New GASB rules enhance transparency on conduit debt issuers’ commitment to pay

Source: Dan Seymour, Alexandra S. Parker, Moody’s, Sector Comment, Public finance – US, May 31, 2019
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On 29 May, the Governmental Accounting Standards Board (GASB) released Statement No. 91, establishing criteria for recognizing certain kinds of conduit debt that an issuer may pay but does not have to. The new accounting rule will require public finance issuers to declare annually whether they are likely to pay debt service on conduit debt, i.e., debt issued on behalf of a third-party borrower. The added transparency will benefit bondholders by clarifying what conduit debt is likely to be supported by the issuer and what debt is not, providing better insight into the credit quality of a large swath of municipal debt, including moral obligation bonds and certain appropriation-backed financings…..