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FMSbonds, Inc.'s Bond Forum™ is an exclusive opportunity for investors to submit questions and comments on the bond market or to respond to one of our articles.
To participate, just send us an e-mail. Be sure to include your name or initials and your state of residence. Posted e-mails may be edited for length and clarity. If you prefer a private response, please note that in your e-mail. Responses are provided by James A. Klotz, president and co-founder of FMSbonds, Inc., a municipal bond specialist for more than 35 years; Dr. Jay H. Abrams, chief municipal credit analyst; and other members of the firm as noted.
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I read your article, “A Cautionary Tale,” on the problems facing Jefferson County. I know their problems well. I was almost burned by New York and Denver (airport) bonds. However, they are less risky than corporates.- S.O.,Texas
We couldn’t agree more.
Why are Alabama’s bonds rated “AA” when Jefferson County is in bankruptcy and the bonds are worthless? It sure makes bond buyers reluctant to buy, or rely on the rating system. I’m a million-dollar muni bondholder.- J.P., Kentucky
The state of Alabama is rated in the “AA” category by both Moody’s and S&P because state’s obligations are very well secured.
It is Jefferson County, not the state of Alabama, that filed for bankruptcy.
There are, however, certain Jefferson County bonds that are backed by bond insurer Assured Guaranty Municipal Corp. (AGM) that also enjoy an “AA” rating.
Jefferson County’s bankruptcy was a disastrous option, but I can't help but wonder whether they had any other options. And even if they didn’t declare bankruptcy, wouldn't their services have deteriorated anyway because of their financial condition?- D.W., California
Jefferson County had a number of opportunities to negotiate settlements with its larger creditors and insurance companies willing to contribute billions of dollars to an orderly resolution and potential refinancing.
Despite the governor’s advice to the contrary, the county commission decided the easy way out would be to file for bankruptcy and "stick it to the creditors."
Our article, “A Cautionary Tale,” reflects the results of that decision.
This report is produced solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. This report is based on information obtained from sources believed to be reliable but no independent verification has been made, nor is its accuracy or completeness guaranteed.