Gates Capital has a long history of involvement in both the primary and secondary markets for high yield municipal securities. We have established long standing relationships with a broad range of institutional clients including hedge funds, mutual funds and money managers whose primary focus is high yield municipals. As a result, our primary market banking clients enjoy a typically wide and active distribution capacity. Our credit experience includes independent and charter schools, healthcare entities, senior living, multifamily housing and certain corporate backed municipal issues.

In addition to our investment banking assignments which include new project financings, we have been active working with both investors and borrowers alike on restructurings and or debt exchanges. Our work here emphasizes bringing all stakeholders together to effect comprehensive, timely and prudent resolutions.

Additionally, we work actively in the secondary markets to identify client appropriate high yield opportunities offering credit insight and a reliable source of liquidity. Our knowledge of applicable covenant and security provisions is particularly important for this asset class. We are constantly looking for both relative value as well as total return opportunities including distressed situations where there may be upside due to credit evolution and or collateral liquidation. Finally, we offer evaluation services for illiquid and little known story credits.

We believe there is a strong investment case for many classes of high yield municipals, and for select portfolios, these bonds can offer attractive risk adjusted returns vs. other fixed income asset classes:

  • Average yield advantage over investment grade municipals of 250 basis points historically;
  • Relatively low default rates compared to corporate bonds;
  • Many high yield municipals enjoy a security structure that includes a collateral pledge on real property  and/or equipment.; and
  • Historically less correlated returns to U.S. equities.