Texas green energy probe threatens banks’ muni deals in state
Texas Attorney General Ken Paxton is sending shock waves through the state’s booming municipal bond market, leaving borrowers and bankers alike on edge.
At least two banks, RBC Capital Markets and Wells Fargo & Co., were dropped from underwriting muni deals since Paxton said last week that he was probing the energy policies of a group of finance companies given commitments they’ve made to cut greenhouse gas emissions.
The review by Paxton, a rising star in the state’s Republican Party, targets eight Wall Street bond underwriters, including JPMorgan Chase & Co., Morgan Stanley, RBC and Wells Fargo. The group has handled more than a quarter of the $51 billion of muni sales from Texas cities and localities in 2023, data compiled by Bloomberg show. Those banks are now at risk of losing business in the Lone Star State.
The borrowing wave, to pay for the infrastructure needs of a swelling population, has catapulted Texas past California atop the ranks of muni issuance this year, making it a lucrative target for Wall Street public finance desks. The review comes roughly two years after Texas GOP-backed measures taking aim at financial companies for their energy and firearm policies turned the market on its head.
Paxton’s office approves muni deals in the state. If it doesn’t green-light a transaction, the deal is effectively canceled and the municipality would have to restart the borrowing process. That threatens to drive up costs given the volatility of interest rates this year.
Some Texas borrowers are already taking steps to head off any complications. For example, Roanoke, a city near Dallas that sold $32 million of munis via auction this week, wouldn’t accept the bid of any entity subject to an unresolved or pending
Read more on investmentnews.com
