For the past three years Wyoming’s County Treasurers and Municipalities have made stakes on high yield returns with taxpayer money. This has been done with a structured investment vehicle (SIV), called Wyoming Class. So far it has paid off. This has not always been the case.
Let us continue. “Think about Bernie Madoff or Sam Bankman-Fried also Michael Milken, the former”junk bond king” from the infamous “decade of greed”. If there were a Mount Rushmore of white-collar crime all three men might have a place.” This, from the opening paragraph, from a book review of, “Witness to a Prosecution” by Charles Gasparino.
Michael Milken was the head of the Drexel Burnham and Lambert high yield department. The high yield investment profits allowed for the destructive “leveraged buyout” mania in the 1980’s, the buyouts destroyed companies and lead to mass unemployment. His alliances and relationships with inside traders such as Ivan Boesky portrayed him as ruthless and unethical.
Milken invented the junk bond. Re-branded in 2011 as a high yield bond.
So has anything changed about a junk bond or the now “high yield” bond? Is it not still a role of the dice?
Wyoming Class is a structured investment vehicle (SIV). It is a special conduit for investing taxpayer’s monies, in asset-backed commercial paper (ABCP). ABCP is an investment in student loans, credit cards, residential mortgages, and car loans. Wyoming Class is a hedge fund with offices in Cheyenne, see wyomingclass, or contact Troy Hunsucker at (307) 222-3790 or Robert Casaceli at (307) 222-0884. Mr. Hunsucker and Mr. Casaceli are salesmen for this hedge fund. Wyoming Class has been operating in Wyoming for approximately three years. The parent company is Public Trust Advisors LLC which registered in Wyoming in 2015. Public Trust Advisors LLC office is located at 17 17th street suite 1850, Denver CO. The registered agent for Public Trust is Cogency Global Inc an international registered corporation.
What is commercial paper? It is an unsecured, short-term, debt instrument issued by corporations. It is typically used to finance short-term liabilities such as payroll, accounts payable, and inventories. Commercial paper is given at a discount from face value. It is a specific amount of money to be repay on a specific date. Terms of maturity extend from one to 270 days. KEY TAKEAWAYS: Commercial paper is an unsecured, short-term debt.
Wyoming Class invests in ABCP. Because the value of ABCP is tied to the underlying value of the asset, any disruption in the market for the underlying asset will impact the ABCP. ABCP is backed by securities; therefore, the perceived quality of the investment depends on the underlying securities. What will happen when the market value of the asset is reduced? Inotherwords, if student loans, credit card debt, car loans, and residential mortgages become depressed assets? You could potentially have several large ABCP programs selling their depressed assets at the same time. SIV sponsors may not be liable for the performance of the ABCP issued. ABCP is commercial paper and much more risky than traditional paper.
Institutional investors in Wyoming i.e. School Districts, Hospital Districts, Municipalities, County Commissions, can and do invest in ABCP, utilizing Wyoming Class. For example the Sheridan County Treasurer’s Office has invested $2.3 Million in Wyoming Class investments. The City of Sheridan has invested $17 Million in Wyoming Class. The reason why, is the interest rate return to the investor, and a short investment duration.
In accordance with W.S. 9-4-803 & W.S. 8-1-7 deposits of the investment funds are made in financial institutions (banks) which offer FDIC insurance. These banks are the custodians for interest bearing investments. Further commercial paper will have a maturity of not more than 270 days, rated by Moodys or by Standard and Poors, of the highest quality rating. Investments, as provided in W.S. 9-4-715(a), (d), and (e). Now we can say that local government entities, i.e. County, Municipalities, Schools, Joint Powers Boards, an any other local government entity can invest taxpayer monies in high risk investments.
In conclusion let us share this advice from Wyoming Class. “Any financial and/or investment decision should be made only after considerable research, consideration, and involvement with an experienced professional engaged for the specific purpose. Past performance is not an indication of future performance. Any financial and /or investment decision may incur losses.”
To join in on the dialog, contact sheridanclash@gmail.com.