Private Placements and the Cost of Borrowing in the Municipal Debt Market

Tima Moldogazíev, Robert A. Greer, Jekyung Lee

Research output: Contribution to journalArticle

Abstract

Private placements continue to be issued in the municipal debt market and remain a topic of interest for municipalities, investors, and regulators. Private placements are often sold without an underwriter to relatively sophisticated investors and are typically “buy-to-hold” transactions. Therefore, compared with traditional competitive or negotiated sales, there are fewer financial intermediaries and fewer regulatory disclosure requirements that accompany private placements. Savings on “flotation” costs can be substantial enough to make private placements a less costly method of debt offering. Conditional on selectivity in the method of sale and key market covariates, private placements offer lower arbitrage yields and issuance costs compared to both competitive and negotiated debt offerings.

Original languageEnglish (US)
Pages (from-to)44-74
Number of pages31
JournalPublic Budgeting and Finance
Volume39
Issue number3
DOIs
Publication statusPublished - Sep 1 2019

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All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics
  • Public Administration

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