Articles are written for a 10th grade reader level. The reader does not know the difference between a debt coverage ratio and net equity concept. The SEC prosecutors use the term debt coverage ratio so maybe you should direct your comments to them.

The numbers you cite are not mine they are from other sources. But thank you for correcting them.

I specifically used the word “borderline junk bond” not junk bond. I also clarified later that the bond was downgraded to junk bond.

I believe you have misinterpreted the article. I have no idea what may come out in a court trial but the law is not only behavioral (you shot someone) but contextual (in self defense). I just tried to put what happened in context.

Is the SEC on an IRS like witch hunt? I have no idea. But it is a newsworthy topic because it is something the public is talking about.

Thank you for sharing your expert knowledge.

You have some facts stated incorrectly in this article. They are might result in some additional investigation on your part or corrections to your conclusions or theories.

First you write: “A debt coverage ratio is the amount of the prospective future rental income from the four hangars above the amount of bonds issued. It serves as a cushion in the event of an unanticipated downturn in the economy.” Not right. What you’ve described is a net equity concept — i.e., the value of leasehold for the the hangers is more than the principal amount of bonds outstanding, leaving equity to pay off the bonds in case the hangers need to be sold to cure a payment default on the bonds. Debt coverage is different and relates to the amount of lease revenues paid on the hangers above debt service on the bonds. Take a look in the Wall Street Journal’s glossary of business terms. It’s a handy tool. Security is always material to bondholders and needs to be clearly and correctly described to bond buyers.

Second,you say that it’s normal for an underwriter to make ten percent of the bonds raised. You quote investopedia, which is not the best available source. So you end up with an incorrect conclusion about underwriter compensation. Municipal investment banking fees in the 1/2% (at the low end for variable rate securities) to just under 2% on the high end (for certain fixed rate revenue bonds) are within the market’s historic and customary parameters. Also, you need to correct the math associated with your incorrect conclusion about underwriter compensation, since according to your numbers, the underwriters received 20% as a “spread” between the bid and ask on $13.3 million in bonds — i.e., $2.3ml in fees on a $13.3 million bond issue. That amount is akin to a private equity promote value, generally given by a private equity source to a manager of investments and/or operator of businesses. You might want to dig some more into what the SEC is questioning here, because excessive compensation is definitely up for debate.

Finally, BBB rated bonds are investment grade, not junk. Junk is below investment grade. Go online to Moody’s, S&P and Fitch and read the descriptions they each give for the dividing line between junk and quality.

A thank you to Russell Ryan for saying what so many of us familiar with the ways of the Securities and Exchange Commission have been thinking (“Why the SEC Needs ‘No-Admit’ Settlements,” op-ed, May 22). Mr. Ryan raises several points that have been lost in the debate about this issue. The matter of SEC resources is most often cited as a reason for retaining the “no-admit” policy, and with good reason. The SEC simply doesn’t have the staff or the resources to litigate all of the matters that would go to trial absent the option for no-admit settlements. Parties in SEC cases, as with all legal disputes, settle for many reasons wholly unrelated to actual liability. The SEC staff often threatens to file cases even when its position isn’t as strong as the agency might like. Some of those cases settle anyway, giving the SEC opportunities to further its programmatic agenda and send messages about appropriate or inappropriate conduct.

Absent the ability to settle these matters without admitting liability, those opportunities would be lost. The inevitable consequences would be fewer settled cases, fewer cases filed overall and many more trials, as defendants put the SEC to its proof rather than accept an admission of liability and the cascade of consequences such an admission might bring. No doubt, present critics of the no-admit policy would complain even more strenuously about that result.

Amy J. Greer

New York

Ms. Greer was chief trial council at the SEC’s Philadelphia office 2003-2008.

I