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BELLE HAVEN INVESTMENTS WINS PENSIONS & INVESTMENTS BEST PLACES TO WORK IN MONEY MANAGEMENT AWARD FOR THE FIFTH YEAR IN ROW
NEW YORK, Dec. 12, 2022 /PRNewswire/
Belle Haven Investments won the 2022 Best Places to Work in Money Management awards announced by Pensions & Investments today. This is the fifth consecutive year the firm has won this award.
Presented by Pensions & Investments, the global news source of money management, the 11th annual survey and recognition program is dedicated to identifying and recognizing the best employers in the money management industry.
Belle Haven's culture is built on a foundation that leverages mutual respect, teamwork and passion. Commitment to shared success is at the heart of what they do. That is why they believe that hiring and retaining individuals with a diverse set of talents, perspectives, and experiences generates better ideas, creates a more creative work environment, and empowers employees to bring their whole self to work. The Firm is committed to maintaining an inclusive organization where all employees feel heard, valued and respected.
"As their employees attest, the companies named to this year's Best Places to Work list demonstrate a commitment to building and maintaining a strong workplace culture,'' said P&I Executive Editor Julie Tatge. "Even as firms grappled with volatile markets and stresses from the pandemic, their employees said they felt strong support from their managers, enabling them to do their best work.''
"Pensions & Investments is proud to honor the Best Places to Work in Money Management for the 11th year. A strong workplace culture that supports talent, advocates progress and drives innovation is paramount to driving the best outcomes and these asset managers demonstrate that. Congratulations to the 2022 honorees for fostering healthy and inclusive workplaces in the face of a rapidly evolving and challenging market," said Chief Operating Officer, Nikki Pirrello.
"We are honored to be recognized by Pensions & Investments as one of the Best Places to Work in Money Management for the fifth year in a row." said Matt Dalton, CEO & CIO, Belle Haven Investments. "We take great pride in our team and firm culture. This acknowledgement reflects our relentless devotion to making Belle Haven a place where people are excited to come to work every day."
Pensions & Investments partnered with Best Companies Group, a research firm specializing in identifying great places to work, to conduct a two-part survey process of employers and their employees.
The first part consisted of evaluating each nominated company's workplace policies, practices, philosophy, systems and demographics. This part of the process was worth approximately 25% of the total evaluation. The second part consisted of an employee survey to measure the employee experience. This part of the process was worth approximately 75% of the total evaluation. The combined scores determined the top companies.
For a complete list of the 2022 Pensions & Investments' Best Places to Work in Money Management winners and write-ups, go to www.pionline.com/BPTW2022.
About Belle Haven Investments
Based in Westchester County, New York, Belle Haven Investments is an independent, employee-owned money manager specializing in separately managed taxable and tax-exempt fixed income portfolios. The Firm's expertise and focus in one asset class have resulted in award-winning strategies. Their goal is to provide an unrivaled level of service, reliability, and customization to their Partners in building what they hope are partnerships for years to come.
About Pensions & Investments
Pensions & Investments, owned by Crain Communications Inc., is the 50-year-old global news source of money management. P&I is written for executives at defined benefit and defined contribution retirement plans, endowments, foundations, and sovereign wealth funds, as well as those at investment management and other investment-related firms. Pensions & Investments provides timely and incisive coverage of events affecting the money management and retirement businesses. Visit us at www.pionline.com
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Pennsylvania Borrows for Bridge Projects
Pennsylvania Borrows for Bridge Projects
By Skylar Woodhouse
Pennsylvania is tapping the municipal bond market to ensure its bridges are able to withstand car traffic less than a year since a bridge in Pittsburgh collapsed, and with about 14% of the commonwealth’s bridges being classified as structurally deficient.
The Pennsylvania Economic Development Financing Authority is selling about $1.9 billion of bonds to help pay for a series of bridge projects, including construction and maintenance. The total cost is estimated at about $2.4 billion, bond documents show.
The sale is being completed through a public-private partnership agreement to fund a loan to Bridging Pennsylvania Developer I, LLC. Bridging Pennsylvania HoldCo LLC and S&B USA Concessions will contribute a combined amount of up to $225,251,445. The Department of Transportation will contribute as much as $90 million in mobilization payments and a $50 million milestone payment, according to bond documents.
“The Commonwealth has the third largest number of bridges in the United States, and this project is a great example of how the public and private sector can partner to deliver critical infrastructure projects,” said Julie Burger, who is involved in the sale and the managing director of public finance transportation at Wells Fargo Corporate & Investment Bank.
Earlier this year, the Fern Hollow Bridge in Pittsburgh, which was deemed in poor condition by the federal bridge inventory, collapsed, highlighting the need to repair infrastructure in the commonwealth and across the US.
The importance of improving US infrastructure is one of the key items on President Biden’s agenda following such incidents as the apartment collapse in Miami last year and the increase of flooding in New York City subways.
The bonds are expected to price Dec. 13, just ahead of the last Federal Reserve meeting of the year. Muni returns are down about 8% this year and on pace for their worst annual performance since 1980. States and cities have sold about $348 billion this year, down 19%, data compiled by Bloomberg show.
The deal’s timing may be advantageous given the “dearth” of supply, according to Burger. Investors appear eager for an opportunity to look at a new credit that will help fund the revitalization of critical transportation infrastructure, she said.
Dora Lee, the director of research at Belle Haven Investments, said it’s hard to predict how the sale will perform, but since it’s the last full week of trading for the year, there will be pressure to close the deal before people take off for the holidays.
The Pennsylvania Economic Development Financing Authority bond offerings are rated Baa2 by Moody’s rates the deal Baa2, two steps above junk, and Fitch Ratings has it one level lower at BBB-. Wells Fargo Securities and JP Morgan are serving as lead managers. The sale has a lower rating due to the public-private partnership and construction risks involved, according to Lee.
Moody’s has a stable outlook on the debt and expects the project will be completed even with the potential for “some moderate delays.”
Projects from the financing will include the replacement of six major bridges over a 66-month construction period.
“The country’s backlog of infrastructure projects has been known for a long time. The longer it takes for infrastructure assets to be repaired and maintain properly, the higher the costs will be,” Lee said. The fact that the commonwealth “has packaged several bridges into this deal reflects the urgent need for these repairs and the overall struggle states face to keep up with its infrastructure needs.”
Chicago Wins Moody’s Upgrade, Exiting Years in Junk Status
Chicago Wins Moody’s Upgrade, Exiting Years in Junk Status
By Mackenzie Hawkins and Shruti Singh
November 8, 2022 at 5:11 PM EST Updated on November 8, 2022 at 6:23 PM EST
Chicago has shed its junk status for the first time in more than seven years marking a major win for Mayor Lori Lightfoot as she seeks re-election.
Moody’s Investors Service on Tuesday raised the city’s rating by one notch to Baa3, freeing Chicago from its one non-investment grade rating for the first time since 2015. The upgrade may allow the city to borrow at lower rates, saving taxpayers money. Moody’s downgraded the city to junk in May 2015 amid rising pension costs.
The move “reflects the city’s substantial increase in pension contributions, including an upcoming boost to comply with the city’s new pension funding policy that targets contributing an amount sufficient to keep reported net pension liabilities from growing,” David Levett, senior analyst at Moody’s, said in a statement. Moody’s also has the city’s debt on a stable outlook.
Lightfoot, who is up for re-election in February, has been faced with rising crime and some high-profile corporate departures. The upgrade is a major win after her administration made actuarially required contributions to all four pension funds for the first time ever in 2022 and plans to do so again next year.
“The City is financially stable and on a path toward economic recovery,” Lightfoot said in an emailed statement. “Hard work pays off and my administration has done the difficult work of finding efficiencies and putting in place structural solutions to be able to begin paying down our debt, boosting reserves, and paying down the pension credit card, all while making historic investments in the City of Chicago.”
Chicago’s severely underfunded pensions have dragged down its credit for years. Fitch Ratings also raised its rating last month, citing the improved financial position and increased pension payments.
When Fitch upgraded the city, Chief Financial Officer Jennie Bennett said the move would save Chicago $100 million on every $1 billion of debt sold. Fitch now rates the city’s bonds BBB, two steps above junk, and it has the city’s rating on a positive outlook, indicating that future upgrades may be possible.
“It’s good that Moody’s finally acknowledged the steps the city has taken to mitigate its large fixed costs including pensions and debt service,” said Dennis Derby, a portfolio manager for Allspring Global Investments, which holds Chicago debt. “The city has taken a number of steps over the years to match increasing pension expenses with new found revenue sources.”
On Monday, the Chicago City Council approved Lightfoot’s $16.4 billion budget for next year, which includes an additional $242 million in early pension payments after the city increased its annual contributions by $1 billion over the last three years.
“The city has improved budgetary management through a willingness and ability to increase revenue that reduced a structural deficit and facilitated the elimination of debt-based budget maneuvers and pension cost deferrals,” Moody’s Levett wrote in the report.
The city still has challenges, notably its leverage and high fixed costs, according to Moody’s.
“The Moody’s upgrade recognizes Chicago’s commitment to funding pensions and moves the rating more in line with secondary trading levels, which have been in the BBB range for some time,” John Miller, head of municipals at Nuveen, said in an emailed statement. Nuveen is the largest holder of Chicago debt.
“The upgrade may provide some positive momentum for the city’s plan to issue additional General Obligation debt in the next few weeks,” Miller said.
The upgrade comes as the city prepares for a $757 million bond sale expected to price the week of Nov. 28. The money raised will help fund community development and infrastructure projects. The sale will also include Chicago’s first ESG issuance.
“Good fiscal management practices such as making pension payments and enacting sustainable budgets go a long way to improving and maintaining credit health,” said Dora Lee, director of research at Belle Haven Investments, which owns Chicago debt. “These practices will become even more important as we face the high possibility of a recession in coming months.”
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https://www.bloomberg.com/news/articles/2022-11-08/chicago-wins-moody-s-upgrade-exiting-seven-years-of-junk-status?sref=dlv6Ue8o
Belle Haven Investments CIO Invests in Sub-Advised Transamerica Funds
Belle Haven Investments CIO Invests in Sub-Advised Transamerica Funds
RYE BROOK, N.Y., Sept. 26, 2022 /PRNewswire/ -- Belle Haven Investments, a boutique fixed income manager with $15 billion under management, announced that Matt Dalton, CEO & CIO, has deployed additional personal investments into the Transamerica Intermediate Muni Fund (TIMUX) and the Transamerica High Yield Muni Fund (THYIX). Matt Dalton is currently one of the Portfolio Managers for each Fund. Mr. Dalton added capital to both Funds in February and May of 2022 as well.
"Buy when painful," is rhetoric that Matt Dalton often echoes.
Matt Dalton has worked exclusively in the fixed income asset class since 1985. He joined Belle Haven Investments in 1996 and assumed his current position as CEO & CIO in 2002, utilizing his years of experience in the institutional muni market to launch and guide the firm in the direction of investment management. As the lead portfolio manager for all of Belle Haven's strategies, Matt has helped the Firm earn recognition and awards from both Lipper and PSN Top Guns. Matt was named the top portfolio manager in the United States by Citywire for his management of the Transamerica Intermediate Muni Fund for the period of 9/30/2014 – 9/30/2019.
The Transamerica Intermediate Muni Fund is sub-advised by Belle Haven Investments and has over $1.7 Billion in AUM as of 8/31/2022. Matt Dalton, Cara Grealy and Max Christiana are the Portfolio Managers. The Fund is actively managed and seeks to maximize total return through a combination of current income that is exempt from federal income tax and capital appreciation.
The Transamerica High Yield Muni Fund is sub-advised by Belle Haven Investments and has over $150 Million in AUM as of 8/31/2022. Matt Dalton and Max Christiana are the Portfolio Managers. The Fund is actively managed and looks to identify inefficiencies in the municipal bond market with the goal of maximizing total return by investing primarily in medium-to-lower grade fixed income securities.
Belle Haven Investments is an independent, employee-owned money manager specializing in separately managed taxable and tax-exempt fixed income portfolios. The Firm also serves as a sub-adviser on the Transamerica Intermediate Muni Fund and the Transamerica High Yield Muni Fund. Belle Haven has been managing portfolios since 2002. The Firm is uniquely committed to serving Consultants and Advisors along with the Institutions, Foundations, Family Offices and High Net Worth individuals whom they represent. The team's expertise and focus in one asset class has resulted in award-winning strategies. Belle Haven is a Registered Investment Advisor with the Securities Exchange Commission (SEC). For more information, please visit www.bellehaven.com.
Disclaimer:
There may be less public information available on municipal fixed income securities than found on public corporations. Municipal bonds may be less liquid than corporate bonds. A portion of the income may be taxable by state or local taxing authorities. Municipal bond holders may also be subject to capital gains taxes and interest income may be subject to alternative minimum tax. Bonds are subject to credit, interest rate inflation risks. In addition, bonds incur ongoing fees and expenses.
An investment in a portfolio involves various risks, including the risk that an investor can lose money. While the Manager strives to attain the investment objective of the strategy through research and portfolio management skills, there is no guarantee of successful performance, that the objective can be reached or that a positive return can be achieved. Past performance is no guarantee of future results
Awards and recognition referenced in this material are produced by firms other than Belle Haven and may relate to strategies or managed products other than those featured in this piece. Criteria used to determine these awards may vary depending on the organization presenting the award; a list of such criteria can be obtained by emailing service@bellehaven.com.
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Return-to-Office Push Does Little to Solve Transit Agency Problems
Return-to-Office Push Does Little to Solve Transit Agency Problems
By Marvis Gutierrez and Mackenzie Hawkins
September 14, 2022 at 1:04 PM EDT
Schoolchildren are piling into morning buses and office workers are jostling for space in the subway on their way home. But as crowded as the urban commute is beginning to seem, stricter return-to-office policies and the start of the academic year won’t be enough to rescue beleaguered public transit agencies from the financial woes of the pandemic.
In New York City, for example, the first day of school last week marked a pandemic subway ridership record, with numbers up 35% from the comparable day a year ago. But that boost brought ridership to just 63% of pre-pandemic levels, around the national trend as of late August. Most fare-dependent transit agencies predict a 70% to 90% recovery over the next few years, according to Fitch Ratings.
Transit systems that rely heavily on farebox revenues hoped that relief would come when bosses clamped down on workers returning to their desks, as many have promised to do after the US Labor Day holiday in early September. But for agencies that count on riders to return, the bigger test will be whether they can come up with alternative revenue sources to buoy their finances, said Andy Shin, senior municipal research analyst at Insight Investment.
“A return to office will help, but we’re still far away from the level reached before the pandemic,” said Mikhail Foux, a municipal strategist at Barclays Plc. “Unlike other sectors where the trend is improvement of credit quality or even stability, here we will continue to see deterioration. Maybe not as fast as before, but it’s still deterioration.”
Several fare-dependent transit agencies, including New York’s Metropolitan Transportation Authority and the San Francisco Municipal Transportation Agency received downgrades over the past two years after their budgets were battered by muted ridership, according to an S&P Global Ratings report released Sept. 8.
“It used to be that reliance on farebox revenue was touted as a credit positive because you didn’t have to rely on regular state appropriations or federal aid as much,” said Dora Lee, director of research at Belle Haven Investments. “Now it’s kind of the opposite.”
Transit systems that rely on tax revenue generally fared better than their fare-dependent counterparts. The Utah Transit Authority, VIA Metropolitan Transit in San Antonio and Colorado’s Roaring Fork Transportation Authority received positive credit outlooks on tax revenue growth over the past two years, according to S&P. While some agencies were able to maintain a stable outlook because of the federal aid they received during the pandemic, they risk burning through that money without finding other means to fund deficits.
Recovery of farebox revenues will depend on whether companies make good on their pledge that Labor Day marks the official return to the office. On Wall Street, Bank of America Corp. is formalizing the flexibility it allowed in the past few years, while executives at Morgan Stanley and Goldman Sachs Group Inc. have removed the final hurdles for in-person, full-time work.
But ridership declines remain a challenge for transit systems as workers push back against mandates to return to their desks and safety concerns discourage once-loyal riders from coming back.
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https://www.bloomberg.com/news/articles/2022-09-14/return-to-office-push-does-little-to-solve-transit-agency-woes?sref=dlv6Ue8o
California Slow to Sell Housing Bonds as Homelessness Worsens
California Slow to Sell Housing Bonds as Homelessness Worsens
By Romy Varghese
April 21, 2022, 9:04 AM EDT Updated on April 21, 2022, 12:16 PM EDT
California’s efforts to alleviate homelessness through local borrowing are running up against the realities of slow-moving bond financing — and rising interest rates mean higher costs for the governments.
It’s been more than five years since voters in Alameda County, home to Oakland; Santa Clara County, the heart of Silicon Valley; and Los Angeles approved borrowing a total of $2.73 billion to tackle homelessness and boost affordable housing. Yet, less than half authorized in Los Angeles and Alameda County has been sold while Santa Clara County has cleared about 63% of its share.
To avoid racking up interest costs unnecessarily, localities sell bonds only when the projects are ready to spend money on construction and other expenses. The share of unsold bonds demonstrates how even if the funds are earmarked, many projects remain bogged down in obstacles such as zoning and still have a long way to go before the money can be spent. Meanwhile, bond yields have started to rise, meaning governments will have to pay more for the debt than they would have paid a couple years ago. Benchmark 10-year municipal bond yields are about 170 basis points higher than they were a year ago, according to Bloomberg indexes.
“Throwing money at the problem is not always the solution, and I think this perfectly illustrates that,” said Dora Lee, director of research at Belle Haven Investments. “It’s time to look at policy solutions in addition to funding solutions.”
The cost of housing and soaring inequality are deepening problems for California, home to the country's most expensive residential markets and 28% of unhoused people. The median home price has soared to almost $850,000 — more than twice the national level. Meanwhile, housing affordability and homelessness top the list of issues voters want the state to address, according to a poll released last week by the University of California, Berkeley’s Institute of Governmental Studies.
Municipal officials and housing developers say the bond measures alone were never meant to cure homelessness and housing crises. The voter-approved money is supposed to be paired with other government subsidies.
One such state funding resource has become competitive for the first time in years, and that’s delaying many projects. And those developments still have to overcome local resistance to multi-family residences in the state that’s the birthplace of single-family zoning and has fallen short of building enough homes for its population for years.
“People need to understand that the production of housing for extremely low-income households basically was non-existent for 10 years,” said Consuelo Hernandez, Santa Clara County’s office of supportive housing director. “So there’s a lot of catch up work that we have to do.”
In Los Angeles, Mayor Eric Garcetti has defended his city’s measure, Proposition HHH, as one that will house thousands of people ahead of its 10-year schedule. Still, only 14% of the projects have been built, and they are taking three to six years to complete, according to a February report by Controller Ron Galperin.
The city has $625 million of bonds left to sell from its $1.2 billion authorization and anticipates selling $351.7 million in the fiscal year beginning in July, according to the mayor’s office.
Alameda County, across the bay from San Francisco, plans to sell the remaining $340 million of its $580 million in June. Nearby Santa Clara County may sell some more bonds under its $950 million capacity next year.
While the local pledges provide an important boost, developers still must cobble together various federal and state funding streams. There is no central place in California to get state financing, for instance. And starting in 2019, developers' requests for private activity bonds, a key source of financing divvied up annually, totaled more than what the state was able to provide, delaying many projects.
“We made commitments to a whole bunch of projects that were ready to go after state funding. And then there wasn’t available state funding,” said Michelle Starratt, Alameda County housing director. “We were all competing for the same dollars against Los Angeles and San Francisco and everybody else. So we’re fighting for every little dime.”
If the financing sources could be narrowed down to a couple, “you would just see projects move much more quickly,” said Holly Benson, executive vice president and incoming president and chief executive officer of nonprofit developer Abode Communities. “But no, it’s not structured that way.”
Meanwhile, the pandemic pushed out timelines and raised costs. And the projects still had to overcome local resistance.
In one case, an affordable housing project in Livermore in the works for years that has a commitment of funding under Alameda County’s bond measure had to return its coveted state subsidies because a lawsuit from a group opposed to the low income limits for the homes delayed its ability to move forward. (A judge in February dismissed the suit, deeming the opponents’ claims “almost utterly without merit,” but an appeal is likely.)
But recent state legislation designed to fast track housing has helped. Dora Gallo, president and chief executive officer of nonprofit developer A Community of Friends, held up a project called West Terrace as an example of Los Angeles’s Proposition HHH working as it should.
The 64-unit affordable housing and permanent supportive housing venture was able to take advantage of a 2017 bill streamlining the approvals required for such projects and was in construction less than two years after the land purchase, she said. Construction will wrap up this year.
“There are a lot of success stories,” Gallo said. “I don’t want the public to lose faith.”
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https://www.bloomberg.com/news/articles/2022-04-21/as-california-homeless-crisis-worsens-bonds-remain-unspent?sref=dlv6Ue8o
Rising Rates Reduce Appeal of Taxable Bonds for Muni Issuers
Rising Rates Reduce Appeal of Taxable Bonds for Muni Issuers
By Shruti Singh and Danielle Moran
April 13, 2022, 2:01 PM EDT
States and localities are shying away from selling taxable bonds, a popular tool in the last two years, as rising interest rates reduce the chances for cost savings, especially from refinancing old debt.
Municipal issuers have sold $19.5 billion of long-term federally taxable bonds year to date, a 39% decrease from the same period a year ago, according to data compiled by Bloomberg. Sales of taxable munis surged in 2020 and the first half of 2021 to peak at almost a third of the primary market, before slowing to about 17% currently, according to Bloomberg data.
The Federal Reserve has begun to raise rates as part of a long-signaled plan to combat the highest inflation in four decades, and in doing so largely erased any savings governments could get from selling bonds to refinance outstanding debt. Taxable refunding bond sales have dropped almost 57% in 2022 from the year-ago period, and when tax-exempt refinancings are included, the decline is 33%, Bloomberg data show.
“Issuers are sensitive to interest rates and costs savings have evaporated,” said Matt Thomas, portfolio manager for Belle Haven Investments. “That takes a huge chunk of the supply out of the market.”
Kalamazoo, Michigan, for example, was planning to sell $76 million of taxable bonds to refinance debt in mid-March, but shelved the deal after rates jumped, said Warren Creamer, a managing director at Troy, Michigan-based MFCI LLC, an adviser on the proposed sale. The transaction is on hold as “the market continued to move away from us,” Creamer said.
“Rates have gone up to a point that the difference between the debt service on the old bonds and the new bonds isn’t enough to proceed with the transaction,” he said. “We were hoping that at some point we would start to see a new normal.”
Sales of all types of long-term municipal bonds this year are down about 6.4% to $113 billion. The yields for AAA muni securities maturing in 10 years on Wednesday reached the highest since March 2020, while 10-year Treasury rates hover around the highest since 2019.
An uptick in taxable sales to levels seen the last two years may be difficult without a sharp drop in interest rates, said Brian Barney, a managing director for Parametric Portfolio Associates. Compared with traditional tax-exempt municipal bonds, the taxable version offers higher yields to investors and can be used for projects ineligible for tax-free financing.
The segment will continue to play a significant role in the municipal market given investors looking for taxable income can tap into sales from muni issuers rated, on average, AA versus BBB corporate sellers, he said.
“It’s a big box in the muni market,” Barney said. “It still holds credence and I wouldn’t say this down tick in issuance pulls back the buying base.”
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https://www.bloomberg.com/news/articles/2022-04-13/rising-rates-reduce-appeal-of-taxable-bonds-for-muni-issuers?sref=dlv6Ue8o
Hybrid Work Poses Credit Risk to Cities Looking to Issue Debt
Hybrid Work Poses Credit Risk to Cities Looking to Issue Debt
By Skylar Woodhouse
April 8, 2022, 1:53 PM EDT
Remote working may be be a boon for many Americans. But it could lead to higher borrowing costs for some cities tapping the municipal-bond market.
Fitch Ratings, earlier this week, affirmed its negative rating of Kansas City, Missouri, flagging remote work as a credit risk. The city anticipates a slow recovery in earnings taxes -- which is its largest source of general fund revenue -- because of increased remote work, Fitch noted.
While cities have been receiving Federal aid to stay afloat, many could risk a downgrade if they burn through pandemic stimulus money without finding other means to fund deficits, Bloomberg Intelligence strategist Eric Kazatsky said in an interview. And those that face a downgrade may have to issue bonds with higher yields to compensate the increased credit risk. This makes it more expensive to issue bonds and makes refunding less optimal, said Eric Friedland, director of municipal research for Lord Abbett & Co.
Drivers of Downgrades
Remote work can impact a city’s revenue in multiple ways, from wage taxes that are levied depending on where workers put in their hours to the sales taxes that commuters pay at a local coffee shop on the way the office. Some states may require you to pay income taxes if you work there for just a day or two and for other states that might be 60 days.
A handful of cities in Ohio, such as Cincinnati, Toledo and Columbus, that rely heavily on income taxes could also see weakness in their revenue streams from remote working and potentially be subject to a downgrade, Kazatsky said.
Cincinnati, for example, derives 73.5% of its general fund revenue from income taxes, a Bloomberg Intelligence report published Thursday said. The average reliance on income taxes for municipal issuers is 8%, according to data from the Metropolitan Policy Program at the Brookings Institute.
Cities that have a greater dependence on commuter taxes are the most sensitive to work-from-home arrangements, Bloomberg Intelligence’s report said.
Richmond, Virginia, has the highest share of jobs held by workers commuting from outside the city at 77%, according to data from Pew Charitable Trusts. New York’s commuter share is 28% and Philadelphia’s is just under 50%.
While remote work won’t be the sole credit driver, it is a factor that ratings firms and investors are increasingly considering, said Dora Lee, director of research at Belle Haven Investments. Cities looking to issue debt must not dismiss remote work as a risk, especially as flexible work becomes a longer reality, said Tom Kozlik, head of municipal research and analytics at Hilltop Securities.
“The uncertainty is the most important thing, because this is a once in a generation type shift that we’re seeing and I think there are a lot of people who are down playing it,” he said.
Navigating the Risk
Large cities may be able to preempt a potential downgrade because their economy is often not focused on a single industry, Lee said. Such cities could use their diverse economy to reinvent themselves, she added. And their revenues could be fairly insulated because of the higher cost of living.
S&P Global Ratings revised their outlook for San Francisco to stable from negative on Thursday despite adding remote work as a risk. San Francisco-based firms have been asking for a reassessment of their property taxes as they’re increasingly adopting flexible work, which could put a dent in the city’s revenue. But the city’s “economically sensitive” revenue streams will be able to bounce back in the long term, credit analyst Chris Morgan said in the report.
“Maybe people are not doing full time in the office, but if the sales tax figures and hotel tax revenues are still rising because of some of the other factors like tourism, then it might not be that big of a deal,” Li Yang, a credit analyst with S&P Global Ratings, said in a phone interview. “We don’t necessarily need to see office workers go back 100%.”
Smaller towns outside larger cities could also see economic growth as hybrid work becomes more permanent, Lee said. With people not traveling to large cities for work as frequently as they were pre-pandemic, smaller suburban areas could see a boost to their economy.
President Joe Biden, governors and mayors have been pushing workers to return to their offices to help revive city economies. Local businesses that relied on workers going into the office could see some respite.
Workers who went to the office in 10 of the largest U.S. business districts rose to 42% of pre-Covid-19 levels in the week ended March 30, according to data from Kastle Systems.
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https://www.bloomberg.com/news/articles/2022-04-08/hybrid-work-poses-credit-risk-to-cities-looking-to-issue-debt?sref=dlv6Ue8o
Washington University Latest School to Sell $1 Billion in Munis
Washington University Latest School to Sell $1 Billion in Munis
By Nic Querolo
March 30, 2022 at 11:00 AM EDT
Washington University in St. Louis is planning to sell $1 billion in municipal bonds, joining a wave of schools tapping taxable debt amid a period of historic volatility and weak performance in the $4 trillion market.
The private university is looking to finance a slate of capital projects, including a neuroscience research facility and cancer center, offering investors one of the largest taxable deals on the calendar that’s expected to price this week, according to roadshow documents.
“If you have your focus on credit and you know how to maneuver the market well, there are definitely buying opportunities,” said Dora Lee, director of research at Belle Haven Investments. “Rewind to last year, everyone was looking for yield, and now yield is here.”
The Missouri university is the latest school to issue taxable debt this month, following similar deals by the Massachusetts Institute of Technology and University of Michigan.
The higher education sector was hit with credit downgrades early in the pandemic, and many colleges and universities have struggled to overcome pressures on enrollment, on-campus living and fluctuations in state budgets. This year will likely be the last to see significant budget relief from federal Covid stimulus, according to a Fitch Ratings report, and it could be a painful transition.
That said, enrollment declines were on average less severe at private colleges and universities, and top-choice schools were better insulated from wavering student interest, according to the Fitch report. Washington University accepted 13% of its applicants this year. Plus, it has seen full-time enrollment grow 12% since the 2017-18 school year despite a slight dip during the pandemic.
The deal stands to benefit from solid investor demand, garnering an Aa1 rating from Moody’s Investors Service, which cited a strong financial profile, leadership and an “excellent” brand.
The University of Michigan’s century bond -- the biggest ever sold by a college or university and part of a record $2 billion debt package -- was “well-oversubscribed” earlier this month, according Barclays Plc, the underwriter.
However, Washington University’s deal will likely price “slightly cheaper” given the difference in name, said Nisha Patel, a managing director at Parametric Portfolio Associates LLC. It will also issue the debt under a corporate CUSIP in a move that may give the school more flexibility in how it spends the proceeds.
“This is obviously not the typical structure that most muni buyers are looking for, especially all that duration in an environment where rising rates are a concern,” she said.
Washington University plans to use the funds to build a 620,000-square foot neuroscience facility with an 1,800-car garage, as well as an ambulatory cancer center that will be jointly owned with Barnes-Jewish hospital.
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https://www.bloomberg.com/markets/fixed-income?sref=dlv6Ue8o
Illinois Spreads Widen as Risk-Shy Investors Exploit Liquidity
Illinois Spreads Widen as Risk-Shy Investors Exploit Liquidity
By Shruti Singh
March 3, 2022, 1:53 PM EST
Illinois, the worst-rated U.S. state, is seeing its penalty in the bond market jump to the highest in nearly a year in the current risk-off environment.
The debt penalty for the state’s bonds over benchmark securities is at the highest since April. The rising spreads came as investors pulled about $8 billion from muni funds this year.
While Illinois’s credit outlook has improved, investors increasingly are showing a desire to raise cash and avoid risk in the $4 trillion municipal bond market, traditionally a credit haven, said Dan Solender, director of tax-free fixed income for Lord, Abbett & Co., which holds Illinois securities as part of $35 billion in muni debt.
“Illinois is an example of a large issuer with a lot of liquidity on the lower side of investment grade,” Solender said in an interview. “It kind of moves down faster at the beginning of a down market because it gets traded more actively.”
Illinois is underperforming the broader market. In February, the Illinois index fell 0.64%, the biggest decline among the largest state issuers in the Bloomberg Municipal Bond Index, which is down 3% this year. The Bloomberg Municipal Baa Index Total Return Index has fallen 3.5%.
Moody’s Investors Service upgraded the state to Baa2 from Baa3 in June, bringing it to two steps above junk. S&P Global Ratings lifted Illinois to BBB from BBB- in July, while Fitch Ratings raised its outlook to positive from negative, but kept it at BBB- given challenges including underfunded pensions.
The state’s 10-year bond spread on Feb. 25 reached about 106 basis points above AAA muni benchmark securities and is still hovering above 100 basis points. Those levels are the widest since April 2021, before Illinois’s first rating upgrade in two decades.
While the penalty is far less than the 4.4% in May 2020 during the early days of the pandemic, the increase is still a near-doubling from the low of 53 basis points in December. The difference in the penalty that Illinois pays over New Jersey, the second-lowest rated state, tripled to about 63 basis points this week from Dec. 1, when Illinois last sold bonds. New Jersey on Wednesday got its first ratings upgrade since 2005.
Carol Knowles, a spokesperson for the Governor’s Office of Management and Budget, said in a statement that the state doesn’t comment on day-to-day market fluctuations.
“When the muni market is hot, spreads compress, especially with the recent upgrade and positive outlook,” said Max Christiana, a portfolio manager for Belle Haven Investments, which holds $16 billion in muni assets including Illinois. “And then in a weak market, it tends to widen out quicker than other muni securities.”
The wider spread is due more to market technicals than the trajectory of Illinois as a credit, he said.
A rebounding economy has led the state’s revenue to top projections and federal stimulus money has eased strains caused by the Covid-19 pandemic. The state also has taken positive budgetary steps and its spreads still are tighter than in the past, said Molly Shellhorn, a senior research analyst for Nuveen, which holds about $1.4 billion in Illinois general-obligation debt as part of $230 billion in muni assets as of Dec. 31.
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https://www.bloomberg.com/news/articles/2022-03-03/illinois-spreads-widen-as-risk-shy-investors-exploit-liquidity?sref=dlv6Ue8o
Belle Haven Investments Awarded 4Q 2021 Top Guns Manager of the Decade Designations by Informa Financial Intelligence
Rye Brook, New York—February 18, 2022— Belle Haven Investments has been awarded with three PSN Top Guns Manager of the Decade distinctions by Informa Financial Intelligence’s PSN manager database, North America’s longest running database of investment managers. This is the third consecutive year that Taxable PLUS has been awarded Manager of the Decade in both the Core Fixed Income and US Fixed Income Universes. Taxable Ladder PLUS was awarded Manager of the Decade in the Core Fixed Income Universe for the second consecutive year.
“We are once again honored to have our two taxable strategies awarded Manager of the Decade by PSN” said Matt Dalton, CEO & CIO of Belle Haven Investments. “We will continue to stick to our disciplined approach that has allowed for this repeatable success.”
Belle Haven Investments’ Taxable PLUS and Taxable Ladder PLUS strategies were named Top Gun Manager of the Decade ratings, meaning these strategies had an r-squared of 0.80 or greater relative to the style benchmark for the latest 10-year period. Moreover, the strategy’s returns were greater than the style benchmark for the latest 10-year period and also standard deviation less than the style benchmark for the latest ten-year period. At this point, the top ten performers for the latest 10-year period become the PSN Top Guns Manager of the Decade.
Belle Haven Investments’ Taxable PLUS and Taxable Ladder PLUS are actively managed separate account strategies that invest in taxable municipal bonds, corporate bonds, agencies and treasuries.
The complete list of PSN Top Guns and an overview of the methodology can be located on https://psn.fi.informais.com/. For more details on the methodology behind the PSN Top Guns Rankings or to purchase PSN Top Guns Reports, contact Margaret Tobiasen at Margaret.tobiasen@informa.com
About BELLE HAVEN INVESTMENTS
Belle Haven Investments is an independent money manager specializing in separately managed taxable and tax-exempt portfolios. Belle Haven has been managing portfolios since 2002. The firm is uniquely committed to serving Consultants and Advisors along with the Institutions, Foundations, Family Offices and High Net Worth individuals whom they represent. The team's expertise and focus in the fixed income asset class has resulted in award-winning strategies. Belle Haven is a Registered Investment Advisor with the Securities Exchange Commission (SEC). For more information, please visit www.bellehaven.com
About Informa Financial Intelligence’s Zephyr
Financial Intelligence, part of the Informa Intelligence Division of Informa plc, is a leading provider of products and services helping financial institutions around the world cut through the noise and take decisive action. Informa Financial Intelligence's solutions provide unparalleled insight into market opportunity, competitive performance and customer segment behavioral patterns and performance through specialized industry research, intelligence, and insight. IFI’s Zephyr portfolio supports asset allocation, investment analysis, portfolio construction, and client communications that combine to help advisors and portfolio managers retain and grow client relationships. For more information about IFI, visit https://financialintelligence.informa.com. For more information about Zephyr’s PSN Separately Managed Accounts data, visit https://financialintelligence.informa.com/products-and-services/data-analysis-and-tools/psn-sma.
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https://www.prnewswire.com/news-releases/belle-haven-investments-awarded-4q-2021-top-guns-manager-of-the-decade-designations-by-informa-financial-intelligence-301487670.html?tc=eml_cleartime
Muni-Bond Buyers Join Commuters in Avoiding Public Transportation
Muni-Bond Buyers Join Commuters in Avoiding Public Transportation
By Romy Varghese
February 18, 2022, 11:12 AM EST
It’s not just rank and file commuters who are eschewing trains and buses -- so are municipal-bond buyers.
Barclays strategists Clare Pickering, Mayur Patel and Mikhail Foux advised clients to steer clear of bonds issued by public transit agencies, even as they touted some airport and toll road debt. That’s because of the systems’ weak ridership and the uncertainty of it reviving to pre-pandemic levels.
“Systems are even more dependent on federal support and significantly revived tax and fare collections to sustain operations and long term capital programs,” they said in a report Thursday.
The recommendation underscores the winners and losers of the pandemic trade. Even as some sectors such as airlines rebound from the depths of the initial Covid selloff in 2020, others remain under pressure. The embrace of remote work means less revenue for agencies as large as New York’s Metropolitan Transportation Authority and for those servicing less-populous areas.
“Smaller systems are also struggling,” said Dora Lee, director of research at Belle Haven Investments. She urged wariness of mass transit bonds without backstops such as a secondary pledge of special taxes. “It’s just that their shortfalls aren’t well in into the billions.”
While political leaders such as New York City Mayor Eric Adams exhort chief executives to bring bodies back behind desks, firms are facing labor shortages and the desire from their employees for flexibility. Less than a third of office workers were back in their buildings as of Feb. 9, according to an index of 10 of the largest U.S. business districts compiled by security company Kastle Systems.
In contrast, pent-up demand for travel and rising vaccination rates mean airports will fare better, S&P Global Ratings said in a report last month. The company expects U.S. enplanements returning to near pre-pandemic levels in the second quarter of 2023, but that mass transit will lag significantly. Its baseline scenario sees public ridership hitting only 75% of its previous volume by the end of 2024.
To be sure, the $69.5 billion in aid to transit systems from the federal government buys them time in avoiding a default. And if spreads widen enough, the Barclays strategists said that may even present a buying opportunity. But the aid will run out.
“Mass transit has always needed to rely on government funding to operate,” Lee said. “Once the infrastructure money runs out, they’ll have to figure out how to fill in the gaps again.”
— With assistance by Joseph Mysak Jr
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https://www.bloombergquint.com/business/muni-bond-buyers-join-commuters-in-eschewing-mass-transit