Perspectives Blog

Detroit’s collateral damage

Ty Schoback, Senior Municipal Analyst | October 24, 2013

…ts. On October 1, the City of Detroit defaulted on its Unlimited Tax General Obligation (UTGO) Bonds. While the default was widely anticipated, it presents a good opportunity to follow up on our initial response to Detroit’s bankruptcy filing, and review any fallout the filing has had on the municipal market. Since Detroit filed for Chapter 9 bankruptcy on July 19, other local governments in Michigan have been hesitant to issue new bonds and pai…

Fear is not a strategy

James Dearborn, Head of Municipal Bonds | November 18, 2013

…know how exposed their portfolios may be. Bankrupt Detroit Detroit’s fiscal erosion has been slow and painful. Decades of financial and economic decline, exacerbated by dysfunctional politics, resulted in the city’s Chapter 9 bankruptcy filing in July. With around 100,000 creditors, including the city’s various pension funds, Detroit is the largest muni bankruptcy in U.S. history. While the filing surprised few muni market participants, news of t…

Municipal market ghosts of past, present and yet to come

James Dearborn, Head of Municipal Bonds | December 9, 2013

…f debate about large unfunded pension liabilities changed dramatically. It was an odd coincidence that Illinois legislators finally decide to confront a large and growing unfunded pension liability on the same day that a U.S. bankruptcy court judge in Detroit ruled that the state constitution provides no protection for pension benefits of the city’s current and future retirees. These two seemingly independent events will have long lasting implica…

A primer on preferred securities

Carl Pappo, Head of Core Fixed Income | March 10, 2014

…es carry attributes of both debt and equity securities. Preferred securities rank higher in the capital structure relative to common equity, as they have a priority claim on dividend payments and a higher claim on assets in a bankruptcy. Preferred securities generally offer higher yields than senior unsecured debt from the same issuer, reflecting their junior position in the capital structure, as well as the issuer’s ability to suspend or defer p…

New taxes require strategies to maximize after-tax return

Abram Claude, Vice President, Columbia Management Learning Center | March 18, 2014

…erral option for owners, key employees and professional partners if their corporate structure will not support a non-qualified deferred compensation (NQDC) plan. In addition, as a qualified plan, it provides both judgment and bankruptcy protection that an NQDC does not. Investors and financial advisors can take proactive steps to maximize after-tax returns in a higher tax environment where “what you keep” is an important investment concern. Learn…

Puerto Rico’s credit challenges intensify

Columbia Management Municipal Investment Team, | July 23, 2014

…lic Corporation Debt Enforcement and Recovery Act (“Act”) — undermines a long-held belief that the U.S. Territory will take any and all necessary actions to preserve its creditworthiness. At its core, the law is essentially a bankruptcy bill and we expect that the constitutionality of many of its provisions will be heavily litigated. While acknowledging the interrelation of on-island credit names, our assessment of the relative strength of Puerto…

Three reasons why REITs can continue to rally

Arthur Hurley, CFA, Senior Portfolio Manager | May 19, 2014

…limited to: Illiquidity and valuation complexities, redemption restrictions, distribution and diversification limits, tax consequences, fees, defaults by borrowers or tenants, market saturation, balloon payments, refinancing, bankruptcy, decreases in market rates for rents and other economic, political, or regulatory occurrences affecting the real estate industry. Dividend payments are not guaranteed. The amount of a dividend payment, if any, can…