Among the revelations emerging from the financial fiasco is that Insurance Companies reportedly have "issued policies guaranteeing so-called auction-rate bonds." Mike Boehm, "Mortgage Crisis Hits Cultural Institutions" (Los Angeles Times Online, Friday, March 21, 2008). Issuers of auction-rate bonds for construction projects in particular, are listed in the linked newspaper report as including the Los Angeles County Museum of Art, the Orange County [California] Performing Artscenter, and the Natural History Museum of Los Angeles County.
One of the Insurance Companies that used to issue Bond Insurance Policies for "auction-rate bonds" is reportedly the now imperiled Financial Guaranty Insurance Company. "With the bond insurance no longer ironclad, investors are demanding higher interest -- if they are willing to bid at all," it is reported in the newspaper article.
These troubles are leading Bond Issuers "to restructure the bonds or find bankers to vouch for them in lieu of the now-suspect bond insurers." One restructuring method currently being explored is negotiating with banks to back these construction Bonds with letters of credit.
Another financial alternative reportedly is to seek out County, State and other Government bodies which may have an interest in investing in these outstanding construction Bonds. For example, Los Angeles County is reportedly in such negotiations right now with the Los Angeles County Museum of Art and the Natural History Museum of Los Angeles County, both of which are governed separately from the Government of Los Angeles County.
In the meantime, other "cultural institutions" are moving forward with construction projects for which funding was obtained by issuing "unaffected fixed-rate bonds."
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