When pressure on the muni bond market’s secondary market eases and the primary market re-opens for new-issue bonds, issuers in every sector will be facing a stark new reality: significantly higher interest rates, wider credit spreads, and credit reviews by rating agencies looming on the horizon.
Transparency, access to information, and the ability to communicate with key officials and staff are all paramount to manage a bond program as efficiently as possible in this new environment. With that in mind, issuers should take advantage of these three tools:
Dedicated Investor Websites: With all market professionals working remotely for the foreseeable future, consistently providing up-to-date interim financial information like monthly revenue collections or budget updates via an investor website is really critical. It will reduce uncertainty for investors in both the primary and secondary markets, and provide much-needed confidence that a steady stream of current data will be easily accessible in the future. These websites should be free and open to institutional investors as well as non-traditional and retail buyers. Disclosing your information once in a single location will also decrease administrative stress on your team, allowing you to focus on more strategic initiatives throughout the issuing process.
Investor Calls & Virtual Roadshows: The more progressive issuers in the muni market will follow best practices undertaken by corporate leaders over the last few weeks by speaking to investors as soon as data on the coronavirus’ credit impact starts to become available. This can include live conference calls or recorded, virtual roadshows – both are valued channels of communication for bond investors. An issuer can conduct calls on a regular basis – say, monthly or quarterly with key staff – which is another way of reducing the uncertainty gaps for the market. I also think that, in this environment, it would be very beneficial to include top officials like governors, treasurers, and mayors in these communications. Adding the support of these major officials has the power to reassure investors and signal they’re a top priority.
Streamlined Distribution Tools: Updates to the MSRB’s EMMA website are critical, and under certain circumstances, legally required. All issuers should work with their counsel to identify required updates to be made to EMMA while also looking for opportunities to make voluntary filings to EMMA as often as possible. To do this seamlessly, use technology that allows simultaneous posting of documents to an investor website as well as the compliance repository.
The lowest cost of capital is always going to flow to those issuers who provide current data to investors. In a challenging credit environment, this is going to be even more true. Using the tools and channels outlined above to share data will help ameliorate the pain of higher rates and wider spreads.