‘Investor-friendly attitude’ in RI lets Wall Street shrug off news
April 20th, 2012 at 4:28 pm by Ted Nesi under Nesi's Notes, On the Main Site
The state is planning to sell $118 million in general-obligation bonds to refinance existing debt next week, and apparently all the bad publicity we’re getting won’t be a problem thanks to the pension overhaul, the bondholders-first law (details here and here) and relatively cautious budgeting.
That’s according to Mike Cherney, reporting for Dow Jones Newswires. The comments he got from investors are fascinating, on the one hand for what they say about how the state’s image is getting battered and on the other hand for how little concern they seem to have about it overall (emphasis mine):
Rhode Island’s investor-friendly attitude should attract buyers to its $118 million bond sale next week, market participants said, despite the state’s well-known problems with high unemployment and wide budget gaps. …
“You want a state that’s going to have policies that are bondholder friendly, that recognize the importance of the market and the importance of contract law,” said Robert Miller, senior portfolio manager at Wells Capital Management. “Rhode Island does fit the bill pretty well.”
Miller contrasted that with Alabama, where the state ultimately failed to act before Jefferson County, Ala., filed the largest municipal bankruptcy ever in November. Moody’s rates Alabama Aa1, a notch above Rhode Island, which it assigned Aa2.
“I’d still rather own Rhode Island,” Miller said ….
“It’s a matter of price, but there’s plenty of demand out there,” [Dan Solender, director of municipal bond management at Lord Abbett & Co.,] said. “Clearly the state’s been in the headlines, but it’s more for their local issues.”
Adam Mackey, senior portfolio manager at PNC Capital Advisors, said institutional investors will focus on the state’s finances, keeping the negative headlines about Rhode Island’s cities separate.
Tags: bondholders, bonds, investing, investors, municipal, state government
Nesi's Notes covers politics and the economy in and around Rhode Island for WPRI.com. (Twitter: 
But is the RI law putting bondholders first, constitutional???
This was not tested in the CF bankruptcy because the employees negotiated the final pension settlement (as happened in Vallejo Calf).
But had a trial moved forward, the RI law might have been tested as to it’s constitutionality putting one group over another. There is no guarantee it would have been upheld by the courts.
So if RI bonds look like a good bet, I would say it has to do with a bunch of brokers looking for a fast commission than a statement on the quality of the bonds.
And if Prov declares bankruptcy after they get the dough, does that put the rest of RI on the hook for the payments??? Has anyone even asked???
It is obvious you have no clue about investing and the bond market. Muni bondholders are loaning money to cities and towns, if they are not the paid after employees get paid for work performed they have no incentive to loan money to institutions. Pensision are not guaranteed there is a differece. If the city takes chapter 9 the bonds will trade what is called flat, that means the dividends are not paid until the city can make payment. Contracts can be broken by bankruptcy. In Providences case that would be many years. I would suggest you look up the whoops bonds from the early 1980′s and I would advise you to start reading the Wall Street Journal.