CDFA // BNY MELLON DE DEVELOPMENT FIN FINANCE WEBCAST SE SERIES - - PowerPoint PPT Presentation

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CDFA // BNY MELLON DE DEVELOPMENT FIN FINANCE WEBCAST SE SERIES - - PowerPoint PPT Presentation

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CDFA // BNY MELLON DE DEVELOPMENT FIN FINANCE WEBCAST SE SERIES Attracting Investors to Your Bond Deal The Broadcast will Begin at 1:00pm EDT Submit your questions in advance using the GoToWebinar control panel View previous webcast

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CDFA // BNY MELLON DE DEVELOPMENT FIN FINANCE WEBCAST SE SERIES Attracting Investors to Your Bond Deal

The Broadcast will Begin at 1:00pm EDT

Submit your questions in advance using the GoToWebinar control panel View previous webcast recordings online at www.cdfa.net

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Are you a CDFA Member?

Hello! Welcome to the webcast.

Members receive exclusive access to thousands of resources in the CDFA Online Resource Database. Create your unique login today at www.cdfa.net

Katie Kramer

Vice President Council of Development Finance Agencies Columbus, OH

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Join the Conversation

Listen through the telephone for best audio quality. Submit your questions to the panelists here.

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Attracting Investors to Your Bond Deal

CDFA Training Institute

12 courses in development finance designed for all skill levels. Learn more and register today at www.cdfa.net

Panelists

Da David id Sa Safer, , Mod

  • derator

Vice President BNY Mellon

Matt Pos

  • sner

Managing Director Municipal Market Advisors

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What are you reading?

Your development finance toolbox isn’t complete without a set of CDFA reference guides. Members save 15% on every purchase. Order today at www.cdfa.net.

Attracting Investors to Your Bond Deal

David Safer

Vice President BNY Mellon New York, NY

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Join CDFA Today

Members receive discounts to all CDFA events, including training courses and the National Summit. Join at www.cdfa.net , and start saving today.

Attracting Investors to Your Bond Deal

Matt Posner

Managing Director Municipal Market Advisors Concord, MA

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MMA

The Power

  • f Independence

Municipal Market Context A Discussion of

Market & Current Issues Municipal Market Advisors, Inc. (MMA) Matt Posner, Managing Director June, 2014

  • www. mma-research.com
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MMA

The Power

  • f Independence

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Bounce Back From Last Year

1.30 1.80 2.30 2.80 3.30 Recent Trends in Fixed Income Yields (%) 10YR UST MMA 5% 10yr

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MMA

The Power

  • f Independence

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Rolling 12-Month Issuance Lowest Since 2002

1.50 2.00 2.50 3.00 3.50 4.00 4.50 $150 $200 $250 $300 $350 $400 $450 $500 Jan-01 Feb-02 Mar-03 Apr-04 May-05 Jun-06 Jul-07 Aug-08 Sep-09 Oct-10 Nov-11 Dec-12 Jan-14 Yield (%) Issuance $B's

Municipal 12-Month Issuance v. MMA 10-Year Yield

10yr Municipal Yield Issuance 12-mo (ALL)

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Wisconsin – Trend Among Larger Issuers?

  • Locked in $278M refunding in 2015 through a delayed draw term loan.
  • Generated $19M in savings or 7%; and complied with refunding/tax rules

because of the delayed nature.

  • WI not alone: As much as $50 billion in 2013 alone with as much as $180

billion outstanding.

  • Pros: Issuer-friendly, avoids some regulatory costs, not reliant on

bank letter of credit

  • Cons: Lack of disclosure, increases reliance on banks, impact on

public finance industry

MMA

The Power

  • f Independence
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MMA

The Power

  • f Independence

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Liquidity Severely Constrained

100 200 300 400 500 600 700 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Monthly Par Traded ($B) Inter-Dealer Trades Customer Sells Customer Buys

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MMA

The Power

  • f Independence

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Market Strength Has Distorted Conditions – Issuers in Best Position

  • 40
  • 20

20 40 60 May-08 Jul-09 Sep-10 Nov-11 Jan-13 Mar-14 Basis Point Spread MMA Municipal Value Index Indicative 10-yr Spread Evaluated Barclay Index vs. MMA Median May, '08 - May, '14 (Last: -11 bps; H: 16; L -2)

Value for Investors Opportunity for Issuers

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MMA

The Power

  • f Independence

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Reinvestment and the Amount of Outstanding Bonds

0.0% 5.0% 10.0% 15.0% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec % of Annual Total

Municipal Reinvestment as % of Annual Total 2012-2014

2012 2013 2014

Source: Interactive Data Corp

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MMA

The Power

  • f Independence

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Municipal Investor Trends Shifting

  • 250
  • 200
  • 150
  • 100
  • 50

50 100 150 Households Money Market Funds Mutual Funds and ETFs All Banks All Other Change in Net Municipal Holdings, 2012-2014 ($B) 2014 2013 2012

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MMA

The Power

  • f Independence

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Bank Security Holdings - Pace of Municipal Ownership Waning Somewhat

  • 20%
  • 10%

0% 10% 20% 30% 40% 2q54 1q57 4q59 3q62 2q65 1q68 4q70 3q73 2q76 1q79 4q81 3q84 2q87 1q90 4q92 3q95 2q98 1q01 4q03 3q06 2q09 1q12

Annual Growth in Bank Holdings of Municipal Bonds

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MMA

The Power

  • f Independence

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But They Are Still Allocating To Municipals Over Other Assets

  • $20.0
  • $10.0

$0.0 $10.0 $20.0 $30.0 $40.0 $50.0 $B's

Bank Security Holdings 1Q14: QoQ Growth $B

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MMA

The Power

  • f Independence

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Mutual Funds Last Year

  • 60
  • 40
  • 20

20

  • 10.0
  • 8.0
  • 6.0
  • 4.0
  • 2.0

0.0 2.0 4.0 1/2 2/27 4/24 6/19 8/14 10/9 12/4 Cumulative Weekly ICI Muni Mutual Fund Net Inflows in 2013 ($B) Weekly Inflows Total Cumulative Inflows

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MMA

The Power

  • f Independence

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Mutual Funds This Year

  • $1

$1 $3 $5 $7 $9

  • $10.0
  • $8.0
  • $6.0
  • $4.0
  • $2.0

$0.0 1/2 2/27 4/24 6/19 8/14 10/9 12/4 Cumulative Weekly ICI Muni Mutual Fund Net Inflows in 2014 ($B) 2014 Total Cumulative Inflows

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MMA

The Power

  • f Independence

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Underlying Credit Conditions Are Improving

  • State Revenues Up 3% in 4Q: Slower than in prior quarters but total revenues are

above pre-recession peaks.

  • Local government revenues facing fewer cutbacks from the state; property taxes

are likely stabilizing with better real estate values.

  • Rating trends continue to diverge; massive upgrades at S&P.
  • Municipal defaults are much lower by number (higher by dollar value); still

concentrated on non-rated and risky-sector issuers.

  • Bankruptcy trends are more about headlines than bankruptcies.
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MMA

The Power

  • f Independence

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Perceptions of Credit Conditions Are Improving Rapidly

  • 28%

72%

  • 100%
  • 80%
  • 60%
  • 40%
  • 20%

0% 20% 40% 60% 80% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 NLC City Fiscal Conditions Survey, 2013: "Is City Better Able to Meet Fiscal Needs than Last Year?" Better Able Less Able

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MMA

The Power

  • f Independence

Page 15

Municipal Payment Defaults Continue to Subside

20 40 60 80 100 120 140 Jan FebMarAprMayJun Jul AugSep OctNovDec Number of Issuers Issuers Defaulting For the First Time: COUNT 2014 2013 2012 2011

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MMA

The Power

  • f Independence

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Chapter 9 Remains More About Headlines Than Bankruptcies

50 100 150 200 250 300 350 400 450 500 2/6/07 4/5/07 12/13/07 5/23/08 10/13/08 2/24/09 7/6/09 10/8/09 10/27/09 12/3/09 3/10/10 8/27/10 12/14/10 3/1/11 6/20/11 9/29/11 10/5/11 10/12/11 11/9/11 1/23/12 4/19/12 6/5/12 7/3/12 8/28/12 10/17/12 3/21/13 7/1/13 7/31/13 1/6/14 4/2/14 4/7/14 Debt Affected by Chapter 9 Bankruptcies ($M) City/County Special District JeffCo $4.2B Detroit $8.9B Stockton Harrisburg (thrown out) Connector 2000

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MMA

The Power

  • f Independence

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DC As the ‘X’ Factor

  • Tax Reform On the Radar
  • 60% chance tax-code changed to impact municipal securities over

next 5-years

  • Private investment vs. Public Finance
  • New Rules:
  • MCDC
  • Best Execution
  • IRS Price Guidance
  • Bank investments
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Case Study: Dallas/Fort Worth International Airport

MMA

The Power

  • f Independence

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$702 $752 $670 $680 $690 $700 $710 $720 $730 $740 $750 $760 Tax-Exempt 28% Cap

Total Debt Service Under Different Tax Scenarios ($B)

Issuer Cost

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MMA

The Power

  • f Independence

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Any Questions?

Matt Posner mposner@mma-research.com 212-433-5522 To Sign Up For Our Free Issuer report email or call.

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Audience Questions

Submit t you

  • ur ques

esti tions to

  • th

the e panel el now by usin ing th the e GoT

  • ToWebinar con
  • ntrol

l panel. el.

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Upcoming Events at CDFA

CDF CDFA Su Summer Sc School: l: Fundamentals of Economic Development Finance Course, Intro RLF Finance Course, Intro EB-5 Finance Course, Intro Tax Credit Finance Course, Intro Brownfields Finance Course August 11-15, 2014; Washington, DC In Intr tro Priv rivate-Public Part artnership Fin Finance WebCourse September 17-18, 2014; Daily: 12-5pm EDT See Seed & Venture Cap Capital l Fin Finance Cou Course November 19, 2014; Scottsdale, AZ

Register Online at www.cdfa.net

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Join Us for Future Webcasts CDFA // BNY MELLON DE DEVELOPMENT FIN FINANCE WEBCAST SE SERIES Tuesday, July 15 @ 1:00 pm EDT

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WWW.CDFA.NET / / WWW.BNYMELLON.COM

David Safer

Vice President 212-815-4959 david.safer@bnymellon.com

The material contained herein is for informational purposes only. The content of this is not intended to provide authoritative financial, legal, regulatory or other professional

  • advice. The Bank of New York Mellon Corporation and any of its subsidiaries makes no express or implied warranty regarding such material, and hereby expressly disclaims all

legal liability and responsibility to persons or entities that use this report based on their reliance of the information in such report. The presentation of this material neither constitutes an offer to sell nor a solicitation of an offer to buy any securities described herein.

Contact Us

Katie Kramer

Vice President 614-224-1316 kkramer@cdfa.net