BRADENTON, Fla. — Historically low interest rates last year boosted municipal bond sales across the Southeast to $63 billion, an increase of 33% over 2011.
The 2012 surge in debt was propelled by $29.1 billion in refundings, a 72% increase from 2011, and $11.14 billion in combined refundings and new-money sales, an increase of 81.4%. By comparison, $22.7 billion in new-money bonds were issued, a 2.3% decrease, according to Thomson Reuters data.
While many issuers sought refundings last year for budget relief, 2013 promises more refundings with the potential for new financing to relieve pent-up needs, according to David Moore, managing director in charge of the southern region for Public Financial Management Inc.
PFM remained the Southeast’s top financial advisor with 164 transactions having a par volume of $14.4 billion.
Public Resources Advisory Group remained in second place with $4.8 billion on 46 issues, and First Southwest Co. was third, advising on 37 deals worth $3.4 billion.
“In 2012 what’s particularly interesting is the magnitude of savings that a lot of clients obtained, and that had a really meaningful impact on budgets that are tight,” Moore said. “This year I think refundings will clearly continue as 2005 deals are called in, and I know the discussions we are having on new projects are increasing.”
Last year, issuers across the Southeast favored tax-exempt financings with $55.4 billion of debt, while taxable sales dropped to $4.9 billion of the volume, a 14.6% decrease.
Issuers sold $2.6 billion of debt subject to the alternative minimum tax, a 92% increase from 2011, with the majority of the offerings on behalf of Miami International Airport, Fort Lauderdale-Hollywood International Airport and Hartsfield-Jackson Atlanta International Airport.
Debt sold for general purposes saw the overall highest volume of issuance at $15.3 billion, a 25% hike, which got an assist from the largest single-day offering: a $1.3 billion insurance deal by Florida’s Citizens Property Insurance Corp.
While many sectors showed gains, two sectors saw triple-digit leaps in the volume of sales.
Issuance for transportation needs totaled $10.8 billion, an increase of 139.6%.
The sector got a lift from the state of Virginia’s aggressive transportation program, for which the Commonwealth Transportation Board sold $1.2 billion of debt to become the region’s seventh-largest issuer last year.
Of the total sold, $1.02 billion was for new-money made available by Gov. Bob McDonnell’s transportation plan, said John Lawson, chief financial officer for the Virginia Department of Transportation.
“Bond sales will continue over the next few years in support of the program, but not at this volume,” Lawson said. “The bonding anticipated in the governor’s plan is utilized in the current six-year transportation program.”
McDonnell, a Republican, is pressing forward with another aggressive program to raise funds for transportation that is being watched across the country.
Because gas taxes are not keeping up with funding needs, he wants legislators to repeal the state’s 17.5-cents-per-gallon gas tax and replace it with a 0.8% increase in the state’s general sales tax.
The Virginia General Assembly is considering the novel program, which is expected to raise about $3.1 billion for transportation construction and maintenance over the next five years.
The measure passed the House. It stalled in the Senate though a revised bill that would raise the gas tax was under consideration. McDonnell has said he hopes the final bill will look more like his proposal if it goes to conference committee.
The health care sector in the Southeast also more than doubled in volume to $7.57 billion of debt, a 105% increase over 2011.
The North Carolina Medical Care Commission added to the sector’s bottom line by selling a total of $1.3 billion of debt for various facilities in 10 transactions.
The commission was the sixth-largest issuer in the region.
Bonds sold for educational purposes reached total sales of $14.5 billion, an 18.4% increase. Sales for utilities were up 25% on par volume of $6.56 billion, while bonds sold for electric power needs totaled $3.35 billion, a 22% increase. Housing sector bond issues increased 14.6% to $2.14 billion.
Bond sales for development and environmental facilities both fell by more than half, to $1.13 billion and $570.4 million, respectively. Issuance for public facilities fell off 8.3% on sales of $994.6 million.
Overall, the region saw a 46% increase in negotiated sales of $45.12 billion, while competitive transactions increased only 8% to $16.2 billion. Private placements were up 9.2% on $1.6 billion of volume.
Revenue bonds remained popular with issuers last year on $45.8 billion in sales, a 36% increase, while general obligation bond issuance increased 24% with $17.1 billion in volume.
Fixed-rate debt was up 41% on $58.5 billion of volume, in contrast to the short-put and long-dated variable-rate categories, which declined 26% and 12%, respectively.
Bond insurance wrapped only $1.7 billion of bonds, less than half the insured volume of 2011. The use of letters of credit, insured mortgages and guaranties were all down substantially. Bank-qualified bonds were up 37.5% to $2.4 billion of sales.
State agencies represented the largest type of issuer in the Southeast last year, with $18.9 billion of debt. Local authorities came in second with $12.87 billion in sales.
Counties and parishes increased issuance 74% last year to of $8.4 billion, while cities and towns boosted their volume by 65.7% to $9.4 billion. Districts sold $6.4 billion of debt, a 26% increase over 2011.
Colleges and universities also increased issuance by 77% to $1.87 billion of volume.
At the state level across the Southeast region, $4.9 billion of bonds were sold, a decrease of 4.5% from 2011. Nearly $2 billion of sales came from Louisiana, making it the largest issuer of debt sold at the state level last year.
The state of Louisiana was the Southeast’s largest issuer in 2012, increasing its bond sales by almost 300% to $1.8 billion, which included a $803 million refunding of state gasoline tax and fuel revenue bonds in May that provided more than $100 million in debt relief, state Treasurer John Kennedy said after the sale.
“It will save the state approximately $4.4 million per year over the next 23 years,” Kennedy said.
Louisiana’s issuance also included a $568 million GO refunding in June.
Florida issuers sold the most debt last year in the Southeast, with 247 deals bringing $17.67 billion to market, a 53% increase over 2011.
Virginia rose from third place to second last year with $10.8 billion of issuance in 136 offerings.
Georgia dropped to third place last year from its historical second-place position, with $6.6 billion in sales follwing a 4.1% decline. The state of Georgia was a large contributor with $1.32 billion in sales, making it the fourth-largest issuer in the Southeast.
In senior managers’ rankings last year Citi rose to first place from second the year before, with par volume of $10.37 billion in 102 deals. Bank of America Merrill Lynch dropped to second place from first in 2011, with $9.95 billion in 113 transactions. JPMorgan remained in third place with $9.13 billion in 89 sales.
Squire Sanders remained the top bond counsel, credited with $3.87 billion in 21 deals. McGuireWoods LLP rose to second place from third in 2011, with $3.74 billion in 55 transactions. Hunton & Williams LLP dropped to third from second place the year before, working on 40 deals worth $3.6 billion.