Special revenue bonds include resource recovery issues, pool bonds, stadium bonds and many other more esoteric forms of municipal bonds, according to Mark Piliero of Lehman Brothers, who repeated as the first-team American Analyst in the category during 1991.

He is best known for his extensive coverage of the resource recovery sector. Piliero has published reports and rating guidelines that not only includes issuers, but also industry participants, technology suppliers and regulatory aspects.

Over the past year the resource recovery sector continued its slow implementation.

"There are many variables and details to consider," Piliero said, "but analysis strips away the unimportant details to focus on the crucial factors that are key to the credit evaluation."

As a result, when a resource recovery plant is built, the focus is on the corporate event risks and teething problems.

Eventually, the facility becomes a fixture of a community's waste disposal system and a more stable credit.

He stressed that each resource recovery plant and issue must be considered separately.

For example the Bridgeport Resco Plant in Connecticut bears closer scrutiny, especially in light of the well documented troubles the state and city face.

Piliero noted that initially the Bridgeport plant would appear to receive about 25% of its revenues from the municipal waste disposal for Bridgeport. This concentration in revenues from any single source that has attempted to file for bankruptcy might give investors cause to be concerned.

But when all of the hauler fees that the facility receives are included, the plant only receives about 10% of its revenues from the municipal waste of Bridgeport. Thus, investors can hold the bonds without undue worry that if Bridgeport collapses so would the plant and their bonds.

"In general, resource recovery issues tend to trade a bit cheaper that comparable credits in a given state, such as water and sewer revenue bonds," Piliero said.

Blind Pools: Caution

"Investors should be very careful before buying blind pools for their portfolios," Piliero said.

Especially with the credit deterioration of the world's banking system, Piliero added, the terms and conditions of investment agreements for pool issues have come under scrutiny.

"Pool programs were designed to be an alternative means of funding and some have made loans - actually quite a few - so the loan participants must be flowed through in your analysis," Piliero said.

"The payment of debt service shifts from the borrower, say 75% to 25% loan participants."

In summary, "if you know what you are buying from a credit quality perspective, you can achieve rates of return," Piliero said.

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