An array of sizable new deals will usher in the first full week of trading following the end of summer, although the municipal market is expected to take on a somber tone today due to the arrival of the fifth anniversary of the Sept. 11 terrorist attacks
None of the week’s largest deals, however, are scheduled to coincide with today’s anniversary.
Underwriting activity is generally light on Mondays, as most deals are usually priced on Tuesdays and Wednesdays. But market sources say there will be an especially quiet mood today, particularly since The Bond Market Association has recommended that market participants observe two moments of silence today in honor of the victims. The first will be at 8:46 a.m., when the first plane hit the World Trade Center, while the second will occur at 10:29 a.m. to mark the time that the second tower collapsed.
“Five years ago, nearly 1,000 bond market participants lost their lives in the terrible attacks of Sept. 11. We will always remember them and the many other victims of that tragic day,” said Micah S. Green, president of the association.
“I think Monday should be a quiet day,” said Gary Strumeyer, a managing director of retail sales at BNY Capital Markets in New York City last week. “I think people could be distracted with the 9/11 observance.”
“Sept. 11 never leaves the minds of people that were here in New York, and we plan to honor the memories of that day during the moment of silence,” said Peter Delahunt, national institutional sales manager at Raymond James & Associates in New York. “There will be a somber tone to the day, regardless of the level of activity.”
The largest deals of the week include a nearly $615 million Springfield, Mo., public utility revenue bond sale, as well as large deals from issuers in New York, Puerto Rico, California, and Illinois.
“There’s good demand out there and summer was a little slow, so I think people are ready and anxious to get back to investing their money,” Delahunt said. The uncertainty in the equity market is also giving a boost to municipal business in general. However, “there’s a little ambiguity as to whether the economy is as weak as some people tend to believe it is, so for the time being we are stuck in a trading range,” Delahunt said.
“About a month ago, I did see retail stick its toe in the water, but with the levels falling I see retail much more reluctant to buy,” Strumeyer said late last week. For now, he said many individual investors are “waiting and watching” for the next significant rise in rates to entice them to participate on the long end of the market.
As of the close of trading on Friday, the 30-year, triple-A general obligation bond was yielding 4.27%, according to Municipal Market Data. On Aug. 7, the same benchmark was yielding 4.38%.
The Springfield deal is slated to come to the competitive market on Thursday, and is one of three sizable deals in the utility sector expected this week.
The deal, which is backed by revenues from the city’s public utility system, is structured to mature from 2012 to 2036. The deal is rated Aa3 by Moody’s Investors Service and AA by both Standard & Poor’s and Fitch Ratings.
Proceeds from the sale will finance an additional coal-fired electric generating unit to be part of the city public utility system’s Southwest Power Station.
In New York, the Long Island Power Authority is planning to sell $517.2 million of electric system general revenue refunding bonds in a negotiated deal earmarked for pricing on Wednesday by Lehman Brothers. The bonds have outstanding ratings of A3 from Moody’s and A-minus from both Standard & Poor’s and Fitch, and LIPA was evaluating the possibility of bond insurance late last week, said a source at the power authority. The bonds are tentatively scheduled to mature serially from 2006 to 2022.
In another sizable deal expected on Wednesday in the negotiated market, the Puerto Rico Infrastructure Financing Authority is slated to sell $400 million of new-money revenue bonds in a deal being senior managed and priced by UBS Securities LLC.
The authority’s bonds have outstanding ratings of Baa3 from Moody’s and BBB from Standard & Poor’s. Other details of the deal’s structure were not yet determined by press time late last week, said a UBS underwriter.
In the education sector, the Chicago Board of Education is planning to sell $360 million of unlimited-tax general obligation bonds in a negotiated deal that is being senior managed by JPMorgan and scheduled for pricing on Wednesday.
The bonds will be insured by Financial Security Assurance Inc., and are further secured by a pledge of state aid revenues, as well as pledged taxes and other funds, securities, and property furnished by the board. The deal contains serial bonds structured to mature from 2007 to 2026, and term bonds that are planned to mature in 2031 and 2036.
Also in the state, the Board of Trustees of the University of Illinois will sell $314.4 million of auxiliary facility system revenue bonds that will be insured. The name of the guarantor was not yet available on Friday.
The new-money and refunding deal, which is structured to mature from 2008 to 2036, will be priced by Loop Capital Markets on Wednesday.
In another sizable deal expected this week, the California Housing Finance Authority will sell $270 million of mortgage revenue bonds in a deal that is planned for pricing on Wednesday by Citigroup Global Markets Inc. after a retail order period tomorrow.
The deal will be insured, but a source at Citigroup said the name of the guarantor and other details, such as the maturity structure, had not yet been determined at press time Friday.
In the Southeast, the Hillsborough County, Fla., Industrial Development Authority will sell $185 million of hospital revenue bonds on behalf of the Tampa General Hospital. The deal will be priced by senior-manager Raymond James.
The hospital’s outstanding bonds were recently upgraded by Moody’s to A3, from Baa1, and by Fitch to A-minus from BBB-plus.
The new deal, which will not be insured, will be heavily weighted on the long end, with three term bonds maturing in 2031, 2036, and 2041. The rest of the deal will consist of serial bonds maturing from 2007 to 2016 and two other term bonds in 2021 and 2026.
Proceeds from the sale will finance the completion of the acquisition, construction, and equipping of a five-story, 300,000 square-foot addition to the hospital’s main campus in Tampa.
