Debt Payouts Capped by New York Bills
New York lawmakers have proposed two bills that would cap the amount of debt payments that can be made to bondholders. The bills, which are being pushed by Governor Andrew Cuomo, have been met with opposition from some of the world’s largest asset managers, including PIMCO and Fidelity.
Background of the Bills
The bills, which were introduced in the New York State Assembly and Senate in April, would limit the amount of debt payments that can be made to bondholders. The bills would also require local governments to seek approval from the state before issuing new debt.
The bills are part of a larger effort by Governor Cuomo to address the state’s fiscal crisis. The state is facing a budget deficit of more than $15 billion, and Cuomo has proposed a number of measures to reduce spending and raise revenue.
Opposition from Asset Managers
The proposed bills have been met with opposition from some of the world’s largest asset managers. PIMCO, Fidelity, and other asset managers have argued that the bills would limit their ability to invest in New York municipal bonds.
The asset managers have also argued that the bills would reduce the amount of liquidity in the municipal bond market, making it more difficult for local governments to access capital. They have also argued that the bills would reduce the amount of revenue that local governments can generate from issuing bonds.
Arguments in Favor of the Bills
Supporters of the bills argue that they are necessary to address the state’s fiscal crisis. They argue that capping debt payments will help local governments reduce their debt burden and free up funds for other priorities.
Supporters also argue that the bills will help ensure that local governments are not taking on too much debt. They argue that capping debt payments will help prevent local governments from taking on more debt than they can afford to pay back.
Impact on Bondholders
The proposed bills would have a significant impact on bondholders. Bondholders would be limited in the amount of debt payments they can receive, and local governments would be required to seek approval from the state before issuing new debt.
The bills could also have a negative impact on the municipal bond market. The reduced liquidity in the market could make it more difficult for local governments to access capital, and the reduced revenue from issuing bonds could make it more difficult for local governments to fund their operations.
Outlook
It remains to be seen whether the bills will be passed by the New York State Legislature. The bills have been met with opposition from some of the world’s largest asset managers, and it is unclear if the legislature will be able to overcome this opposition.
If the bills are passed, they could have a significant impact on the municipal bond market and on bondholders. The reduced liquidity in the market could make it more difficult for local governments to access capital, and the reduced revenue from issuing bonds could make it more difficult for local governments to fund their operations.