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Light in August: Preparing for the autumn ahead
August 13, 2018
It’s true. Things are all quiet on the muni front, with new issuance still sluggish. Some issues are pricing; a few active investors are circling; and a ton of cash (remember those redemptions?) is waiting on the sidelines. But this isn’t all bad news for issuers.
Now is a great time to make preparations for the potential sound and the fury of the fall market. The last four months of 2017 were especially vigorous, and while that’s unlikely again, we should at least get to witness improved issuance in the final third of 2018. Here are some things issuers can do to prepare to be part of the resurgence.
Make a Plan
It’s never too early to make a plan. Lay out your “wish list” for infrastructure investment. Think about how much you can afford to borrow, and what projects you will need to fund through the municipal market.
Let Investors Know
Municipal bond issuers can benefit greatly from enhanced investor outreach. Those who are devoting time and resources to the enhanced investor outreach initiatives, such as dedicated websites, can connect and communicate directly with bond investors. These platforms can enable issuers to provide more information to investors about who they are and what they do, including public documents and data, and make a social connection between the bonds and their capital projects. They can also provide a boost to the compliance aspect of issuer disclosure from a regulatory perspective. This type of enhanced investor outreach not only can enhance investors’ interest in the bonds, it’s also a great avenue to alert the market to your upcoming sale(s).
Tell Your Own Story
This is one of the most frequent conversations BondLink has with its issuer clients. It’s easy for issuers to continue the traditional idea of obtaining a rating from the agencies and pricing primarily based on that score. While the ratings have value, there’s so much issuers can do. Rating agencies will interpret an issuer’s financial position based on their own criteria, which can change over time. They may also emphasize one aspect of an issuer’s fundamentals and not another, perhaps sometimes removing issuer-valuable factors. The credit rating should only be part of the issuer’s narrative. An effective investor outreach program makes it possible to tell your OWN story to the market, rather than the ratings agencies being your main voice. Through enhanced disclosure & transparency, project updates and easy navigation, investors can deliver a more holistic – and hopefully favorable! – view of underlying creditworthiness. We’ve certainly seen enough academic research proving that the best disclosure can lead to improved pricing for both issuers and investors.
The Road Ahead
As the new issues calendar picks up more steam, having your house in order and utilizing available technology for your investor outreach can help you stand out from the pack. With the availability of channels to communicate directly with investors like investor websites, an issuer can do A LOT more than simply publish historical data in a POS. By letting investors know more about you, issuers can improve the chances of those investors being repeat and long-term. Enjoy the rest of summer!