New York mayor’s indictment may raise questions from investors

US Attorney’s Office files lawsuit against New York City Mayor Eric Adams on federal bribery, campaign finance and conspiracy charges .

Analysts say the charges come at a time when the city is heavily indebted and the course of the case could affect investor interest.

“I think people will definitely have questions about the alleged corruption and fraud,” said John Hallacy of John Hallacy Consulting. “How deep does it go?”

The mayor has said he will not resign and plans to defend himself at a hearing.

Hallacy said investors will know that New York City “isn’t going to go away” and that the mayor isn’t particularly interested in bond financing. Still, leadership issues and the scope of the accusations could complicate investment in the city.

“A given loan is not always driven by a single person, but it is too early to assess any real impact,” said Kim Olsan, senior fixed income portfolio manager at NewSquare Capital.

“Investors are pretty skeptical at first, and I don’t think they’ll be surprised,” Hallacy said. “I also don’t know if this will be the sole reason to sell the bonds. Although anyone who owns the bonds, especially their size, will be called out on what to do by their boards or relevant auditors because it’s in the news”

Hallacy said the city may need to file new disclosure documents for some of its agreements.

Perhaps the most sensitively timed deal is the sale of $1.5 billion in New York City general obligation bonds scheduled to be priced on Oct. 9, according to an online investor presentation that noted the timeline could change. This program will continue until Thursday afternoon.

$820 million of those bonds will be social bonds for affordable housing, one of Adams’ signature priorities. Press release In announcing the deal, Adams was mentioned alongside city Treasurer Brad Lander, who is campaigning to unseat Adams in the 2025 election and on Thursday. .

Mayor’s Office of Management and Budget and comptroller’s office to issue city bonds.

The deal is also taxable, so its market extends beyond the traditional market for those exempt from city taxes to a variety of institutional, out-of-state and international investors who read the dramatic headlines in a story. .

According to the presentation, BofA Securities will handle the accounting and Blaylock Van will be the joint lead manager; BofA declined to comment and Blaylock Van did not respond as of press time.

The indictment came amid another city deal in the period between pricing and closing.

The New York City Municipal Water Finance Agency this week set the price for $887 million in bonds and $102 million in recourse bonds in a deal scheduled to close Wednesday.

New York City is rated Aa2 by Moody’s Investors Service, AA by Fitch Ratings and S&P Global Ratings, and AA-plus by Kroll Bond Rating Agency. The city has $40.9 billion in GO debt outstanding, according to JP Morgan strategists led by Peter DeGroot.

“The impact, if any, of this development on the city’s credit is unclear at this time,” strategists at JP Morgan wrote. “However, we note that S&P’s local governance methodology indicates that S&P may consider a downward adjustment in management assessment in the event of ‘political gridlock or ongoing personnel turnover in key positions that adversely affects operations’ and/or ‘the existence of unusual financial or legal difficulties’ or fraud or like other criminal activities.'”

New York Governor Kathy Hochul power to dismiss the mayorAccording to The City, an online news publication Investigations surrounding Adams leading up to Thursday’s indictment. The city charter also provides for an “incompetence committee” of city officials who can remove a mayor, The City reported.

If Adams resigns or is removed from office, the city’s elected public defender, Jumaane Williams, will serve as mayor until a special election is held.

“Mayor Adams, like all New Yorkers, deserves due process, the presumption of innocence, and his day in court. But it is clear that defending himself against serious federal charges will require the significant amount of time and attention required to manage this process in a great city,” Lander said. He said in a statement Wednesday night.

“The longer it goes on, the worse it will get,” Hallacy said. “If it gets to some sort of resolution quicker, then I think it will be less of a problem. If it drags on, it becomes a bigger problem.”