Citi experienced great difficulties throughout the financial crisis but in the municipal world it was business as usual. The firm took top honors for municipal underwriting in each year of the tumultuous decade, capturing 14.4% of the market overall, according to data from Thomson Reuters.
Annual rankings show that Citi ran the books on 399 issues totaling $58.1 billion in 2009, giving the New York-based bank a 14.3% share of the market. The number of deals Citi closed fell 22% compared to 2008 but overall issuance sizes were larger and that allowed Citi to increase volume by 4.3%.
A close second in the overall rankings was Bank of America Merrill Lynch, which captured 13.6% of the market on 513 issues totaling $55.4 billion.
Impressive as that is, it doesn’t match 2008 when — acting as separate units before announcing the merger in September of that year — B of A and Merrill controlled 15.7% of the market share on 695 issues totaling $60.6 billion. Together that outweighs Citi’s share in 2008, giving B of A Merrill the top spot in Thomson Reuters’ chart, but as the merger didn’t officially take effect until Jan. 1, 2009, Citi never actually got knocked from its high ground.
In any case, last year Citi was a top-10 player in each municipal sector, but it was three particular areas that helped the firm retain its title.
Citi was senior manager on 97 general purpose deals worth a total of $22.7 billion in the year — 115% more than in 2008 — accounting for 17.7% of the market. In transportation, the firm managed 50 deals worth $10.0 billion, accounting for 20.5% of the market. And in health care, it absorbed 20.2% of the issuance pie, leading 83 deals amounting to $9.0 billion.
JPMorgan remained in third place as it ran the books on 387 issues for a total of $46.9 billion. The firm improved its market share to 11.5% in 2009 from 9.8% in 2008.
The 2009 rankings show that the biggest firms continue to dominate the market, in largely the same order.
Outside the merger of Merrill and Bank of America, it can be seen that each of the top nine firms in 2009 was in the top 10 in 2008. The only top-10 player of 2008 not to make it into the ranks last year was UBS Securities LLC, which mostly exited the public finance business in 2008, and as a result sank from the seventh spot in 2008 to 15th last year.
Indeed, for all the talk of large firms scaling back their operations and giving room for smaller firms to climb the ranks, the top eight firms accounted for 71.1% of all underwriting in the year, in line with the decade’s average of 71.9%.
However, there were some notable climbers. The most obvious was Ramirez & Co., which jumped to 20th place as it managed $2.7 billion of issuances last year from the 60th spot in 2008 when it managed $307 million.
The trend of the dominant few extends to the Build America Bonds program, which hit the market in late March as part of the Obama administration’s stimulus package.
In Thomson Reuters’ new category tracking stimulus-related issuances — 95% of which are BABs, while 4% are qualified school construction bonds and 1% are recovery zone economic development zone bonds, qualified zone academy bonds, or clean renewable energy bonds — Goldman, Sachs & Co. took command. The firm controlled 14.7% of the stimulus market on 36 issues totaling $9.9 billion. More than a quarter of all Goldman underwriting was for BABs, placing it fifth in the overall senior manager ranks.
Looking at the 2009 municipal market by sector shows two dramatic movements. Issuance of general purpose bonds advanced a whopping 59.7% in the year as underwriters managed 3,548 deals worth $128.3 billion. In contrast, housing-related issuance fell 40.4% from $17.4 billion in 2008 to $10.4 billion last year.
Meanwhile, in terms of selecting an underwriter, competitive deals rose nearly 9% in 2009, but the clear choice for issuers remains negotiated underwriting, which increased by 4.3% and accounted for 85.7% of all transactions.
The number one underwriter of negotiated deals was Citi with 15.6% of the market share. In competitive deals, by contrast, Citi placed only fifth as rival B of A Merrill grabbed 17.2% of the deals.
The top spot for small-issue underwriters — $10 million or less — went to Milwaukee-based Robert W. Baird & Co., which climbed from seventh in 2008. On 436 separate deals totaling $1.773 billion, Baird seized 7.8% of the market, bumping Morgan Keegan & Co. to second place with 6.2% of the market.
RBC Capital Markets, which was the top underwriter for small deals for 16 consecutive years through 2006, fell one spot to third in 2009 with a 5.7% market share.
In the rankings of financial advisers, Public Financial Management Inc. ranked first for each year of the decade. In 2009 it advised on 829 deals worth a total of $51.5 billion and controlled 16.4% of the market.
Notable movements in the financial adviser category include NW Financial Group LLC, which climbed from 113th in 2008 to 13th last year. The New Jersey-based firm advised on 17 issues totaling $3.8 billion in 2009, compared with just $264 million in 2008. In the other direction, Morgan Keegan fell from the top 10 to number 20 — the firm advised on 83 deals totaling $2.47 billion, about half of the prior year’s total.
Among issuers, the largest by far in 2009 was California. The Golden State sold $23.2 billion of munis last year, almost three times more than in the previous year. With 24 separate issues, the state took up 5.7% of the total market, far more than the number-two participant, the Dormitory Authority of the State of New York, which captured 1.8% of the market with $7.5 billion of deals.
California’s largest sale was so big it eclipsed the cumulative issue amounts from every other issuer in the country except one. On April 22, the state came to market with a $6.86 billion taxable deal — the fourth-largest single issuance in history. The transaction was priced by a syndicate led by Goldman, JPMorgan, Barclays Capital, and Morgan Stanley.
In the decade as a whole, California issued $90.4 billion in 105 separate deals — almost double the $48.8 billion issued by New York City, which ranked as the second-largest issuer in the decade.
