Fund infrastructure with local bonds
Investment in transportation, airports, conventions, etc
[This article was reported on "Radar M," a paid media outlet specializing in the capital market in Mail Business, on June 24 (10:39).]
Nubin Asset Management announced on the 24th that it has published a report highlighting the infrastructure expansion and the key role of local bonds in 11 U.S. World Cup host cities. Nubin's total operating assets amount to 1.4 trillion dollars (about 2,119 trillion won).
The report noted that the U.S. local bond market is successfully bridging the gap in local government infrastructure construction resources. It also diagnosed that local bonds are creating value by providing non-taxable profits to investors while reducing long-term benefits to local communities.
According to the report, hosting one World Cup game alone is estimated to cost about $100 million to $200 million. Federal government funds are being invested to support the preparation of the World Cup in the host city, but it is not enough to cover the entire cost.
Local bonds have emerged as a key means of filling the financial gap as the state and host cities have to raise much of the necessary capital investment on their own.
Host cities have raised low-interest funds essential for related projects such as transportation, accessibility, and stadiums through local bond markets.
According to the report, 11 host cities in the U.S. have invested funds secured by issuing local bonds in four areas: △ expansion of public transportation and land transportation networks △ improvement of airport facilities △ convention and broadcasting infrastructure △ urban connection and community infrastructure.
The report noted that host cities did not excessively increase their debt to build new stadiums. Instead, it is analyzed that the World Cup was used as an opportunity to take existing stadiums and infrastructure assets to the next level.
As a result, sound financial conditions and prudent financial management capabilities have become key indicators for determining whether the city can effectively accommodate additional demand following the World Cup. These cities are expected to be more attractive investment opportunities for local bond investors.
In addition, local governments that promoted the World Cup project in connection with long-term investment plans, not one-time expenditures, maintained an excellent credit rating. Through this, the local bond market is raising funds stably.
Representative examples of this long-term approach include Atlanta's investment in transportation infrastructure, Houston's airport expansion, and Seattle's extended opening of light rail.
In addition, the report advised investors to pay attention to the structure of local bonds. This is because the nature of the risk varies depending on the issuance structure. It is explained that identifying the stability of bond repayment resources is very important for credit rating.
Finally, the report evaluated that the World Cup served as an opportunity to show how important the local bond market plays a role in shaping Americans' lives and workplaces.
Host cities have transformed related infrastructure into long-term assets for local communities beyond responding to short-term demand called the World Cup through local bonds.
"At the end of the day, the most attractive local government is where it turns large events into responsible and sustainable capital investment opportunities rather than a one-time financial burden," said Daniel Close, head of Nubin's local bonds.
"Nubin continues to analyze structural trends affecting local bond creditworthiness across the market sector and select and provide very promising investment opportunities for institutional investors around the world," it added.
