The capital markets that lend, raise money for, and are directly or indirectly involved with municipal financing and acquisitions have undergone drastic changes, that have shifted the landscape, and forever altered the way that municipalities, public entities, state and local governments, and similar rated entities procure funds for their growth. This change has shifted the marketplaces where business takes place, which markets are regulated by the Municipal Securities Rulemaking Board, the information that is available on the Electronic Municipal Market Access, and how secondary market activities, such as practices that GetMunicipalFinancing.com provides to its clients, will help provide missing capital for public growth projects.
Why Direct Lending?
Currently, there exists gaps of hundreds of billions, if not trillions, of dollars for various municipal financing & refinancing projects across the United States. The depth and impact of these financing shortfalls will be truly felt and endured over the next few years, as loans mature, are extended, public debt increases, statutory debt limitations are enforced, and borrowing costs increase. The implications of state and local statutory debt limitations for municipal financing, including the legal consequences that are imposed on the myriad of public entities that are regulated by such restrictions, can seriously prohibit public construction and refinancing projects progress, vis-a-vis, their ability to provide basic services to the community. Counties, cities, universities, rated tenants, school districts, and similar entities have been actively seeking to increase the loan products they can access to meet their demands. Further, they have been engaging with markets that offer these municipal financing products, in order to reduce their reliance on primary market choices, such as municipal bonds and similar state and local securities.
Rated financing, as a form of direct lending, is simply the next logical evolutionary step in supporting public and private project development, energy, and refinancing requirements. Secondary markets are created by innovators, in some cases as a response to certain unintended consequences from legislation, such as the “Volcker Rule,” which was direct result of [the] Dodd-Frank Act, to bring balance and implement market inefficiencies in an effort to provide the best solutions, tools, and resources to achieve [theoretical] economic equilibrium. Nevertheless, Municipal Financing engages with our clients that have received, or are willing to pursue, an investment grade credit rating, from one of the major credit ratings firms. These firms (Fitch, S&P, and Moody’s) are the world experts at analyzing and underwriting credit risks for both public and private entities throughout the world and the United States. Their ultimate decision, as regards a credit rating of speculative to investment-grade, has a tremendous impact on that entities’ ability to borrow funds and operate their business – their decision to downgrade or upgrade can mean the difference of millions of dollars.