The Bond Buyer published a followup article discussing the recent trend in municipal bankruptcies. The aftermath of the 2008 credit crisis, the Great Recession and awakening to the impact of other post employment benefits (“OPEB” retiree health benefits) and pension promises are cited as key factors driving the increase in bankruptcies.
Real estate values in certain parts of the U.S. have rebounded, but in other areas values are still well below the peaks. Many municipal issuers issued significant debt during the period of increasing property values. With the decline in property values, debt to assessed or market value ratios have hit new highs. This has had a significant negative impact on municipal issuers, especially issuers of limited general obligation bonds.
