The Week Ahead

Bay Area, Puerto Rico Bond Big

A $1.75 billion sale from California’s Bay Area Toll Authority will join a $1.4 billion offering of subordinate sales-tax revenue bonds from the Puerto Rico Sales Tax Financing Corp. to dominate the primary activity this week as the market prepares for an estimated $8.21 billion in new long-term volume, according to Ipreo LLC and The Bond Buyer.

Investors managed to digest most of a calendar last week that included the pricing of a revised $5.31 billion, according to Thomson Reuters, down slightly from the original estimate of $5.71 billion.

This week investors are expected to have an equally hearty appetite, especially as spring rollover season continues, according to Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott in Philadelphia.

“The calendar was pretty heavy this past week, but most new-issue deals cleared the markets,” he said.

“The underlying tone in the markets — both primary and secondary — has turned pretty positive, as it looks like there will be plenty of reinvestment demand in late June into July,” LeBas said.

Municipal yields rose between four and six basis points on the long end in the last week, depending on credit quality, according to Municipal Market Data.

This week’s toll authority deal in California is structured as taxable Build America Bonds and is slated for pricing on Thursday by Bank of America Merrill Lynch after a tentative retail order period planned for Wednesday.

The BATA revenue bonds are expected to be rated A1 by Moody’s Investors Service and A-plus by Standard & Poor’s. The proceeds will be used to ­finance the authority’s capital projects.

Led by Citi, the Puerto Rico deal is planned for pricing tomorrow and consists of current interest serial bonds maturing from 2036 to 2042, capital appreciation bonds from 2035 to 2040, and convertible bonds in 2035.

The Puerto Rico bonds, known by the Spanish acronym for the issuer, COFINA, are subordinate in payment to the senior bonds and parity obligations of the corporation, according to the preliminary official statement.

They are expected to be rated A1 by Moody’s and A-plus by Standard & Poor’s and Fitch Ratings.

The Puerto Rico sales tax financing “is one of the stronger credits on the island, and in the past, pricing has been attractive relative to risk levels,” LeBas said. “As a result of both market demand and interest in the specific credit, we believe the sale will fare relatively well.”

Elsewhere, issuers are planning large deals, such as the $516.2 million issuance of taxable BABs by the University of Texas System Board of Regents. The bonds, which are secured by pledged revenues, will be negotiated by Morgan Stanley tomorrow or Wednesday and are expected to be rated triple-A by all three major rating agencies, the preliminary official statement said.

The deal’s structured was not finalized at press time, according to a source at Morgan Stanley.

The Northeast is also expecting two sizable deals, the largest of which is $400 million of second-resolution water and sewer system revenue debt planned for tomorrow from the New York City Municipal Water Finance Authority.

The deal, which will be priced by senior book-running manager Morgan Keegan & Co., consists of taxable BABs structured as one maturity in 2042 that will have bifurcated coupons.

The coupon structure was not available at press time, according to the firm.

The authority’s second-resolution bonds are rated Aa2 by Moody’s, AAA by Standard & Poor’s, and AA-plus by Fitch. Barclays Capital, Jefferies & Co., M.R. Beal & Co., and Ramirez & Co. are co-senior managers.

A $250 million Massachusetts general obligation offering is also slated for pricing today by Bank of America Merrill following a retail order period that began on Friday.

Rated Aa1 by Moody’s, AA by Standard & Poor’s, and AA-plus by Fitch, the deal is structured with serial bonds maturing from 2011 to 2020.

Looking to the Southwest, the Texas market is gearing up for the pricing of two hefty deals, both slated for pricing tomorrow.

A $341.4 million GO refunding will be issued by the Texas Public Finance Authority.

The bonds, which are being priced by Barclays, are structured to mature serially from 2011 to 2030 and have ratings of Aaa from Moody’s, AA-plus from Standard & Poor’s, and AAA from Fitch.

Amid the series of long-term deals, three short-term note deals will also command attention this week — and one of them hails from Texas.

Harris County will satisfy its cash-flow needs tomorrow when it issues $450 million of tax anticipation notes rated SP1-plus by Standard & Poor’s and F1-plus by Fitch.

Meanwhile, an $838 million sale of Tans from Oregon expected on Thursday will dominate the short-term market.

The one-year negotiated note deal is expected to be priced by Citi and be rated MIG-1 by Moody’s, SP1-plus by Standard & Poor’s, and F1-plus by Fitch Ratings.

In addition, Idaho intends to round out the short-term activity with its sale of $500 million of one-year Tans in a negotiated deal being priced by Seattle-Northwest Securities tomorrow.

Last week, one of the largest deals priced was a $600 million offering of private-activity, tax-exempt senior-lien bonds from the Texas Private Activity Bond Surface Transportation Corp. Tuesday by Bank of America.

Rated Baa3 by Moody’s and BBB-minus by Fitch, the deal’s 2040 final maturity carried a 7% coupon and was priced to yield 7.25%.

At the time of the pricing, the generic, triple-A GO bond due in 2040 ended at a 4.08%, according to Municipal Market Data.


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