Update on Municipal Bankruptcies and Multi-Notch Downgrades
The municipal market is experiencing a heightened awareness of credit risk in large measure due to high profile bankruptcies such as Jefferson County, Alabama and Harrisburg, Pennsylvania. Pressures on municipal credits have increased over the last several years, manifesting in two notable developments: the rare municipal bankruptcy filing, and the more common multi-notch downgrade. Samson purchases only high quality municipal securities and our strict credit criteria, grounded in our capital preservation approach, means our clients have not been exposed to any municipal bankruptcies. Nonetheless, as these events are shaping public perceptions of broad trends in municipal credit, we thought it timely to review these bankruptcies, the increased trend towards multi-notch downgrades, and how they relate to the realities of municipal investing today.