Montana 2024 Republican U.S. Senate candidate Tim Sheehy. (Courtesy Tim Sheehy campaign)
In Billings, city residents are rightfully outraged by confusing and contradictory water bills. In the state’s Magic City, a new billing and software system has made a mess that has residents understandably peeved.
As much as I stand with that group and am irritated, sometimes, it’s helpful to look around and see: We may not have it so bad.
I don’t know that I’d necessarily trade places with friends in Gallatin County who, in addition, to seeing higher housing prices and taxes, may also see the cost of things like roads, pipes, water and buildings get more expensive for them.
As stories continue to mount about the fiscal questions and challenges of Bridger Aerospace, the company founded U.S. Senate candidate Tim Sheehy, it’s understandable that the world of municipal bonds, stock and collateral go over most people’s heads. Few have ever taken out, say, $160 million in loans, so it’s not surprising. But, it’s also important to realize that the success of Bridger Aerospace is linked to the financial fortunes of Gallatin County, and recent reporting by NBC News bears that out.
A tidal wave of money has crashed upon Montana in the U.S. Senate race, and the balance of power in Washington, D.C., remains intimately intertwined with Montana’s election between incumbent Democrat Sen. Jon Tester and challenger and Republican Sheehy. That race has consumed much of our — and the rest of Montana’s media — attention.
By now, there are just so many different Sheey-related angles: From a mysterious gunshot wound to an aerial fire-fighting company that is on questionable financial ground, to comments made about women, Native Americans, and Black children and the Department of Education.
One of the more intriguing pieces published recently came from NBC News and national financial reporter Gretchen Morgenson. She, like many of us, took a deep look at how the officials in Gallatin County put together the financial deal with Sheehy’s Bridger Aerospace, which he recently left as CEO and founder to concentrate on his senatorial aspirations.
For Sheehy, the timing appears both logical and perfect.
Morgenson’s reporting not only raises serious questions about the financial stability of Bridger Aerospace, but it has ramifications that could reverberate well past the election.
When Gallatin County signed off on issuing the $160 million of bonds, commissioners did so with the assurance that the county would not be on the hook in case of a default — something widely speculated about because of Bridger’s precarious cash flow position. That’s a nice way of saying: It appears the company is struggling to pay its debt, and has since been forced to lay off people in order to conserve cash.
The problem, as NBC, the Daily Montanan, and others have reported isn’t just that fire seasons weren’t quite as robust as Bridger had hoped, it’s that the bond payments are staggering. Earlier this year, as the stock price was already significantly below where it began, Bridger sold more stock, ostensibly to raise enough cash to pay the bond payments, which, for the record, the company said is current.
Those kind of maneuvers, not always clear to the average resident, signal to financial experts that the company may be struggling financially because selling more stock dilutes the value of those who have already invested.
But, all of that was previously known and fairly well documented.
Instead, NBC pointed out that despite Gallatin County’s claim that residents there will not be on the hook if Bridger crumbles, it wouldn’t be without consequences. The reporting points out that while these “conduit” bonds, which allow the county to help a private business borrow at more advantageous rates, happen in the name of investing in the community and economic growth.
In Gallatin County’s case, it was led to understand there’d be more jobs and more infrastructure at the airport. But Morgenson’s reporting shows that the number of jobs has fallen and the company had already fallen below its basic financial agreement thresholds before the bonds were even issued. Moreover, at least one of the two hangars that was scheduled to be built by the bond money hasn’t even broken ground. That means if the company does go under financially, there will be fewer assets to help make investors whole.
The reporting also points to a number of troubling financial facts about the company Sheehy started, including that he sold his own aircraft to the company at a handsome profit (he paid $3 million and sold it for $3.85 million). Also, more than two-thirds of the bond amount — $134 million — of the original offering went to pay a private equity company that had loaned Bridger money, paying off private investors, while leaving the new bond holders in an uncertain position.
A representative of Sheehy’s company claimed that decision was done to pay off a higher-interest debt with lower interest. But Sheehy still has not explained why the bond offering was even higher priced than a junk bond. Sheehy’s Bridger bonds were sold at more than 11% interest rate, while most “junk bonds” trade several points lower than that. In other words, even if you don’t believe any negative reporting about Sheehy’s finances, understand that bankers and investors would be told a lot about the risk involved with bonds sold at an 11% rate (an incredible rate of return…if you ever see a return).
While Sheehy’s business dealings raise the question of which investors would risk that much money even if it did return such a tidy profit, it also leaves the unanswered question: Why would Gallatin County commit to such a transaction?
That taxpayers aren’t on the hook if Bridger defaults that is true. However, it could mean that their own credit rating would take a hit because of Bridger. The NBC reporting also details other municipalities that suffered higher bond pricing because they had been too lax in trading diligence and oversight for the lure of economic development. Now, the county may have to pay more for its roads, its buildings and any upgrades to the rapidly expanding county.
Montana residents have been rightly confused about the intricacies of Bridger Aerospace, a company that Sheehy touts as a Treasure State success story.
But right now, Sheehy got the cash, the airplanes and the appearance of success, but Gallatin County is still waiting on the jobs, another hangar and it may have to face higher interest rates.
That makes Billings’ water issues look, well, like a drop in the bucket.