The Puerto Rico Aqueduct and Sewer Authority's $750 million bond deal will be coming to market on Thursday, according to a Bank of America Merrill Lynch trader.
In the secondary trading on Tuesday, prices of top-rated municipal bonds were weaker at mid-session, with yields on some maturities strengthening by as much as two basis points. In the primary, Portland, Ore., sold over $400 million of bonds in the competitive sector.
PRASA Pricing on Thursday
It had been expected that PRASA's Series 2015A senior lien revenue bonds would be priced on Tuesday. However the BAML trader told The Bond Buyer that the deal had always been set for Thursday.
The PRASA sale is rated Caa3 by Moody's Investors Service, CCC-minus by Standard & Poor's and CC by Fitch Ratings.
The offering is the first from a Puerto Rico public sector agency since the commonwealth's $3.5 billion general obligation bond sale in March of 2014.
Since that time, Puerto Rico Gov. Alejandro García Padilla said the commonwealth's debt was unpayable due to slow economic growth; and on Aug. 1 the Puerto Rico Public Finance Corp. defaulted on 99% of a $58 million debt payment.
Price talk on the deal indicated "the anticipated single maturity of 2045 will carry an 8% coupon and yield to maturity in the 9.5% to 10.00% range," according to Janney Municipal Strategist Alan Schankel.
Bloomberg quoted a person familiar with the deal as saying the 30-year bonds would have a preliminary yield of 9.50%.
PRASA Series 2012A revenue 5 1/4s of 2042 were trading on Tuesday at a low price of 65.283 cents on the dollar, a high yield of 8.574%, in four trades totaling $120,000, according to the Municipal Rulemaking Board's EMMA website. On Monday, the 5 1/2s were trading at a low price of 64.53, a high yield of 8.676%, in six trades totaling $2.88 million, according to EMMA.
PRASA 2008 Series A senior lien 6s of 2038 were trading on Monday at a low price of 68.74 cents on the dollar, a high yield of 9.329%, in five trades totaling $4.88 million. On Monday, the 6s were trading at a low price of 68.70, a high yield of 9.334%, in six trades totaling 2.88 million, according to EMMA.
Moody's said when assigning its rating that "proceeds of the current issue will finance elements of PRASA's capital improvement program for the five years ending with fiscal 2019, and will also repay $67 million owed to the GDB and refinance $90 million of short-term bank-held senior debt. As much as $288 million of the proceeds will reimburse the authority for past operating revenue spent on capital improvements."
Fitch Ratings added that "proceeds of the current sale should provide significant cash flow relief as a portion of the proceeds will be used repay the upcoming term loan, thereby releasing the $90 million escrow back to PRASA."
Primary Market
In the competitive arena, Portland, Ore., sold $341.53 million of Series 2015A first lien sewer system revenue refunding bonds and $62.39 million of Series 2015B second lien sewer system revenue refunding bonds in two separate sales.
Wells Fargo Securities won the Series 2015A bonds with a true interest cost of 2.16%. Pricing information was not immediately available.
BAML won the Series 2015B bonds with a TIC of 2.75%. The bonds were priced to yield from 0.24% with a 5% coupon in 2016 to 3.18% with a 3% coupon in 2031.
The Series 2015A bonds are rated Aa2 by Moody's and AA by S&P while the Series 2015B bonds are rated Aa3 by Moody's and AA-minus by S&P.
Since 1995, the city of Portland has issued roughly $6.91 billion of debt. The years of 2008 and 2010 saw the most issuance with $807 million and $633 million, respectively. The city saw low years of issuance in 2002 and 2009, when it issued just $74 million and $69 million, respectively.
Citigroup priced the Hillsborough County, Fla., Aviation Authority's $386 million of tax-exempt and taxable bonds for the Tampa International Airport.
The $89.11 million of Series 2015A non-AMT customer facility charge revenue bonds were priced as 5s to yield 3.85% in 2044. Pricing on the tax-exempt port of the deal was not available.
The issue was rated A3 by Moody's and A-minus by S&P and Fitch.
Wells Fargo priced the District of Columbia's $145.41 million of Series 2015 taxable Southwest Waterfront Project revenue bonds.
The issue was priced to yield from 125 basis points above the comparable Treasury security in 2020 to 240 basis points above the comparable Treasury security in 2030; a 2035 maturity was 209 priced basis points above the comparable Treasury security and a 2040 maturity was priced 220 basis points above the comparable Treasury security.
The bonds were rated Aa3 by Moody's, A-plus by S&P and AA-minus by Fitch.
Also attracting a lot of interest this week is Detroit's first post-bankruptcy bond sale. Scheduled for sale on Wednesday, Barclays Capital will price the $245 million of local government loan program revenue bonds, which are being issued through the Michigan Finance Authority.
The deal consists of Series 2014F 1 and 2 bonds consisting of $134.73 million tax-exempts and $110.28 million of taxables.
The issue is enhanced with a statutory lien and intercept feature on Detroit's income tax, which will pay off the bonds. The protections, combined with debt-service coverage levels of 6.5 times, helped the deal get an A rating from S&P.
Secondary Trading
The yield on the 10-year benchmark muni general obligation on Tuesday was up by as much as two basis points from 2.20% on Monday, while the yield on the 30-year GO was up by as much as two basis points from 3.06%, according to a read of Municipal Market Data's triple-A scale.
Treasury prices were also lower on Tuesday, with the yield on the two-year Treasury note rising to 0.72% from 0.71% on Monday, while the 10-year yield rose to 2.18% from 2.15% and the 30-year yield increased to 2.84% from 2.80%.
The 10-year muni to Treasury ratio was calculated on Monday at 102.2% versus 100.3% on Friday, while the 30-year muni to Treasury ratio stood at 109.1% compared to 108.1%, according to MMD.
MSRB Previous Session's Activity
The Municipal Securities Rulemaking Board reported 32,359 trades on Monday on volume of $3.978 billion.
The most active bond, based on the number of trades, was the Washington state HealthCare Facilities Authority Series 2015A Providence Health and Services revenue 4s of 2045, which traded 144 times at an average price of 99.652, an average yield of 4.02%. The bonds were initially priced at 97.766 to yield 4.13%.
Bond Buyer Visible Supply
The Bond Buyer's 30-day visible supply calendar rose $297.9 million to $9.82 billion on Tuesday. The total is comprised of $2.96 billion competitive sales and $6.86 billion of negotiated deals.
