MAGNY

Monthly Luncheon & Discussion

Friday, October 19, 2018

The Future (or Lack Thereof?) of Muni Credit Enhancement

Date: Friday, October 19, 2018

Time: 11:30 am - 2:00 pm

Location: Yale Club, 50 Vanderbilt Avenue, NYC

Moderator: Joseph Campagna, BayernLB

Speakers: 

Kevin Dunphy - Bio
Managing Director & Head of Public Finance
MUFG Union Bank, N.A. 

Marjorie E. Henning - Bio
Deputy Comptroller for Public Finance
New York City Comptroller’s Office

Nick Sourbis - Bio
Managing Director
Municipal Market Analytics

Details: 

Since the Financial Crisis of 2008, the municipal market has experienced significant upheaval.  One of the most deeply impacted areas has been the availability of credit enhancement.  Before 2008, about half of all new municipal bond issuance (46% in 2006) was insured. By the end of 2017, however, insured penetration of new issues was only 5% and the proportion of insured bonds in the Bloomberg Barclay’s Index was 0.24%.  Prior to 2008, the principal amount of outstanding variable rate demand bonds (VRDOs) topped $500 billion, but by 2017 VRDO outstandings had shrunk to $150 billion.  Bank-issued letters of credit (LOCs) and standby bond purchase agreements (SBPAs) were widely used to back VRDOs before 2008, but the number of LOCs issued in the market has fallen dramatically as VRDO outstandings have declined and the cost of obtaining LOCs has risen.   

Are we witnessing the slow, but steady death of credit enhancement in the municipal market?  Or, with rates finally moving up, will the bond insurance and VRDO propositions make a comeback?  After tax reform, will we see a gradual, wholesale conversion of direct bank loans back into LOC/SBPA-backed VRDOs, or is this a market sector whose time has passed?  Are innovative new forms of credit enhancement already evolving to replace older forms, requiring only broader market awareness and acceptance to take root? 

Our panel of experts including Marjorie E. Henning, Deputy Comptroller, New York City; Kevin Dunphy, Head of Public Finance, MUFG; and Nick Sourbis, Managing Director at Municipal Markets Analytics (MMA) will examine the current environment and give us their insights and prognosis concerning the future of credit enhancement.

Cost: $75 for members, $85 for non-members.

Registration: Registration is now closed.