Essential service, health care, housing, and transportation offerings will dominate the primary market as issuers look to finance a variety of utility needs, hospital facilities, and road and housing projects in a week when new volume is pegged at $7.37 billion, according to Ipreo LLC and The Bond Buyer.
The first week of May will see almost double the supply of last week, which closed with the pricing of a revised $3.72 billion, according to Thomson Reuters.
Issuers sold just over $26 billion in municipal debt in April, down almost 30% from the $36.8 billion sold in April 2009, preliminary data from Thomson shows.
But this week gets a big boost with the California Department of Water Resources’ $2 billion sale of power supply revenue bonds on Wednesday.
It will headline the week’s negotiated activity and will be the third-largest tax-exempt offering in 2010, according to Thomson.
Book-runners Morgan Stanley, De La Rosa & Co., and JPMorgan will lead 25 selling group members and run a two-day retail order period today and tomorrow before the official pricing.
The full maturity structure was not available by press time, but state officials said they expected strong retail demand for bonds maturing between 2011 and 2022.
The DWR deal is expected to carry ratings of Aa3 by Moody’s Investors Service and AA-minus by Standard & Poor’s and Fitch Ratings. Fitch upgraded the credit from A-plus last Tuesday.
The deal will refund and restructure part of the debt portfolio created by the DWR’s landmark $11.3 billion issuance in 2002 in the aftermath of the California energy crisis.
Proceeds will be used to redeem outstanding variable-rate bonds, advance refund outstanding fixed-rate bonds, and pay associated swap termination payments, according to the preliminary official statement.
The bonds are secured by surcharges imposed on customers of the state’s three major investor-owned utilities.
In other utility-related deals, the Long Island Power Authority in New York will sell a total of $410 million of electric system general revenue debt in two separate deals this week — including its first-ever taxable Build America Bond issue.
The bonds will be priced by different underwriters on different days.
The larger of the pair is a $210 million BAB sale that will be senior-managed and priced by Citi on Wednesday, likely with long-term bonds structured to mature out to 30 years. The exact structure was still being determined late last week, according to LIPA officials.
Another $200 million of tax-exempts will refund senior-lien bonds and will be led and priced by book-runner Morgan Stanley tomorrow as variable-rate bonds with maturities of up to five years. The final structure was not available by press time.
Bonds from both deals are expected to be rated A3 by Moody’s and A-minus by Standard & Poor’s. Fitch rates the BABs A-minus and last week upgraded the tax-exempt bonds to A with a stable outlook from A-minus with a negative outlook.
LIPA plans to use the new-money proceeds for ongoing capital improvement and maintenance of its power transmission and distribution system.
Meanwhile, a $1.02 billion sale of health facilities revenue bonds will benefit the Sisters of Charity of Leavenworth Health System of Lenexa, Kan. JPMorgan will price the multi-state deal on Thursday.
The unenhanced, fixed-rate bonds will be issued in five separate series — $327 million and $277.5 million from the Colorado Health Facilities Authority, $202.8 million from the Kansas Development Finance Authority, and $101.8 million and $116.1 million from the Montana Facility Finance Authority.
The new bonds are expected to be rated Aa3 by Moody’s, AA by Standard & Poor’s, and AA-minus by Fitch.
Fitch also revised the outlook to stable from negative, and downgraded outstanding debt to AA-minus from AA last week.
Only the larger Montana series is a refunding, while the rest are all new money.
The proceeds from the Series 2010 bonds will be used to refund certain series of outstanding debt of the health system and its restricted affiliate, Exempla Inc.; refinance certain outstanding taxable debt; fund certain past and future capital expenditures; and pay costs of issuance.
The system includes 11 hospitals and four stand-alone clinics in California, Colorado, Kansas, and Montana.
Switching gears to transportation, the North Texas Tollway Authority will come to market with $400 million of subordinate-lien revenue bonds, a portion of which are expected to be issued as BABs. Series 2010 A will consist of zero-coupon, serial, and term bonds that are tax-exempt, and Series 2010 B will consist of a single BAB zero-coupon term.
Proceeds will help finance the new State Highway 161 toll project, which is a north-south thoroughfare on Dallas’ eastern edge in the heart of the metro area.
The bonds are slated for pricing by lead manager JPMorgan on Thursday. They will be rated Baa3 by Moody’s.
The deal will be the authority’s first project to have stand-alone financing as it is secured by monies in a capital improvement fund. Debt for all other projects is backed by toll system revenues.
Back in the Northeast, relatively sizable offerings from issuers in Massachusetts and Pennsylvania will round out the week’s negotiated activity.
The Massachusetts Housing Authority is planning to issue $250 million of multifamily housing revenue bonds in a Bank of America Merrill Lynch-led deal on Wednesday, after a retail order period on Monday and Tuesday.
The bonds are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch, but the structure was unavailable by press time.
The Pennsylvania Intergovernmental Cooperation Authority is expected to issue $205.7 million of special tax revenue refunding bonds tomorrow by lead book-runner Goldman, Sachs & Co.
The bonds are expected to carry ratings of Aa2 from Moody’s, AA from Standard & Poor’s, and AA-plus from Fitch. They are structured as all serial bonds maturing from 2011 to 2022 and will help finance Philadelphia’s funding program.
