Muni-Bond Funds Burned Chasing Yield With Wood-Pellet Bankruptcy
- Almost $300 million of debt in default owned by biggest firms
- Muni-financed Louisiana plant couldn't hit production targets
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Wood pellets are made to be burned. It turns out a Louisiana facility that was built to make the pieces for power plants is doing the same to municipal-bond investors.
Invesco Ltd., Waddell & Reed Financial Inc. and AllianceBernstein Holding LP are among buyers left in limbo after Louisiana Pellets Inc., a subsidiary of the world’s biggest pellet maker in Germany, filed for Chapter 11 bankruptcy last month. After selling almost $300 million in municipal debt since 2013, it defaulted on some taxable bonds on Jan. 1 because its facility in a small lumber town struggled to ramp up output to the levels projected in initial offering documents.