Municipal Bond Credit Analysis

Summaries

1. Tax-backed debt – secured by tax revenue
1. Issuer’s debt structure
2. Budgeting policy
3. Local tax and support from state government
4. Municipal’s socioeconomic environment

2. Revenue Bonds – repay by the revenue generated from the project
1. Any limitation to the revenue (profit margin has to be lower than certain level by law?)
2. Flow of the fund structures (make sure at the right priority)

                                                               i.      Revenue goes to Revenue Fund

                                                             ii.      Deduct operation

                                                            iii.      Deduct ordinary maintenance

                                                           iv.      Deduct debt services (here get the payment)

                                                            v.      Major repairs

                                                           vi.      Extraordinary maintenance

                                                         vii.      Go to Reserve Fund

3. Rate Covenant – how product/ service price is set
4. Can others preempt the flow of the fund structure?
5. Can they issue additional bond with claims against the same revenue?