CWU is one of more than 300 bond holders that will be affected at 10:00 a.m. today when the City of Wenatchee defaults on $42 million in bond-anticipation notes that were sold to build the Town Toyota Center.
In June 2009 the bonds had a triple-A rating, one of Standard and Poor’s top picks. Municipal bonds are one of the most conservative investments one can make, with a default rate of .09%. CWU purchased $1.6 million in bonds, part of an investment portfolio of about $26 million that includes a wide range of municipal bonds, from Everett to Illinois.
For the past three days the legislature has been struggling to construct a bailout plan for Wenatchee, fearing a bond default could lower the credit rating of the entire state and call up memories of the state’s last default. The Washington Public Power Supply System defaulted on $2.5 billion in bonds in January 1982, the largest bond default in the history of the US and one that still causes investors to think twice about investing in WA municipalities.
State House budget leaders said that a bailout, though late, may still be possible. A House bill is up for consideration by the full House today. If approved it could move forward for a vote of the full Senate.
Meantime, CWU will consult with our assistant attorney general to determine options available if the legislature does not act.