Credit Work Is the Key Differentiator
For more than three decades, the Rochester team has proactively worked to create shareholder value by identifying attractive risk/reward trade-offs in yield-rich sectors.

When it comes to evaluating non-rated securities, our in-house credit team, led by Rich Stein, employs stringent credit criteria designed to help mitigate the asset class's inherent risks, and it remains focused on the ultimate outcome even when faced with new headline risk. To the benefit of long-term shareholders, the team's willingness to search the far corners of the muni market and to fight for the best-possible outcomes, no matter what befalls a given security, has helped establish our funds as strong, yield-focused competitors in what is often called a plain vanilla market.

Two sector stories below illustrate the work of our credit team and the positive impact on our funds: 

  • In 2009, St. Mary’s Hospital for Children needed a new facility in Queens, New York to treat medically fragile children whose conditions require more care than a traditional nursing home could provide but less than would be available at a typical acute-care hospital. Four of our funds – Oppenheimer Rochester AMT-Free Municipal Fund (OPTAX), Oppenheimer Rochester AMT-Free New York Municipal Fund (OPNYX), Oppenheimer Rochester Fund Municipals (RMUNX), and Oppenheimer Rochester High Yield Municipal Fund (ORNAX) – bought 100% of the $102 million bond in a private placement, one of our biggest. The bonds carried construction risk and also increased the financial leverage of the hospital, which already had a weak credit profile. As a result, the bonds had a 7.875% coupon at a time when interest rates in the U.S. were much lower. Over the years, donations and the demand for services have grown considerably, and the credit quality of our holdings has steadily improved; the roster of generous donors includes the multi-talented entertainer Nick Cannon, who is on the board and frequently visits the kids in Queens. It’s not every day that a shareholder or credit analyst can claim 6 degrees of separation from a superstar.
  • In 2007, Oppenheimer Rochester California Municipal Fund (OPCAX) purchased a portion of the TIF (Tax Increment Financing) bonds that are secured by incremental property tax revenues from a 1,230-acre TIF district in Riverbank, a primarily residential community near Modesto. The assessed valuation of the district – and thus its TIF revenues – declined sharply during California’s housing crisis, and the bonds incurred a payment default in 2012. Based on our credit work and our understanding of housing market cycles, we fully expected the district’s assessed value to rise, which it began to do in 2016. Debt-service payments resumed in 2017, all past due interest has been received, and principal payments to date have now surpassed those initially projected.

Well-researched securities, we believe, are central to the value proposition at Oppenheimer Rochester.

For additional examples of how solid credit analysis can benefit muni investors, read the full sector story in the 2018 Annual Overview.