Credit analysts are concerned with assessing the financial health of any organization that borrows money. The major means by which state and local governments borrow money to fund projects is municipal bonds. Municipal bond credit analysts examine the financial data that you have been learning about in this class. In fact, one of the best ways to learn how to evaluate the financial performance of a government is to examine what municipal credit analysts have to say about the health of the organization.
Electronic Municipal Market Access (EMMA) is an excellent resource for investors and others who are interested in state and local government debt and financial information. EMMA is an online service that provides a significant amount of free information about the current financial health of outstanding state and local government debt securities. Via EMMA, you can learn about what type of debt is outstanding for a government of interest, the debt’s characteristics, and the financial performance of the entity. EMMA can be accessed at http://emma.msrb.org/.
For this assignment, you will access the EMMA website to learn about municipal bond credit ratings in general and to more carefully examine debt securities that have been issued by a city in the state you chose for your Week 3 assignment.
To complete this assignment, first read Understanding Credit Ratings at http://emma.msrb.org/EmmaHelp/UnderstandingCreditRatings.aspx. Then research (find and read at least two scholarly articles that discuss) municipal bond credit rating to answer/discuss the following questions:
What is a credit rating and when is a credit rating issued?
What are the major differences between the different credit rating agencies and why do differences in credit scored assigned to a security sometime differ from agency to agency?
What is an official statement and what financial information is required in an official statement?
Next, using Browse Issuers on EMMA (http://emma.msrb.org/IssuerHomePage/Map), click on a state (the one you used for your Week 3 assignment), and then type your city (either the city you used in Week 2 or a city nearby) in the Find in results box. Click links in the list that interest you until you find an issuance that has a credit rating (for example, if you choose the state of Georgia, then type in Atlanta, then click the link for ATLANTA GA ARPT PASSENGER FAC CHARGE REV, then click the link for AIRPORT PASSENGER FACILITY CHARGE AND SUBORDINATE LIEN GENERAL REVENUE BONDS, SERIES 2010B, you will see that the issue with CUSIP 04780TBW3 has a rating of a rating of A from Fitch and a rating of A1 from Moody’s). So you know what you will be looking for in the issuance you want to choose, the link that lists this CUSIP is: http://emma.msrb.org/IssueView/IssueDetails.aspx?id=EP342770. Note: you cannot use the issue in this example even if you are from Georgia. You must find your own issuance.
What is the credit rating provided for the debt issue you selected? If there is no credit rating provided, choose another security or issuer. After you find a security with a rating, who issued the rating (if more than one, list all) and what is the rating (if more than one, list all)?
Was the debt initially issued at a premium or a discount?
Next, click the CUSIP number. Then open and browse through the Official Statement (you do not have to read the entire document; merely browse to find answers to the following).
What is the purpose of the debt and what is the source of revenue that will repay the debt?
Indicate any other financial information that was included with the official statement that you found to be particularly interesting.
Support your paper with a minimum of two (2) scholarly resources. In addition to these specified resources, other appropriate scholarly resources, including older articles, may be included.