Municipal bond investors have long known that annual appropriation-type debt, such as certificates of participation, are inferior debt structures. Those investors who bought them had faith at the time in the issuer’s responsibility to stand behind the debt.

But recent traumas in Jefferson County, Ala., and Stockton, Calif., that involve non-general-obligation debt or other forms of “non-debt” debt, have investors concerned about the safety of their alternative securities in the shadow of a possible municipal bankruptcy. In the end, an individual issuer’s state laws on bankruptcy filing determine whether alternative debt securities are exempt from municipal bankruptcy, industry pros say.

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