More governments make draws on reserves, disclose inability to pay
More and more municipalities are disclosing that they are unable to make principal and interest payments on their existing bond issues and are making unscheduled draws on debt service related to the pandemic.
In a weekly disclosure report released by the Municipal Securities Rulemaking Board Tuesday morning, the MSRB revealed that more municipalities disclosed that they were making unscheduled draws on debt service due to financial difficulties. Since the beginning of the year, 11 municipalities have made unscheduled draws, with three disclosing those over the past week.
The Franklin County Convention Facilities Authority made an unscheduled draw of $4.4 million on May 22 from its CFA 2010 bond fund reflecting financial difficulties connected to its lease revenue anticipation bonds.
“The unscheduled draw on the fund by the issuer will be used to pay debt service on the Series 2010 Bonds and is in response to the outbreak and spread of COVID-19 that has negatively affected hotel tax collections within Franklin County, Ohio and the net operating income of the issuer’s convention center hotel located in Columbus, Ohio,” according to the filing.
Those Series 2010 lease revenue anticipation bonds totaled to $160 million, according to the MSRB's EMMA site.
That draw on the fund will not be used to pay debt service on the issuer’s Series 2019 hotel project revenue bonds for a Greater Columbia Convention Center Hotel Expansion Project or for its Series 2019 lease appropriation bonds.
Before the unscheduled draw, the funds’ balance was about $4.5 million and after the draw is $112,565.
Franklin County Convention Facility Authority filed that disclosure on June 1.
Since the beginning of the year, eight municipalities have disclosed that they were unable to make principal and interest payments on existing bond issues. On June 2, the Employees Retirement System of the Government of the Commonwealth of Puerto Rico was among them.
The issuer gave notice to holders of its senior pension funding bonds series, a, b and c. The retirement system is required, under a court order, to make monthly stipulated payments to holders of those bonds.
As of May 1, accrued and outstanding interest totaled about $7.9 million for its senior pension funding bonds Series A, $4.3 million for its series pension funding bonds Series B and $1.5 million for its senior pension funding bonds Series C. Those payments have not been made.
On Feb. 8, the Financial Oversight and Management Board for Puerto Rico filed a joint plan to pay the interest with the U.S. District Court for the District of Puerto Rico.
“The amended plan and disclosure statement do not reflect the potential economic impact from the ongoing outbreak of COVID-19,” the disclosure said. “As a result, on March 23, 2020, the Oversight Board filed an urgent motion requesting to adjourn consideration of the amended disclosure statement—which had been scheduled for June 3 and June 4, 2020—until further notice. The Title III Court granted the motion on March 27, 2020.”
Other continuing disclosures increased over the past week. Continuing disclosures are provided to the market on an ongoing basis. Over the past week, COVID-19 related continuing disclosures increased to 5,677 from 5,041 the prior week ending May 31.
Primary market disclosures also increased to 2,529 filings from 2,178. That brings the total number of COVID-19 related disclosures to 8,206 so far this year from 7,219 the prior week.
MSRB’s Chief Operating Officer, Mark Kim has said he expects disclosure to continue to increase week over week.