fiscal year 2021.

Krist predicted the number of filings will increase and decrease over the next coming months due to the nature of the pandemic.

“It changes all the time,” Krist said.

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