For example, a debt service coverage ratio of 1.25 means that an issuer's revenue available to pay debt service must total at least 125 percent of the debt service actually owed. If revenues fall short, the issuer is in technical default. Others issuers have been forced to take drastic steps to avoid negative repercussions. Also, pricing and trading of flow-control related bonds in the secondary market has suffered. Trading volume in municipal solid waste debt securities is low.
Prices are depressed.
As a result of downgrades and erratic pricing, the market value of existing bonds has fallen substantially. The only way to prevent additional damage to investors is for Congress to act to preserve flow control authority for communities with bonds outstanding. Fortunately for solid waste bond issuers, dealers and investors, the effects of the Carbone decision on the municipal market are not as immediately acute or widespread as first anticipated. This is attributable to two factors. First, litigation challenging state and local flow control ordinances is pending in a number of states.