Default Details

Summary

This bond is in Monetary Default.

Introduction

There are two types of defaults for municipal bonds. When an issuer actual misses making a scheduled principal or interest payment, that is known as a "payment or monetary default" or sometimes called an "actual default". The other type is a "technical default" occurs when there is an adverse event that has not yet resulted in any missed payments.

Description

An unscheduled draw on credit enhancement acts as an early warning feature for investors. It signals that the regular revenue stream that secures the bonds was insufficient to make the scheduled principal and/or interest payment when it was due. It signifies a financial weakness with the issuer and its operations that could be a precursor to a payment default.

Many bond issues have credit enhancement, generally from a bank or insurance company that provides a promise to pay any shortfall in principal and interest payments that may occur. If an issuer cannot make its required payment, and the entity providing credit enhancement makes the payment, while a payment default is avoided, it signifies that the regular revenue source that was intended to provide the funds to make the debt service payments is stressed or insufficient.

Risk

The value of the bonds under this scenario may or may not be impacted. If the market has faith that the entity providing credit enhancement will be able to continue to meet the payment obligations, then the bond will maintain its value. However, if the market does not have confidence that it will be able to continue the payments when due, then the market value of the bonds will go down.

Click below to view the Official Statement and Financial Disclosures filed for this bond issuer.