Alaska Bonds (Alaska Municipal Bonds)
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Municipal bonds are wonderful instruments for tax free debt obligations. Municipal securities are debt obligations issued by states, cities, counties and other governmental entities to raise money to build schools, highways, hospitals and other public facilities. Actually, offering municipal bonds is the primary way a US state and local governments borrow money to finance their cash flow needs.[br]
The majority of Alaska Bonds (Alaska Municipal Bonds) have tax exempt status. This is the primary reason investors accept lower interest payments than alternative instruments of borrowing. This makes the issuance of bonds an attractive source of financing to many municipal entities, as the borrowing rate available in the open market is frequently lower than what is available through other channels. The bonds are used for the development of local and national projects in cities like Anchorage and Juneau.
However municipal bonds carry some inherent risk factors. They can be:
· Payment risks
· Interest rate risks
· Market risks
Alaska Bonds (Alaska Municipal Bonds): Alaska Municipal Bond Bank Authority
The Alaska Municipal Bond Bank Authority is a public institution, headquartered in Juneau. The bank was established to assist Alaska municipalities that have difficulty in financing projects such as schools, highways, libraries, civic amenities and public parks. The bank was created by passing the Alaska Municipal Bond Bank Act (AS 44.85).
Generally, the Alaskan Municipal Bond Bank sells its bonds on the national market and utilizes the proceeds of its sales to purchase the bonds of Alaskan municipalities, thereby providing these municipalities with the funds for their capital projects. As municipalities pay principal and interest to the Bond Bank on their debt, the Bond Bank uses these payments to pay its debt to its bondholders.[br]
In 2004, the Bond Bank issued $ 482,000 to the cities of Seward, Craig, Nome, Petersburg and Valdez for some public development projects. In March 2003, the Bank issued bonds worth $17 million in obligation bonds to the cities Nome, Valdez and Petersburg, and to refinance existing bond issues for the cities of Craig and Seward. The bond had a 25 year maturity period. The coupon was determined at 3.77%.
In Oct 2009, Fitch had upgraded the Seward loan, the Ketchikan Gateway Borough loan, the Valdez loan, the Anchorage bank and the Juneau bank issued by the Alaska Municipal Bond Bank Authority to A+ from A.
