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The Handbook of Municipal Bonds


The Handbook of Municipal Bonds


Frank J. Fabozzi Series, Band 155 1. Aufl.

von: Sylvan G. Feldstein, Frank J. Fabozzi

121,99 €

Verlag: Wiley
Format: EPUB
Veröffentl.: 13.01.2011
ISBN/EAN: 9781118044940
Sprache: englisch
Anzahl Seiten: 1376

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Beschreibungen

In <i>The Handbook of Municipal Bonds,</i> editors Sylvan Feldstein and Frank Fabozzi provide traders, bankers, and advisors—among other industry participants—with a well-rounded look at the industry of tax-exempt municipal bonds. Chapter by chapter, a diverse group of experienced contributors provide detailed explanations and a variety of relevant examples that illuminate essential elements of this area. With this book as your guide, you’ll quickly become familiar with both buy side and sell side issues as well as important innovations in this field.
<p>Foreword xxxi</p> <p><i>Christoper “Kit” Taylor</i></p> <p>Preface xxxiii</p> <p>About the Editors xxxix</p> <p>Contributing Authors xli</p> <p><b>PART ONE The Sell Side: The Originators of Deals 1</b></p> <p><b>CHAPTER 1 The Central Place of States and Local Governments in American Federalism 3</b></p> <p><i>Richard Briffault</i></p> <p>The States 7</p> <p>The Complex Structure of American Local Government 12</p> <p>From Dillon’s Rule to Home Rule 17</p> <p>Forms of Local Government 19</p> <p>Metropolitan Governance 21</p> <p>Summary 23</p> <p><b>CHAPTER 2 An Overview of Investment Banking 25</b></p> <p><i>Herman R. Charbonneau</i></p> <p>Overview of Public Finance Banking 25</p> <p>Regional Broker-Dealer Firms 29</p> <p>Strategic Advantages for the Regional Firm 31</p> <p>Disadvantages Faced by the Regional Firm 34</p> <p>Importance of a Well-Defined Plan 35</p> <p>Recent Challenges 39</p> <p>The Outcome of Regional Banking Efforts 41</p> <p><b>CHAPTER 3 Role of the Financial Advisor 43</b></p> <p><i>William H. Wood</i></p> <p>Overview of Financial Advisors and Their Roles 43</p> <p>Financial Advisors in Negotiated Transactions 44</p> <p>Financial Advisors in Competitive Transactions 45</p> <p>Securities Dealers as Financial Advisors 45</p> <p>Independent Financial Advisors 46</p> <p>Pricing of Financial Advisory Services 46</p> <p>Details Regarding the Financial Advisor’s Functions 47</p> <p>Typical Advisory Services Provided In Connection with an Interest Rate Swap 48</p> <p>How to Hire a Financial Advisor 49</p> <p>Summary 50</p> <p><b>CHAPTER 4 Method of Sale in the Municipal Bond Market 51</b></p> <p><i>Jun Peng, Kenneth A. Kriz, and Tracy Neish</i></p> <p>Method of Sale 52</p> <p>Debate on the Method of Sale 57</p> <p>Historical Data on Use of Sale Method 62</p> <p>Summary 66</p> <p><b>CHAPTER 5 The Role of Bond Counsel in Public Agency Financing 69</b></p> <p><i>John L. Kraft</i></p> <p>History of Bond Counsel 69</p> <p>Review of Bond Counsel Opinion 70</p> <p>Further Tax Developments 75</p> <p>Disclosure and Securities Laws 75</p> <p>Recent Developments 76</p> <p><b>CHAPTER 6 The Role of Counsel to the Underwriters 79</b></p> <p><i>Mary G. Wilson</i></p> <p>Structuring 80</p> <p>Securities Laws 80</p> <p>Underwriting Documents 85</p> <p>Review of Other Bond Documents 87</p> <p>Blue Sky 88</p> <p>Opinion 88</p> <p>Summary 89</p> <p><b>CHAPTER 7 Summary of Federal Tax Requirements for Tax-Exempt Bonds 91</b></p> <p><i>Perry E. Israel</i></p> <p>Arbitrage 93</p> <p>Private Activity Bonds 108</p> <p>Other Miscellaneous Rules, Including Refundings 120</p> <p>Conclusion 125</p> <p><b>CHAPTER 8 The Role of the Municipal Bond Trustee 127</b></p> <p><i>James E. Spiotto</i></p> <p>The Nature of the Bond Trustee’s Duties and Responsibilities 127</p> <p>The Municipal Bond Trustee Preclosing 132</p> <p>Administration of the Transaction by the Bond Trustee 135</p> <p>Selected Challenges and Issues for</p> <p>Municipal Trustees Postissuance 137</p> <p>Summary 144</p> <p><b>Chapter 9: The Last Resort for Financially Distressed Municipalities 145</b></p> <p><i>James E. Spiotto</i></p> <p>Historically, Bankruptcy Has Been a Mechanism of Debt Adjustment in Other Countries 149</p> <p>Brief History of Municipal Bankruptcy Legislation in the United States 150</p> <p>Existing Municipal Bankruptcy Provisions 153</p> <p>Initiation of Chapter 9 Proceeding and Effect on Bondholder Rights and Remedies 156</p> <p>Unique Features of Chapter 9 161</p> <p>The Required Maintenance of Municipal Service during a Municipal Bankruptcy 163</p> <p>Labor Contracts Are an Important Element of the Municipal Budget Whose Status in Chapter 9 Has Been a Subject of Discussion 164</p> <p>Statute Governing the Rejection of Collective Bargaining Agreement in Corporate Context 165</p> <p>“Special Revenues” Pledged to Bondholders 166</p> <p>Payments to Bondholders Are not Preferences 168</p> <p>Use of Letters of Credit as Backing for Municipal and Conduit Obligations 169</p> <p>Plan of Adjustment for Municipality Time, Content, Impairment of Claims and Acceptance 170</p> <p>Postpetition Disclosure and Solicitation 174</p> <p>Acceptance of the Plan 175</p> <p>Confirmation of Plan 176</p> <p>Appendix: Chapter 9 Cases Filed as of February 8, 2007 180</p> <p><b>CHAPTER 10 Subnational Infrastructure Finance in the Emerging Markets: A Financial Guaranty Perspective 191</b></p> <p><i>Thomas H. Cochran, Anthony Pellegrini, David Stevens, Richard Torkelson, and David White</i></p> <p>The Development and Growth of Locally Denominated Contractual Savings Pools and Credit Markets 192</p> <p>The Devolution Revolution: Decentralization and/or Privatization Is Continuing in Virtually All Emerging Markets 195</p> <p>Developing Financially Sustainable Subnational</p> <p>Infrastructure Credits in the Emerging Markets 198</p> <p>Conclusions 222</p> <p><b>CHAPTER 11 The Role of the Rating Agencies 223</b></p> <p><i>Edward A. Rabson</i></p> <p>Moody’s Investors Service 224</p> <p>Standard & Poor’s 227</p> <p>Fitch Ratings 231</p> <p>Summary 233</p> <p><b>CHAPTER 12 Municipal Bond Refundings 235</b></p> <p><i>William H. Wood</i></p> <p>Refunding Overview 235</p> <p>Reasons to Sell Refunding Bonds 236</p> <p>Issues Relating to Structuring a Refunding Bond Issue 238</p> <p>When Should an Issuer Refund Prior Bonds? 242</p> <p>Refundings and Derivatives 244</p> <p>Competitive versus Negotiated Sale 246</p> <p>Conclusions 246</p> <p><b>CHAPTER 13 Public-Private Partnerships 247</b></p> <p><i>Robert H. Muller</i></p> <p>History 248</p> <p>The Process of Privatization 252</p> <p>Summary 261</p> <p><b>PART TWO The Sell Side: Distribution and Market-Making Roles 263</b></p> <p><b>CHAPTER 14 The Role of the Underwriter 265</b></p> <p><i>Christopher J. Mier</i></p> <p>The Underwriter’s Role in Context 265</p> <p>When Does the Underwriter Become Involved in the Process? 266</p> <p>The Lead-Up to Pricing 268</p> <p>Summary 271</p> <p><b>CHAPTER 15 The Roles of Traders and Brokers 273</b></p> <p><i>JonPaul Zaptin</i></p> <p>Traders 273</p> <p>Types of Traders 277</p> <p>Watching the Taxable Markets 278</p> <p>Trading Discipline and Mental Attitudes 278</p> <p>Who Becomes a Trader? 279</p> <p>Brokers 280</p> <p>A Word on E-Commerce 281</p> <p>Summary 281</p> <p><b>CHAPTER 16 Municipal Arbitrage and Tender Option Bonds 283</b></p> <p><i>Bart Mosley</i></p> <p>Relative Value—What “Should” a Municipal Bond Be Worth? 284</p> <p>How Municipal Arbitrage Works 286</p> <p>Where Does the Municipal Yield Curve’s Steepness Come from? 292</p> <p>Conclusion 294</p> <p>Appendix: Tender Option Bonds in a Nutshell 296</p> <p><b>CHAPTER 17 Interest Rate Swaps and Their Application to Tax-Exempt Financing 299</b></p> <p><i>Eric H. Chu, Craig Underwood, Thomas B. Fox, Jon A. McMahon,Roger L. Davis, Stephen A. Spitz, Albert Simons III, and George G. Wolf</i></p> <p>What Are Swaps and How Do They Work? 300</p> <p>Types of Swaps and Other Hedges 305</p> <p>Uses and Benefits 311</p> <p>Business Risks 315</p> <p>How to Acquire a Swap 317</p> <p>Legal Issues 323</p> <p>Tax Issues 326</p> <p>Documentation and Negotiation 333</p> <p>After the Close: Posttrade Management 337</p> <p>Appendix: Glossary of Key Terms 340</p> <p><b>CHAPTER 18 The Regional Firm: Its Customers, Traders, and Institutional Salespeople 345</b></p> <p><i>Mychele Lindvall</i></p> <p>Understanding “Regional” 345</p> <p>Trading 347</p> <p>The Regional Institutional Salesperson and Their Customers 351</p> <p>The Skills of the Salesperson 353</p> <p><b>CHAPTER 19 Changing Roles of Buyers and Sellers of Municipal Bonds: One Participant’s View 355</b></p> <p><i>William J. Darusmont</i></p> <p>Communications and Technology 357</p> <p>The Legal Opinion and Indenture of a Municipal Bond 357</p> <p>The Role of Credit Agencies 358</p> <p>Changes in Tax-Exempt Status 358</p> <p>Pricing Transparency 359</p> <p>The Buyers of Municipals 359</p> <p>Sellers of Municipal Bonds 360</p> <p>The Future as Prologue 362</p> <p><b>CHAPTER 20 The Depository Trust Company and Real-Time Price Transparency 365</b></p> <p><i>Sylvan G. Feldstein and David Ratner</i></p> <p>The Depository Trust & Clearing Corporation 365</p> <p>Summary 370</p> <p><b>CHAPTER 21 i-Deal/Ipreo: The Transaction Platform 373</b></p> <p><i>Allen Williams</i></p> <p>The Evolution of New-Issue Technology 373</p> <p>Order Entry 374</p> <p>The Issuer and Prospectus Delivery 375</p> <p>The Future 375</p> <p>Summary 379</p> <p><b>PART THREE Compliance Issues 381</b></p> <p><b>CHAPTER 22 The Municipal Securities Rulemaking Board 383</b></p> <p><i>Paul S. Maco and Jennifer Webster Taffe</i></p> <p>Organization of the MSRB and the Scope of Rulemaking Authority 385</p> <p>Professional Qualifications, Supervision, Recordkeeping and Compliance 386</p> <p>Uniform Practice Rules 388</p> <p>Municipal Market Transparency and the MSRB 390</p> <p>Fair Dealing and Suitability 391</p> <p>Municipal Securities Information Library 393</p> <p>Market Integrity 394</p> <p>Additional Information Regarding MSRB 396</p> <p><b>CHAPTER 23 The Role of the Securities and Exchange Commission 397</b></p> <p><i>Paul S. Maco and Cristy C. Edwards</i></p> <p>Framework of the Federal Securities Laws 399</p> <p>Application to Municipal Securities 407</p> <p>Rule 15(c)2-12 420</p> <p><b>CHAPTER 24 Sarbanes-Oxley and the Securities and Exchange Commission 425</b></p> <p><i>Paul S. Maco</i></p> <p>The Act 426</p> <p>Conclusion 446</p> <p><b>CHAPTER 25 Using Auditing Techniques to Develop Investment Adviser Compliance Procedures 447</b></p> <p>Kevin Reilly</p> <p>Getting Started 448</p> <p>Understanding the Process 448</p> <p>Document the Process 453</p> <p>Review the Process 454</p> <p>Revise the Process Documentation 456</p> <p>Summary 456</p> <p><b>CHAPTER 26 Rule 2a-7: Legal and Research Issues for Tax-Exempt Money Market Funds 459</b></p> <p><i>Stephen A. Keen and Leslie K. Ross</i></p> <p>Definition of a Tax-Exempt Money Market Fund 460</p> <p>General Requirements of Rule 2a-7 462</p> <p>Eligible Securities for Tax Exempt Funds 469</p> <p>Diversifi cation of Tax Exempt Funds Under Rule 2a-7 477</p> <p>Application of Rule 2a-7 to Municipal Securities 482</p> <p>Postacquisition Constraints Imposed by Rule 2a-7 496</p> <p>Summary 498</p> <p><b>PART FOUR Fixed Income Analysis of Municipal Products 501</b></p> <p><b>CHAPTER 27 Evaluation of Municipal Bonds 503</b></p> <p><i>Gerard Brennan</i></p> <p>The Need for Evaluations 503</p> <p>Tools of Evaluation 504</p> <p>Adjusting for Different Types of Municipal Bonds 507</p> <p>Other Considerations 507</p> <p>The Future of Municipal Bond Evaluation 511</p> <p><b>CHAPTER 28 Valuation of Municipal Bonds with Embedded Options 513</b></p> <p><i>Frank J. Fabozzi, Andrew Kalotay, and Michael P. Dorigan</i></p> <p>Underlying Principles 514</p> <p>Overview of Bond Valuation 514</p> <p>Valuation Model 516</p> <p>Specific Adjustments to the Valuation Model for Municipal Bonds 527</p> <p>Tax Adjustments to the Model 528</p> <p>Horizon Price 532</p> <p>Other Values Calculated from the Model 533</p> <p>Relative Value Analysis of Municipal Bonds 534</p> <p>Summary 535</p> <p><b>CHAPTER 29 Analyzing and Evaluating Tax-Exempt Indexed Floaters: Investor and Issuer Perspectives 537</b></p> <p><i>Yingchen Li</i></p> <p>Breakeven Equation for the Issuer 537</p> <p>Risk Analysis of LIBOR-Indexed Floaters 538</p> <p>Other Percent LIBOR-Indexed Floaters 539</p> <p>Percent BMA-Indexed Floaters 540</p> <p>CMS and BMS 541</p> <p>Percent CMS-Indexed Structures 541</p> <p>Risks of Percent CMS and Percent BMS 542</p> <p>Summary 543</p> <p><b>CHAPTER 30 Municipal Inverse Floating Rate Securities 545</b></p> <p><i>Cadmus Hicks</i></p> <p>Description 545</p> <p>Tax Treatment 546</p> <p>Computations 547</p> <p>Accounting Treatment 550</p> <p>Tender Option Bonds 551</p> <p>Summary 551</p> <p><b>CHAPTER 31 Analyzing Portfolios Daily 553</b></p> <p><i>Paul R. Daniels</i></p> <p>A Four-Level Framework for Portfolio Assets 554</p> <p>Credit-Level Analysis 555</p> <p>Basic Holding-Level Analysis 557</p> <p>Total Return Performance 562</p> <p>Simulations 564</p> <p>Portfolio Structure: Compliance and Targets 566</p> <p>Reporting 567</p> <p>A Secret Formula? 567</p> <p>Summary: 20 Ingredients for Success 568</p> <p><b>CHAPTER 32 Discovering Relative Value Using Custom Indices 571</b></p> <p><i>Daniel J. Garrett</i></p> <p>Intuitive Patterns 571</p> <p>Empirical Patterns 572</p> <p>Discovery 572</p> <p>Caveats and Disclaimers 575</p> <p>Conclusion 575</p> <p><b>CHAPTER 33 Municipal Bond Swaps 577</b></p> <p><i>Evan C. Rourke</i></p> <p>Description of a Bond Swap 577</p> <p>Tax Swapping 577</p> <p>Other Types of Municipal Bond Swaps 579</p> <p>Summary 580</p> <p><b>CHAPTER 34 The Tax Treatment of Municipal Bonds 581</b></p> <p><i>Martin J. Mauro and Philip Fischer</i></p> <p>Federal Tax Treatment of Municipal Bonds 581</p> <p>Calculating the Effective Tax Rate on Interest Income from Out-of-State Municipal Bonds 585</p> <p>Summary 588</p> <p><b>PART FIVE The Buy Side: Institutional Investors 589</b></p> <p><b>CHAPTER 35 Managing a National Municipal Bond Fund 591</b></p> <p><i>Alexander Grant</i></p> <p>The Investor Who Buys the Fund 592</p> <p>National versus State-Specifi c Funds 593</p> <p>Total Rate of Return 594</p> <p>Managing a Fund by Relative Value 595</p> <p>Issues of Coupon and Structure 596</p> <p>Traditional Buyers versus the Arbitrageurs 597</p> <p>Conclusion 598</p> <p><b>CHAPTER 36 Managing a High-Yield Municipal Fund 599</b></p> <p><i>Wayne Godlin, Jim Phillips, Bill Black, Barnet Sherman, Mark Paris, and Seth Horwitz</i></p> <p>High-Yield Borrowers 600</p> <p>High-Yield Municipal Bond Fund Track Record 601</p> <p>Credit Analysis 603</p> <p>Sector Allocation 603</p> <p>Trading Opportunities 604</p> <p>Story Bonds 606</p> <p>Opportunity Bonds 607</p> <p>Credit Improvement and Enhancement 607</p> <p>Derivatives 608</p> <p>The Use of Benchmarks 610</p> <p>High-Yield Municipal Fund Infrastructure 610</p> <p>Summary 611</p> <p><b>CHAPTER 37 Managing Municipal Bonds for Property and Casualty Insurance Companies for Total Return 613</b></p> <p><i>Karen Szerszen</i></p> <p>Business of Property and Casualty Insurance Companies 613</p> <p>Combined Ratio 614</p> <p>Total Return versus Benchmark 616</p> <p>Regulatory Factors 616</p> <p>Tax Risk 618</p> <p>Credit Risk 619</p> <p>Interest Rate Risk 622</p> <p>Conclusion 623</p> <p><b>CHAPTER 38 The Role of Hedge Funds in the Municipal Market 625</b></p> <p><i>Jonathan A. Fiebach</i></p> <p>Ratio Curves 626</p> <p>Hedge Fund Activity 628</p> <p>Conclusion 631</p> <p><b>CHAPTER 39 Managing Municipal Bond Portfolios for High-Net-Worth Investors 633</b></p> <p><i>Thomas P. Dalpiaz</i></p> <p>A Living, Breathing Human Being 633</p> <p>Emotional Ups and Downs 634</p> <p>Transparency 634</p> <p>Education 634</p> <p>The Starting Point 634</p> <p>The Client’s Existing Situation 635</p> <p>Uncovering Client Objectives 636</p> <p>What Is the Client Really Trying to Achieve in the Bond Market? 636</p> <p>Articulating Objectives and Setting Parameters 637</p> <p>Performance Measurement 638</p> <p>Uncovering Value in the Municipal Bond Market 640</p> <p>Confronting Interest Rate Risk 640</p> <p>Confronting Credit Risk 642</p> <p>Confronting Call Risk 642</p> <p>Confronting Liquidity Risk 643</p> <p>Yield Curve Analysis 644</p> <p>Bond Swapping 644</p> <p>Using Balance in Portfolio Construction and Reconstruction 645</p> <p>Portfolio Distributions 646</p> <p>Municipal Bonds: A Most Necessary Investment 646</p> <p><b>CHAPTER 40 Municipal Credit Default Swaps 647</b></p> <p><i>Frank J. Fabozzi</i></p> <p>Single-Name Municipal CDS Contract 648</p> <p>Uses of Municipal CDS by Portfolio Managers 652</p> <p>Second Generation of Credit Default Swaps 654</p> <p>Summary 655</p> <p><b>CHAPTER 41 Municipal Collateralized Debt Obligations 657</b></p> <p><i>Rebecca Manning, Douglas J. Lucas, Laurie S. Goodman, and Frank J. Fabozzi</i></p> <p>CDO Basics 658</p> <p>Muni CDOs 662</p> <p>Summary 663</p> <p><b>CHAPTER 42 Performance Attribution of Municipal Bonds 665</b></p> <p><i>Daniel J. Garrett</i></p> <p>Which Approach for Municipal Bonds? 666</p> <p>What Doesn’t Work for Municipal Bond Attribution 667</p> <p>The Better Approach for Municipal Bond Attribution 670</p> <p>Mathematics of Returns-Based Attribution 672</p> <p>Examples of Returns-Based Attribution for Municipal Bonds 677</p> <p>Client Stories: Applying Municipal Bond Attribution 684</p> <p>Summary 686</p> <p><b>PART SIX Credit Analysis 689</b></p> <p><b>CHAPTER 43 The Role of the National Federation of Municipal Analysts in Promoting Better Disclosure 691</b></p> <p><i>Lisa Good, Gerry Lian, Tom Weyl, Gregory A. Clark, and Gregory Aikman</i></p> <p>Summary of NFMA Initiatives 692</p> <p>The Special Importance of Disclosure 693</p> <p>A Detailed Look at the NFMA’s Recommended Best Practices 697</p> <p>Procedure for Developing RBP Documents 698</p> <p>The Mechanical Steps Used to Develop an RBP Document 701</p> <p>Current Issues and Challenges Facing the NFMA 702</p> <p><b>CHAPTER 44 A History of Modern Municipal Defaults 707</b></p> <p><i>James E. Spiotto</i></p> <p>Analysis of Defaults of Municipal Debt in the United States 707</p> <p>Lessons Learned from Troubled Municipal Financing 719</p> <p>Summary of Lessons Learned 726</p> <p>Rules for Survival 727</p> <p>Appendix: The Structure for Oversight and Emergency Financing 728</p> <p><b>CHAPTER 45 New Issues in Municipal Accounting 733</b></p> <p><i>David R. Bean and Dean Michael Mead</i></p> <p>Structure of Governmental Financial Statements 734</p> <p>Information Presented in Basic Financial Statements and RSI 735</p> <p>Summary 764</p> <p><b>CHAPTER 46 Managing a Buy-Side Municipal Bond Research Department 767</b></p> <p><i>Richard A. Ciccarone</i></p> <p>Assessment of Challenges 768</p> <p>Summary 777</p> <p><b>CHAPTER 47 The Role of an Activist Bond Analyst 779</b></p> <p><i>Arthur E. Schloss</i></p> <p>Activist Bond Analyst’s Approach to Improving Stressed or Deteriorating Credits 779</p> <p>Watchful Waiting 782</p> <p>Asset Preservation 783</p> <p>The Conference Call 783</p> <p>Covenant Waivers/Consultants 784</p> <p>Project Sale to External Buyer 785</p> <p>The Debt Service Reserve Fund 786</p> <p>Deleveraging 786</p> <p>Conclusion 788</p> <p><b>CHAPTER 48 How to Analyze General Obligation Bonds 789</b></p> <p><i>Sylvan G. Feldstein and Terry J. Goode</i></p> <p>The Issuer’s Debt Structure and Security for General Obligation Bonds 790</p> <p>The Issuer’s Budgetary Operations 796</p> <p>The Issuer’s Revenue Structure 801</p> <p>The Economy 802</p> <p>The More Important Debt Ratios 806</p> <p>Conclusion 807</p> <p>CHAPTER 49 General Analytical Framework for Assessing the Credit Worthiness of Revenue Bonds 809</p> <p><i>Sylvan G. Feldstein</i></p> <p>Limits of the Basic Security 810</p> <p>Flow-of-Funds Structure 810</p> <p>Rate, User Charge or Dedicated Revenue and Tax Covenants 811</p> <p>The Priority of Pledged Revenue Claims 811</p> <p>The Additional Bonds Test 811</p> <p>Other Relevant Covenants and Issues 812</p> <p><b>CHAPTER 50 How to Analyze Airport Revenue Bonds 813</b></p> <p><i>William E. Oliver and Daryl Clements</i></p> <p>Airport Ownership Structures 813</p> <p>Passenger Demand Characteristics 814</p> <p>Competition 816</p> <p>Use and Lease Agreements 816</p> <p>Gate Control 817</p> <p>Airport Management 818</p> <p>Conclusion 818</p> <p><b>CHAPTER 51 Land-Secured Bonds 821</b></p> <p><i>Ronald L. Mintz</i></p> <p>Advantages of Land-Secured Bonds 821</p> <p>General Characteristics of Land-Secured Bonds 822</p> <p>Credit Criteria 824</p> <p>Role of the Developer 832</p> <p>Disclosure 835</p> <p>The Land-Secured Bond Market 835</p> <p>Bond Structures 842</p> <p>Conclusion 843</p> <p><b>CHAPTER 52 Hospital Bond Analysis 845</b></p> <p><i>Lynn Cavallaro</i></p> <p>National Level Overview 846</p> <p>Local Level Review 850</p> <p>Hospital Level Review 851</p> <p>Transaction-Specifi c Risks 856</p> <p>Examples of Hospital Downgrades 857</p> <p>Conclusion 858</p> <p><b>CHAPTER 53 Single-Family Housing Bonds 861</b></p> <p><i>Kurt van Kuller</i></p> <p>The Appeal of Single-Family Bonds 861</p> <p>SF Bond Issuance Record in 2006 864</p> <p>Credit Strength of SF Bonds 867</p> <p>A Unique Basket of Call Options 871</p> <p>Prepayments in SF Bonds 872</p> <p>Municipal Prepayment Speeds 874</p> <p>Other Ways of Handling Prepayments 879</p> <p>PAC Bonds 879</p> <p>Discriminating between PAC Bonds 880</p> <p>Passthroughs 881</p> <p>Lockout Bonds 881</p> <p>Crosscalling 882</p> <p>The Ten Year Rule 884</p> <p>Universal Cap Regulations 886</p> <p>The Unused Proceeds Call 886</p> <p>Optional Redemptions in Single-Family Bonds 888</p> <p>Pricing Single-Family Bonds 889</p> <p>Concluding Remarks 891</p> <p><b>CHAPTER 54 Multifamily Bonds 893</b></p> <p><i>Kurt van Kuller</i></p> <p>Multifamily Bond Market Parameters 893</p> <p>AMT Penalizes the Sector 895</p> <p>Multifamily Supply Outlook Positive 897</p> <p>Volume Cap Constrains Bond Issuance 897</p> <p>Great Diversity of Issuers 897</p> <p>Abundance of Project Types 899</p> <p>Multifamily Bonds: Default Rates 901</p> <p>Multifamily Default Cycles 902</p> <p>An Array of Credit Enhancements 904</p> <p>The Low Income Housing Tax Credit 905</p> <p>FHA Insurance 905</p> <p>Risk Sharing: Superior FHA Program 908</p> <p>GNMA Backed Multifamily Bonds 909</p> <p>Project-Based Section 8 911</p> <p>FHA Section 8 Mark-to-Market 913</p> <p>Section 236 Interest Subsidy 914</p> <p>“Affordable Housing” Projects 915</p> <p>Tax Opinion Risks 916</p> <p>Multifamily Bond Redemptions 916</p> <p>Prepayments in Multifamily Bonds 918</p> <p>Other Call Options in Multifamily Bonds 920</p> <p>Conclusion 921</p> <p><b>CHAPTER 55 Tax-Exempt Electric Utility Debt 923</b></p> <p><i>Gary M. Krellenstein and Paul R. Bockwoldt</i></p> <p>Structure of the U.S. Electric Industry 925</p> <p>Cost of Electricity 933</p> <p>Charges for Service 934</p> <p>Credit Considerations 935</p> <p>Summary 939</p> <p><b>CHAPTER 56 How to Analyze Startup Continuing Care Retirement Community Bonds 941</b></p> <p><i>Edward C. Merrigan</i></p> <p>Accommodation and Service Options 941</p> <p>Residency Contracts 943</p> <p>Ownership, Governance, and Management 946</p> <p>Demand Analysis of Independent Living Units 947</p> <p>The Analysis of Advance Fee Deposits and Monthly Service Fee Prices 950</p> <p>Assisted Living Unit and Nursing Care Bed Demand Analysis 950</p> <p>Utilization and Fill-Up Expectations 951</p> <p>Financial Statement Analysis 951</p> <p>Ratio Analysis 952</p> <p>Legal Security Features and Covenant Considerations 953</p> <p>Continuing Disclosure 954</p> <p>Summary 955</p> <p><b>CHAPTER 57 How to Analyze Tobacco Bonds 957</b></p> <p><i>Gerry Lian</i></p> <p>Background 957</p> <p>Analysis of Structural Risk 964</p> <p>Analysis of Corporate Credit Risk 965</p> <p>Analysis of Cash Flow Risk 968</p> <p>Analysis of Litigation Risk 971</p> <p>Conclusion 978</p> <p><b>CHAPTER 58 Toll Road Analysis 981</b></p> <p><i>Robert H. Muller</i></p> <p>History 981</p> <p>Key Analytical Factors 984</p> <p>Conclusion 993</p> <p><b>CHAPTER 59 Water and Sewer Bond Analysis 995</b></p> <p><i>Brian Winters</i></p> <p>Structure 996</p> <p>Management 997</p> <p>Economic Base 997</p> <p>Financial Ratios 998</p> <p>Bond Security 1000</p> <p>Environmental Issues 1002</p> <p>Other Considerations 1002</p> <p>Conclusion 1002</p> <p><b>PART SEVEN Special Security Structures and Their Analysis 1005</b></p> <p><b>CHAPTER 60 Evaluating Tax-Exempt Commercial Paper 1007</b></p> <p><i>Maria C. Sazon</i></p> <p>Overview of Commercial Paper 1007</p> <p>Repayment of Commercial Paper Notes 1008</p> <p>Analyzing Various Sources of Repayment for Commercial Paper 1009</p> <p>Analyzing Commercial Paper without Enhancement 1011</p> <p>Summary 1012</p> <p><b>CHAPTER 61 The Use of Letters-of-Credit in Connection with Municipal Securities 1015</b></p> <p><i>Todd P. Zerega</i></p> <p>Overview of LOCs 1016</p> <p>Considerations in Reviewing a LOC-Backed Security 1019</p> <p>Conclusion 1023</p> <p><b>CHAPTER 62 How to Analyze Tax, Bond, and Grant Anticipation Notes 1025</b></p> <p><i>Sylvan G. Feldstein and Frank J. Fabozzi</i></p> <p>Two Major Purposes of Notes 1025</p> <p>Security Behind Tax and Revenue Anticipation Notes 1026</p> <p>Information Needed Before Buying Tax or Revenue Anticipation Notes 1027</p> <p>Summary 1029</p> <p><b>CHAPTER 63 How to Analyze Refunded Municipal Bonds 1035</b></p> <p><i>Sylvan G. Feldstein</i></p> <p>Pure versus Mixed Escrow Funds 1035</p> <p>What are the Reasons for Refundings? 1036</p> <p>Two Types of Refunded Bonds 1037</p> <p>Determining the Safety of the Refunded Bonds 1038</p> <p><b>CHAPTER 64 Pollution Control Revenue, Industrial Development Revenue, and Conduit Financing Bonds 1041</b></p> <p><i>Gary Krellenstein</i></p> <p>Security 1042</p> <p>Restrictions on Issuance and Refunding of PCR/IDR Debt 1044</p> <p>Call Features 1047</p> <p>Summary 1048</p> <p><b>CHAPTER 65 How to Analyze FHA-Insured Mortgage Hospital Bonds 1049</b></p> <p><i>Sylvan G. Feldstein</i></p> <p>FHA Hospital Mortgage Insurance 1050</p> <p>Credit Risk 1051</p> <p>The “Prudent Man” Evaluation Approach 1053</p> <p>Summary 1054</p> <p><b>CHAPTER 66 How to Analyze Higher Education Bonds 1055</b></p> <p><i>Bradley D. Mincke</i></p> <p>The Institution 1056</p> <p>Use of Bond Proceeds 1057</p> <p>Security 1058</p> <p>Degrees and Programs 1060</p> <p>Student Demand 1060</p> <p>Management and Governance 1064</p> <p>Faculty and Staff 1065</p> <p>Tuition and Financial Aid 1066</p> <p>Financial Statements 1067</p> <p>Endowment Funds 1072</p> <p>Plant and Facilities 1073</p> <p>Fundraising Abilities 1074</p> <p>Definitions of Certain Terms 1074</p> <p>Continuing Disclosure 1074</p> <p>Conclusion 1075</p> <p><b>CHAPTER 67 Analyzing Human Service Provider Bonds 1077</b></p> <p><i>Ruben Selles</i></p> <p>Milestones in the Development of Human Service Providers 1078</p> <p>Risk Factors Associated with Human Service Providers 1081</p> <p>Summary 1083</p> <p><b>CHAPTER 68 How to Analyze the Municipal Bond Insurers and the Bonds They Insure 1085</b></p> <p><i>Donald King Cirillo</i></p> <p>What Is Municipal Bond Insurance? 1085</p> <p>Municipal Bond Insurance Benefi ts 1087</p> <p>Additional Benefi ts of Bond Insurance 1089</p> <p>Types of Municipal Bond Insurance 1090</p> <p>Municipal Bond Insurance Providers 1091</p> <p>Other Municipal Bond Insurance Providers 1092</p> <p>Reinsurance 1093</p> <p>Telling the Difference 1094</p> <p>Financial Factors 1096</p> <p>Other Financial Factors 1097</p> <p>Other Businesses 1098</p> <p>Conclusion 1099</p> <p><b>CHAPTER 69 Student Loan Financing: Risk Evaluation Tax-Exempt and Taxable Markets Converge 1101</b></p> <p><i>Diane R. Maurice and Ankur Goyal</i></p> <p>Tax-Exempt Issuers and Privatization Trends 1103</p> <p>Systemic Shift-Risk Transference 1107</p> <p>Guaranteed versus Private Loans 1108</p> <p>Risk Profi le Evolves 1109</p> <p>Summary 1109</p> <p>Appendix: Recent Investigatory and Legislative Developments 1111</p> <p><b>CHAPTER 70 Analysis of Tribal Casino Bonds 1119</b></p> <p><i>Megan Neuburger, Michael Paladino, Jessalynn Moro, and David Litvack</i></p> <p>Issuer Credit Factors 1120</p> <p>Bond Structure and Security Features 1126</p> <p>Summary 1128</p> <p><b>CHAPTER 71 Understanding Variable Rate Demand Obligations 1129</b></p> <p><i>Mitchell Savader</i></p> <p>How VRDOs Work 1129</p> <p>The Need for Cash 1130</p> <p>The Role of Bond Insurance 1131</p> <p><b>CHAPTER 72 State Credit Enhancement Programs for School Districts and Municipalities 1133</b></p> <p><i>Harold B. Burger</i></p> <p>Types of State Credit Enhancement Programs 1134</p> <p>Assessing State Credit Enhancement Programs 1135</p> <p>Credit Enhancement Program Advantages and Disadvantages 1136</p> <p>Summary 1139</p> <p><b>CHAPTER 73 The ABCs of Charter Schools 1141</b></p> <p><i>Mitchell Savader</i></p> <p>Understanding Charter Schools 1141</p> <p>The Charter 1142</p> <p>The Relationship between Demand and Financial Success 1144</p> <p>Summary 1146</p> <p><b>CASE STUDIES OF INNOVATIVE AND OTHER SECURITY STRUCTURES CASE STUDY 1</b></p> <p>New York City Uses Taxable Municipals After 9/11 for Budget Relief and Affordable Housing 1149</p> <p><i>Emily A. Youssouf</i></p> <p>CASE STUDY 2 9/11, Subprime Loans, and the Magnolia Park Apartments Bond Default 1153</p> <p><i>Michael J. Ross</i></p> <p>CASE STUDY 3 Newport News Issues an Energy Savings COP 1161</p> <p><i>A. Theodore Palatucci</i></p> <p>CASE STUDY 4 Tax-Exempt Airport Finance: Tales from the Friendly Skies 1165</p> <p><i>James E. Spiotto</i></p> <p>CASE STUDY 5 Toronto’s Highway 407 1185</p> <p><i>William E. Oliver</i></p> <p>CASE STUDY 6 Disney’s California Adventure and Tax-Exempt Bonds 1191</p> <p><i>Hilary E. Feldstein</i></p> <p>CASE STUDY 7 Super Bowl XXXII Helps Resolve Bond Default 1195</p> <p><i>Bill Huck</i></p> <p>CASE STUDY 8 A Tax-Exempt Prepay Natural Gas Purchase Bond 1201</p> <p><i>Sandra McDonald</i></p> <p>CASE STUDY 9 Universal Studios Road Financing: First with Special Assessment Bonds and Second with Tax Increment Financing Bonds 1207</p> <p><i>Hilary E. Feldstein</i></p> <p>CASE STUDY 10 California’s Workers’ Compensation Insurance Crisis and the Financing of the California Insurance Guarantee Association 1211</p> <p><i>Anthony H. Fisher</i></p> <p>CASE STUDY 11 Dreamworks Tries to Issue Tax-Exempt Bonds 1215</p> <p><i>Rich Saskal</i></p> <p>CASE STUDY 12 Financings of the Medical University Hospital Authority of South Carolina 1217</p> <p><i>Joseph A. Spiak</i></p> <p>CASE STUDY 13 Niagara Falls Memorial Medical Center 1223</p> <p><i>Herman R. Charbonneau</i></p> <p>CASE STUDY 14 Aruba Airport Authority Airport Revenue Bonds 1227</p> <p><i>William E. Oliver</i></p> <p>CASE STUDY 15 Yankees versus Mets: A Subway Series 1233</p> <p><i>Mitchell Savader</i></p> <p>CASE STUDY 16 Good Swap, Bad Swap 1237</p> <p><i>Peter Shapiro</i></p> <p>CASE STUDY 17 Westminster-Canterbury of the Blue Ridge Continuing Care Retirement Community 1241</p> <p><i>Marie S. Pisecki</i></p> <p>CASE STUDY 18 Preserving Housing Affordability with Taxable Municipals 1249</p> <p><i>Emily A. Youssouf</i></p> <p>CASE STUDY 19 Massachusetts Sells LIBOR Index General Obligation Bonds with an Interest Rate Swap 1253</p> <p><i>Sylvan G. Feldstein and Patrick Landers</i></p> <p>CASE STUDY 20 Developing Hudson Yards with a $2 Billion Bond Issue 1257</p> <p><i>James McSpiritt</i></p> <p>CASE STUDY 21 Seminole Tribe Bets on Taxability 1263</p> <p><i>Joseph Krist</i></p> <p><b>APPENDIX A</b></p> <p>A Pictorial History of Municipal Bonds 1269</p> <p><i>Sylvan G. Feldstein and Peter O’Brien</i></p> <p><b>APPENDIX B</b></p> <p>Glossary of Terms 1291</p> <p><i>Mitchell Savader</i></p> <p>Index 1297</p>
"timeless and important...to all participants in the municipal bond market."--The Bond Buyer
<p><b>SYLVAN G. FELDSTEIN, P<small>H</small>D,</b> is a Director in the Investment Department of the Guardian Life Insurance Company of America, specializing in tax-exempt, taxable, and non-U.S. municipal bonds. Prior to this, he was a research manager and analyst at major Wall Street broker-dealers and a rating agency. A graduate of Columbia University, Feldstein has won the Analyst of the Year Award from the National Federation of Municipal Analysts in addition to authoring or editing four other municipal bond industry books. <p><b>FRANK J. FABOZZI, P<small>H</small>D, CFA,</b> is Professor in the Practice of Finance at Yale University's School of Management and the Editor of the <i>Journal of Portfolio Management.</i> In 2002, he was inducted into the Fixed Income Analysts Society Hall of Fame and, in 2007, was the recipient of the C. Stewart Sheppard Award given by the CFA Institute.
<p>Over the past twenty years, the municipal bond industry has seen enormous growth and undergone dramatic change. With more municipals outstanding than ever, it's fair to say that the municipal debt market continues to constantly evolve. <p>That's why you need a comprehensive guide covering this fast-changing field. In <i>The Handbook of Municipal Bonds,</i> editors Sylvan Feldstein and Frank Fabozzi provide traders, bankers, and advisors—among other industry participants—with a well-rounded look at the industry of tax-exempt municipal bonds. Chapter by chapter, a diverse group of experienced contributors will share their expertise in this area with you. <p>In addition to covering credit research, portfolio manage-ment, and critical legal and tax issues, this book will introduce you to a variety of new innovations in financial structures. These include credit default swaps, derivatives, tender option bonds, collateralized debt obligations, and much more. You'll also discover how to effectively implement these instruments in your everyday financial endeavors as well as learn why both buyers and issuers must pay close attention to the risks found within this evolving market. <p>Along with a comprehensive glossary of municipal bond terminology, this book also contains an extensive array of case studies that offer information on some of the most innovative and essential aspects of these bonds. The cases cover a wide range of topics arising from the 9/11 catastrophe, subprime loans, a major airline bankruptcy, and others. They are relevant for both buyers and issuers of municipal bonds. <p>Divided into seven comprehensive parts, <i>The Handbook of Municipal Bonds</i> provides detailed explanations and a variety of relevant examples that illuminate crucial components and essential areas such as: <ul> <li>The Sell Side: deals, distribution, and market-making roles</li> <li>The Buy Side: institutional investors</li> <li>Credit analysis</li> <li>Compliance issues</li> <li>Fixed income analysis of municipal products</li> <li>Special security structures and their analysis</li> <li>Bond Insurers</li> </ul> <p>Municipal bonds offer attractive opportunities for both retail and institutional investors. But to make the most of them, you need a firm understanding of the many elements that make up this market. With <i>The Handbook of Municipal Bonds</i> as your guide, you'll learn how to efficiently integrate "munis" into your investment portfolio.

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