• The Aquorn Team

Better Debt Management Can Lead to Higher Bond Ratings

City Managers have long known that they could create considerable savings for their residents by reducing the costs of borrowing, which depends in turn on good bond ratings. Now, in its release of a recent rating upgrade for the City of Los Angeles, Fitch Ratings has confirmed that strong debt management is a significant factor in that process. Quoted in the Bond Buyer, City Administrative Officer Richard Llewellyn, Jr., noted that “[t]his upgrade demonstrates the continued fiscal stewardship of the City by Mayor Eric Garcetti and the City Council. We are pleased that Fitch Ratings recognized our good management practices.” Good management extends not only to the administration of the City itself, but to its debt obligations. Bondholders need assurance from rating agencies that issuers have systems in place to insure the timely repayment of debt.

Managing public debt has gotten only more complex in the past few years. Pressures to improve transparency for stakeholders, to comply with changing continuing disclosure obligations, to meet various state and local deadlines respecting debt reporting and to satisfy GASB, all contribute to the energy at senior levels within an agency required to manage outstanding debt. Bond transactions generate considerable paperwork, even when the documents are not, strictly speaking, on “paper.” Senior staff may find themselves digging through hard copy files, looseleaf notebooks, redwells, bound volumes, CD collections and on-line transcripts in order to organize agency compliance with their legal documents. Over time, staff and finance team changes may create a disconnect that results in the loss of important information regarding agency debt.

Aquorn has created the first cloud-based platform – 1812.io – that provides a one-stop library of all the basic data surrounding debt obligations of its clients. By uploading debt details down to the CUSIP level, corresponding legal documents, information from interested parties lists and a master calendar of debt-related events, Aquorn has made it possible for senior managers to access all of this directly from a laptop. 1812.io permits an agency to designate staff, governing board members and even the public, to various data sets on the platform. The system is designed to help eliminate the chance that deadlines will be missed.

Managing agency debt by using 1812.io is a way for public agencies to demonstrate that they, too, deserve a ratings upgrade.