Muni Issuance, at $7 Billion, Digs its Way Out of the Sand

Issuance in the municipal bond market should make a resounding return to pre-storm levels this week.

As the effects of Hurricane Sandy recede and more underwriting operations in the New York metropolitan area affected by its wrath return to full capacity, volume numbers were expected to recover. Municipal bond volume for this week should total an estimated $7.06 billion, up from a hurricane-pared $1.66 billion last week.

The heftiest deals on the week hail from the negotiated side of the calendar, where the Metropolitan Transportation Authority leads with an expected $350 million transportation revenue bond deal.

Some of the deals expected this week were originally scheduled for last week, prior to Hurricane Sandy’s arrival. Because of the storm, most of last week’s deals from underwriters based in the New York metropolitan area were postponed until this week or for the near future.

Underwriters said they anticipate this week will be busy. They expect deals to price even on Election Day Tuesday.

The numbers show that there are $5.75 billion in muni bonds scheduled for negotiated sale this week, up from $1.16 billion sold last week. Bonds scheduled for competitive sale this week total an estimated $1.31 billion, up from $494.3 million sold last week.

The heftiest deals hail from the negotiated side of the calendar.

The Metropolitan Transportation Authority leads issuers. Siebert Brandford Shank & Co. expects to price $350 million of MTA transportation revenue bonds.

The bonds are rated A2 by Moody’s Investors Service and A by both Standard & Poor’s and Fitch Ratings. A retail order period is expected Wednesday; institutions should have a shot at the credits one day later.

Morgan Stanley is expected to price $296.8 million of Utah Transit Authority subordinated sales tax revenue and refunding bonds. The bonds are rated A1 by Moody’s, A-minus by Standard & Poor’s, and A-plus by Fitch.

The credits should arrive Tuesday, structured as both serials and terms.

JPMorgan should price $278.8 million of California Health Facilities Finance Authority revenue bonds for the City of Hope hospital and research center. The bonds are rated A1 by Moody’s, A-plus by Standard & Poor’s, and AA-minus by Fitch.

Morgan Stanley on Thursday priced last week’s largest deal, $355.1 million of East Bay Municipal Utility District water system revenue refunding bonds. Though it was a relatively large deal arranged through an underwriter in the hurricane’s path, its arrival did not come as a complete surprise.

For starters, it was from California-based issuer. In addition, Morgan Stanley, whose underwriting operations are based in midtown, and not downtown, Manhattan, weathered the storm relatively well, said Brian Wynne, co-head of public finance at the firm.

Morgan Stanley surveyed the investing community Thursday morning and determined that at least 75% of the meaningful investors were operational, Wynne said. Another 10% to 15% at northern New Jersey insurance companies and downtown New York-based insurance companies and bond funds located at remote locations or at recovery zones were working on functioning, he added.

“Clearly there were no credit concerns with this issue due to the storm,” Wynne said. “So, we felt it was important to move forward.”

Eric Sandler, director of finance for the East Bay MUD, said he was concerned initially that the market for his bonds would not be there. But he was quickly convinced by the survey’s findings that it would work.

“The consensus was that we could move forward and that it would be a good deal to bring to the market post-hurricane,” Sandler said.

The week’s competitive deals include one holdover from the previous week that was delayed by the storm. That deal is the only one scheduled of any size for the week.

The Washington Suburban Sanitation District is expected to auction $250 million of consolidated public improvement bonds.

The bonds, which are expected to arrive Monday structured as serials, are rated triple-A by the major credit ratings agencies.




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