Most issuers in the municipal bond market don’t have the luxury to postpone an expected bond sale indefinitely just because market conditions turn negative. For smaller issuers who issue bonds once per year, sales require a significant amount of time in planning and documentation. Other issuers may be borrowing to reimburse themselves for initial funding of a public infrastructure project.
Knowing that you have to come to market during a period of reduced liquidity, reduced investor demand, and yields trending higher, here are some steps that you can take to make to give your sale the best chance to succeed:
Communicate. Being transparent & accessible during periods of market stress is an important best practice. Working with counsel and advisors, issuers should develop a comprehensive plan to communicate with the market.
Uncertainty around the credit impact of coronavirus is top-of-mind for most investors. Issuers should use conference calls and roadshows to share how you’re measuring the economic impact of current events, how you’re addressing the financial effects, and when you expect to deliver more updates in the future.
Leverage Up-to-Date Data. We’re now in a period of remote work, which could extend for weeks or months. Like issuers, investors will be remote and laser focused on credit given the uncertainty over coronavirus. Make sure you provide as much recent public data and information as possible on your IR website or through voluntary filings to the MSRB’s EMMA website. This commitment to speed and thoroughness can help you earn the investor confidence that issuers are seeking in an uncertain time.
Plan Ahead. If you expect to be in the market soon, let investors know about your bond sale earlier than usual. With cash leaving the market after 60 consecutive weeks of inflows, investors are going to be much more selective. Don’t cut corners – get your POS released early, do a virtual investor roadshow or investor conference call, and be accessible to take questions or suggestions on preferred bond structures.
MuniLand abruptly pivoted to a buyer’s market from an issuer’s market in the past two weeks. Issuers can still access the market successfully. But to do so, they should take steps to reduce the uncertainty that’s currently driving investor decisions.