A $1.5 billion general obligation bond sale from the Los Angeles Community College District shares the primary market spotlight this week with $900 million of BABs from Illinois, expected to price Wednesday after a two-week delay.
The two largest deals of the week are part of an estimated $5.63 billion in new, long-term volume, according to Ipreo LLC and The Bond Buyer.
A revised $1.28 billion was actually priced last week, according to Thomson Reuters, as volume fell during a four-day week curtailed by the July 4 holiday.
Amid lackluster new-issue activity, 30-year triple-A GO bonds saw little change and ended the week at a 3.99% yield at the close of trading last Friday, after beginning the week at 4% at the close of trading last Tuesday.
The largest deal of the week was a $399 million Virgin Island Public Finance Authority revenue bond sale that was snapped up for its triple-B rated subordinate-lien revenue bonds, which were priced with a 5 1/4% coupon and 5.30% yield in 2029.
It was the kind of opportunity income buyers have been longing for lately, according to Matt Fabian, a senior analyst at Boston-based Municipal Market Advisors.
“Although we have begun reporting some buyers getting comfortable with current low nominal yields, there is still more discomfort than otherwise as income buyers need to buy income,” Fabian wrote in his weekly outlook report.
“With liquidity low, there is and should be concern that should today’s marginal buyers back away, the market as a whole could need to reprice sharply to re-attract demand,” he wrote.
Back to this week, the Los Angeles college deal will be priced Thursday in two series — $875 million of BABs led by Citi, as well as $175 million of tax-exempt GOs priced by Morgan Stanley.
The bonds are rated Aa1 by Moody’s Investors Service and AA by Standard & Poor’s. The structure was not available at press time. Proceeds will be used to finance capital projects at the district’s headquarters, nine main campuses, and satellite locations. It also will pay the costs of financing and prepay $300 million of bond anticipation notes issued June 15.
The Illinois deal is planned for pricing Wednesday by Citi after state officials sidelined it for two weeks while the fiscal 2011 budget was being signed and implemented.
The financing will arrive amid ongoing fiscal stress for the state, even though its budget includes $1.4 billion in proposed spending cuts.
Illinois ended fiscal 2010 with 6.9% less sales taxes revenue and a 9.7% decline in income taxes. It is one of two states with the nation’s lowest GO ratings, the other being California.
The bonds, originally set to price the week of June 28, are rated A1 by Moody’s and A-plus by Standard & Poor’s and Fitch Ratings. The deal is structured with serial bonds maturing from 2011 to 2015 and term bonds in 2022 and 2035.
Switching gears to the Northeast market, the Maryland Transportation Authority is planning to sell $299 million of transportation facility project revenue bonds Wednesday.
The two-pronged deal will be senior-managed by Citi. It includes $287.1 million of taxable BABs maturing from 2018 to 2020 with term bonds in 2025, 2030, and 2040, as well as $12 million of tax-exempt bonds maturing from 2015 to 2017. All of the bonds are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch.
The tax-exempt bonds will be offered to retail investors tomorrow before Wednesday’s official pricing.
One of the week’s other sizable deals hails from Washington, where the Port of Seattle is planning to sell nearly $400 million of revenue refunding bonds, and another comes from Arizona, where the Water Infrastructure Financing Authority will sell $239 million of water quality bonds. Both deals are being senior-managed by Morgan Stanley.
The three-pronged Port of Seattle deal consists of $136 million of private-activity revenue bonds subject to the alternative minimum tax, $233.2 million of revenue and refunding private-activity, non-AMT bonds, and $25.2 million of non-AMT, governmental revenue and refunding bonds — all rated Aa3 by Moody’s and A-plus by Standard & Poor’s.
Proceeds will pay or reimburse costs of capital improvements to airport facilities, refund certain outstanding port bonds, make a deposit to a reserve account, and pay the costs of issuance.
The Arizona deal is rated triple-A by all three rating agencies and structured to include $139 million of water quality revenue bonds and $100 million of water quality revenue refunding bonds. Maturities were not available at press time.
Nearby, New Mexico will issue $200 million of one-year tax and revenue anticipation notes Wednesday in the short-term competitive market.
