US municipal borrowers are increasingly turning to private debt deals for funding, the FT reports, raising fears over hidden risks in public debt. Direct loans from banks and direct purchases of municipal securities by banks have enabled local borrowers to refinance billions of dollars of debt as public issuance has dropped. New Jersey officials are considering taking a $2.25bn ‘bridge loan‘ from JP Morgan to close the state’s cash shortfall, the Wall Street Journal adds. The interest rate is relatively low, but could shoot as high as 9 per cent if the state didn’t pay back the bank in six months, a person familiar said. Read more
A mergers and acquisitions lawyer and a stock trader were accused by federal prosecutors of masterminding a 17-year insider trading scheme that reaped $32m in illegal profits by stealing deal information from three corporate law firms, the FT reports. Prosecutors filed charges in a New Jersey federal court against Matthew Kluger, a former senior associate at Wilson Sonsini Goodrich & Rosati, and Garrett Bauer, a trader who worked at several proprietary trading firms, over the alleged scheme. Mr Kluger allegedly stole confidential information from Wilson Sonsini about deals involving high-technology companies including Oracle, Sun Microsystems, McAfee and 3Com, and passed tips to Mr Bauer through a third unnamed co-conspirator, with instructions on how many shares to buy, according to the Federal Bureau of Investigation. Read more
Mad, bad, and dangerous to know — the response from states to the idea of Congress pre-emptively legislating for their bankruptcy.
In Monday’s Wall Street Journal, EJ McMahon of the Manhattan Institute adds to the criticism, arguing that it could distract states from the essential task of pension reform. Read more
We have asked the question before and we will ask it again; what price Betfair, when it lists on the London stock exchange later this month?
Well, if these slides from Numis Securities’ pre-float marketing presentation is anything to go by £1.5bn looks to be the ball park figure. Read more
The US state of New Jersey has settled claims brought forth by the Securities and Exchange Commission that it mislead investors about the health of its two largest state pension funds, while selling billions of dollars of bonds. According to Bloomberg, the SEC accused the state of failing to put enough cash into its two biggest pension plans despite selling $26bn of bonds from 2001 to 2007. The Wall Street Journal reports state authorities settled the case on Wednesday without admitting or denying wrongdoing.The case becomes the first SEC fraud charge against a state and follows the creation of a unit set up this year to focus on municipal securities and pension funds. Read more
The state of New Jersey appears to have blazed a new trail, but hopefully it’s one that other states won’t follow:
New Jersey is the first state ever charged by the SEC for violations of the federal securities laws. New Jersey agreed to settle the case without admitting or denying the SEC’s findings. Read more
The stuff of cheap thrillers, this one. FT Alphaville reports that a Russian-Irish spy ring supposedly eyed the `global gold market’ in, err, New Jersey. The US complaint – part of a fast-developing spy story, allegedly involving various Russians, some of whom are said to have been operating under Irish names, includes accusations that certain ‘New Jersey conspirators’ used New York contacts to convey information on the market for the yellow metal. They also appear to have targeted an unnamed NYC financier. Read more
Those of you who enjoy a good interest rate swap debacle (Traders, Guns and Money-style) are in for a treat.
And Goldman Sachs conspiracy theorists especially. Read more
California and the New Jersey Turnpike Authority are among several issuers hoping investors will buy ‘Build America bonds’, a new form of federally approved funding unveiled earlier this month by the US Treasury
These bonds are intended to support the stressed municipal bond market, which has been hurt by the collapse of the bond insurance industry and by the disruption in the market for auction rate securities and variable-rate demand notes (VRDNs). Read more
No sooner has California narrowly survived one fiscal disaster – a short term funding crisis in early October that threatened state default – is it onto its next.
From the Governator: Read more