Now what happens - Munibond Alert Dissolution?

[Earl E Retyre]

I received an event alert indicating that there has been a "dissolution" of my Highland California Redevelopment Agency municipal bond. I tried calling Fidelity and of course the fixed bond desk is closed until next Tuesday. The bond is insured by AMBAC. Does anyone have any knowledge of what happens? Am I guaranteed back by principal? When?

 

[MichaelB]

California is allowing the redevelopment agencies to be closed. That is probably the "dissolution" mentioned in the notice you received. According to this article California RDA Law Upheld - The Bond Buyer Article there is no intention to default or not repay the outstanding obligations. Your bond should continue to be mature and pay coupons as agreed.

According to the state’s reading of the law, when the agencies are shut down, the money to pay debts would be put in a special fund and bondholders would get paid, said H.D. Palmer, a spokesman for the Department of Finance. In this year’s state budget, the state directed that $5 billion should go toward payments on the bond debt, Palmer said. The state expects to have $1.7 billion left after the bond payments are made to fund other state budget items. The state’s 400 RDAs have $20 billion of bonds outstanding.

The insurance is an additional guarantee. Relax and enjoy the weekend.

 

[Earl E Retyre]

Awesome. Thanks, Michael, for the quick reply.