MuniMarket Pulse Interviews Natalie Cohen of National Municipal Research on Credit Issues in the Municipal Bond Market
MuniMarket Pulse is the most listened-to podcast focused exclusively on the municipal bond market. The podcast has posted more than 160 interviews on current issues affecting the municipal bond industry.

MINNEAPOLIS, MN, May 10, 2010 /24-7PressRelease/ -- MuniMarket Pulse recently posted an interview with Natalie Cohen, founder of National Municipal Research, Inc., in which she discusses rating agency upgrades, constraints on municipal bankruptcy, and whether investors should be worried by the negative headlines surrounding the municipal market.

Ms. Cohen points out that the municipal market is not homogeneous and that chilling headlines about imminent collapse can be misleading. She reminds investors that due to different state statutes, credits can vary significantly even within the same sector such as land development deals: "...[I]n Texas the developers are required to pre-finance the infrastructure and then when enough tax base has grown-up to support tax-exempt debt, they have to get permission from the state agency overseeing them to actually issue tax-exempt bonds. And there are some constraints that are put in place for when they do issue debt. Other states don't necessarily have those constraints. That's why in Florida you're seeing a lot more defaults on community development districts today than you're seeing in Texas."

When asked if she believes that there will be an increase in municipal bond defaults, Ms. Cohen said: "...[T]here are probably going to be more defaults in the municipal market but certainly far, far lower than what you have seen or will see in the corporate markets." And she believes that the defaults will stay primarily in high yield bonds, which are inherently riskier and historically where most municipal defaults occur.

Ms. Cohen also reminds us that Chapter 9 bankruptcy is a measure of last resort for troubled municipalities, "It's not that easy and it doesn't necessarily get the municipality that much compared to Chapter 11 which is the bankruptcy code for corporations. To file bankruptcy today, there has to be a specific statute at the state level authorizing a municipality to file, and there are only about 24 states that actually authorize a filing." A major deterrent to a municipality filing for bankruptcy is that the municipality will lose its ability to borrow in the municipal market.

Although the rating agencies are in the process of recalibrating municipal bonds to the global scale, Ms. Cohen warns that the recalibration will result in a loss of "granularity" within the broad rating categories. She reinforces that: "...investors do need to do their homework." She mentions several places that investors can get free, helpful information, including going to the resources listed on her website www.nationalmunicipal.com.

For more information about MuniMarket Pulse or its sister podcasts CapitalMarket Pulse and MMA MuniCast, please visit http://podcast.derivactiv.com/. A complete audio interview and transcript can also be found at: http://podcast.derivactiv.com/.

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