Chicago's $1 billion sale of third-lien revenue bonds for O'Hare International Airport will be the centerpiece of an otherwise relatively light post-holiday market this week.
The deal leads an estimated $3.05 billion of new issuance, according to Ipreo LLC and The Bond Buyer.
Last week, a revised $2.06 billion came to market, according to Thomson Reuters — slightly higher than the $1.43 billion originally expected but still one of the thinnest weeks so far this year. It was led by a $285 million Rochester, Minn., health care facilities revenue deal on behalf of the Mayo Clinic.
The hospital offering was priced on Wednesday by Bank of America Merrill Lynch with a final 2038 maturity with bifurcated coupons of 4% and 4 1/2%, priced to yield 3.49% and 4.22%, respectively — this at a time when the generic triple-A general obligation scale in 2038 yielded a 4.69%, according to Municipal Market Data.
The deal is rated Aa2 by Moody's Investors Service and AA by Standard & Poor's.
The O'Hare airport deal this week will finance projects under an ongoing $8 billion runway-expansion program. It is slated for pricing by book-running senior manager Citi on Tuesday for retail investors and Wednesday for institutions. Siebert Brandford Shank & Co. is co-senior manager.
The deal will be structured as three series: a 2039 term bond in Series A, serial bonds maturing from 2014 to 2021 and terms in 2031 and 2041 in Series B, and terms in 2031 and 2041 in Series C. The bonds are rated A1 by Moody's, and A-minus by Standard & Poor's and Fitch Ratings.
Fitch affirmed the A-minus third-lien general airport revenue bond rating and upgraded the passenger facility charge credit rating to A from A-minus. The move followed the city's decision last month to shift the structure on most of the upcoming transaction to GARBs from PFC bonds in order to ease the growing strain on coverage ratios for O'Hare's PFC credit.
Overall, O'Hare has $5.58 billion of third-lien GARBs outstanding.
In addition to the billion-dollar financing, Citi will also price a total of $53 million of PFC revenue refunding bonds for O'Hare on the same day.
That deal will be structured as $34 million of serial bonds subject to the alternative minimum tax that are slated to mature in 2017 and 2018 with a term bond in 2033, and $19 million of non-AMT bonds maturing serially in 2018 and 2019 with a term bond in 2032.
The PFCs are rated A2 by Moody's and A-minus by Standard & Poor's.
There are only two other somewhat sizable negotiated deals planned for this week.
A $353.5 million sale of revenue bonds from the Massachusetts Development Finance Agency on behalf of the Broad Institute is planned for Wednesday. The bonds are rated A1 by Moody's and AA-minus by Standard & Poor's. They will be priced by Morgan Stanley with a structure that includes $269.9 million of Series A tax-exempt bonds and $83.5 million of Series B taxable revenue bonds.
In addition, the Municipal Electric Authority of Georgia will issue $178.1 million of Project One subordinated bonds Series 2011 A, B, and C, which are taxable, and general resolution project-subordinated bonds Series 2011 A, B, and C, which are also taxable.
The bonds, which will be priced by Morgan Stanley, are rated A2 by Moody's, A by Standard & Poor's, and A-plus by Fitch.
