Expected Volume Dropping as Memorial Day Approaches

A handful of sizable deals will make their way to the primary market this week as the municipal market begins to show signs of the seasonal lull in volume that is typical ahead of the Memorial Day holiday next week.

Volume this week is expected to total an estimated $5.42 billion, compared with last week when the market saw a revised $7.50 billion in supply, according to Thomson Reuters. The sharpest decline in volume this week is represented by the drop in planned negotiated sales, which is estimated at $3.33 billion compared with a revised $6.04 billion last week.

While May has been relatively lackluster so far, April was a record month as its volume was revised to $51.5 billion after preliminary data indicated that monthly volume totaled approximately $43.8 billion.

As the recovery from the collapse of the auction-rate market continues, at least three of this week's larger deals consist of auction-rate conversions to fixed or adjustable-rate debt.

Kicking off the activity this week is a $541 million offering being issued by the Massachusetts Health and Educational Facilities Authority on behalf of CareGroup Healthcare System.

Citi is expected to price the deal on Wednesday with a structure that includes bonds maturing from 2009 to 2038. A portion of the deal will convert some of the system's outstanding ARS debt, including $68.5 million of Series 2004 C1 and $69.5 million of Series 2004 C2, both of which mature on July 1, 2025, as well as $49 million of Series 2004 D maturing on July 1, 2024.

The bonds are expected to carry ratings of A3 from Moody's Investors Service, and BBB-plus from Standard & Poor's.

In the transportation sector, Colorado's E-470 Public Highway Authority will come to market with a $422.1 million sale of revenue bonds on Wednesday.

Morgan Stanleywill price the deal, which is expected to be structured with fixed-rate serial bonds maturing from 2008 to 2024, as well as two put bonds in 2011 and 2013, each sized at $104 million, according to an underwriter at the firm.

The deal will be insured by MBIA Insurance Co., and has underlying ratings of Baa2 from Moody's and BBB-minus from Standard & Poor's and Fitch Ratings.

Two competitive deals, meanwhile, will provide investors sizable offerings in the Northeast and Far West.

Pennsylvania will issue $405 million of its general obligation debt in the competitive market tomorrow. The deal consists of $325 million of new-money bonds maturing from 2009 to 2028, and $80 million of GO refunding bonds that mature from 2008 to 2013.

The new-money proceeds will finance public building rehabilitation, community redevelopment, flood control projects, environmental protection projects, prison expansion and construction, as well a military compensation fund, among other purposes.

The refunding portion will retire $14.7 million of the state's Second Series 1998 bonds maturing in 2009 and $67.5 million of its Third Series 1998 bonds maturing from 2009 to 2013, according to the preliminary official statement.

The state's outstanding GO ratings are Aa2 from Moody's, and AA from Standard & Poor's and Fitch.

San Francisco is also expected to issue GO refunding bonds tomorrow when the city sells a two-pronged, tax-exempt and taxable offering in the competitive market.

The Series 2008 R1 portion will consist of $234 .2 million of tax-exempt GO refunding debt maturing from 2009 to 2021, while Series 2008 R2 will consist of $40.1 million of taxable GO refunding bonds maturing from 2009 to 2018. The city's bonds are expected to be sold with ratings of Aa3 from Moody's, AA from Standard & Poor's, and AA-minus from Fitch.

In other activity, Houston will come to market with $275 million of combined utility system first-lien revenue refunding bonds tomorrow. Expected to be priced by Goldman, Sachs & Co., the offering will convert the city's Series 2004C-1, 2004C-2A, and Series 2004C-2B auction-rate securities to adjustable rate.

The New Jersey Economic Development Authority will sell $200 million of school facilities construction bonds in a deal that is expected to be priced by Merrill, Lynch & Co. on Wednesday. The expected ratings include A1 from Moody's, AA-minus from Standard & Poor's, and A-plus from Fitch, and the bonds are structured to mature from 2009 to 2028 with a term in 2033.

Back in the health care sector, Merrill tomorrow is expected to price a $205 million conversion of auction-rate securities on behalf of the South Carolina-based Palmetto Health Alliance.

The deal will be insured by Financial Security Assurance and its structure was still being finalized at press time.

 

For reprint and licensing requests for this article, click here.
Buy side
MORE FROM BOND BUYER