Municipal-bond investors are trading a record amount of debt from Napa County, California, in a sign that some may be concerned about damage from an Aug. 24 earthquake that was the worst to hit the area in 25 years.
County certificates of participation that mature from June 2016 to June 2020 all changed hands this week, data compiled by Bloomberg show. The 2016 and 2017 bonds traded Aug. 25 for the first time since they were issued in May 2012. A $1.1 million block of the debt due in 2020 traded the same day, an unprecedented size for the Napa securities, the data show.
The magnitude 6 temblor crumpled historic buildings, caused fires, cracked roads and injured more than 200 people. California Governor Jerry Brown declared a state of emergency because of damage and aftershocks in Napa and neighboring Solano and Sonoma counties. Napa County’s debt certificates are tied to property it leases, including its now-damaged courthouse, offering documents show.
The Napa County bond trades are probably “in direct response to the earthquake,” Kelly Wine, a senior trader at RH Investment Corp. in Encino, California, said by e-mail.
The lease payments that back the securities “will be subject to abatement during any period in which by reason of damage or destruction there is substantial interference with the use and occupancy by the county of the leased property,” according to offering documents for the refinancing.
Lease Payments
Proceeds from the initial deal in 1993 funded construction throughout the county, including work on a library, fire station and jail, offering documents show. The county makes lease payments to the Napa County Public Improvement Corp.
The documents also specify that “the county is under no obligation to provide insurance against loss or damage occasioned by the perils of earthquake or flood.”
Napa County Executive Officer Nancy Watt didn’t immediately respond to a voicemail message seeking comment on the bonds. Keith Caldwell, who serves on the county’s board of supervisors and authorized the offering documents, didn’t immediately respond to a voicemail and e-mail seeking comment on how the earthquake damage might affect bondholder payments.