Southeast Bond Sales Continue Two-Year Slide

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BRADENTON, Fla. - Issuers in the Southeast sold $48.8 billion of municipal bonds in 2014, according to Thomson Reuters, down 14.3% from 2013 to decline for the second consecutive year.

Buoyed by the low interest rate environment, refundings in the region were up 7% to $23.04 billion, while new money issuance dropped 21.6% to $18.5 billion.

Combined refunding and new money deals were also down 38.6% with total sales of $7.24 billion.

Only the fourth quarter of 2014 saw positive year-over-year volume growth with a 16.8% increase. Even with a slight backup in interest rates so far in 2015, refinancings are likely to continue this year, according to David Moore, managing director of the southern region financial advisory practice at Public Financial Management Inc.

"We did see in 2014 significant refundings, and particularly in the first month of this year it was very, very busy for us," Moore said. "We really did see a pickup in new money discussions and deals late in the year that we see carrying forward into 2015."

Based on planning PFM does with its clients, Moore said that bond issuance volume across most sectors should begin to crank up over the next year to 15 months.

PFM maintained its No. 1 position as the top financial advisor in the Southeast last year, credited by Thomson Reuters with work on $9.31 billion of bond transactions, about $206 million less than in 2013.

FirstSouthwest Co. came in second among financial advisors with $3.01 billion, up from third place in 2013 when the firm was credited with $3.75 billion. Davenport & Co. LLC was the region's third-ranked financial advisory firm with $2.76 billion, compared with $3.08 billion.

Bond volume increased in only three states of the Southeast's 11 in 2014.

Volume was up 3.4% in Virginia, Florida had a 2.7% increase, and Louisiana was up 0.3%.

Florida maintained its No. 1 position in overall volume with issuers there selling $13.9 billion. Miami-Dade County was the third-largest issuer in the region with $1.32 billion in total sales.

In Virginia, issuers sold $6.99 billion in bonds, compared to $6.76 billion in 2013. More than $1.6 billion was sold by three state agencies: Virginia's transportation board, resources authority, and public school authority.

The Virginia deals helped McGuireWoods LLP garner $2.5 billion in sales volume to top the Southeast league table of bond counsel firms in the Southeast region last year, up from seventh place in 2013.

McGuireWoods was bond counsel on transactions in most of the Southeast's states and also worked on deals across the country, said partner Alan Cason, who chairs the firm's public finance department.

"Last year was good from a volume standpoint," Cason said. "This year, we're off to a really fast start."

Cason said that McGuireWoods has been expanding, and last year staffed new public finance offices in Houston and Chicago. The firm has about 35 professionals operating in 10 offices, and continues to look for growth opportunities.

Greenberg Traurig was the Southeast's second-ranked bond counsel firm in 2014 with $2.49 billion. Haynsworth Sinkler Boyd PA came in third place with $2.2 billion.

Bank of America Merrill Lynch was the No. 1 senior manager, credited with $7.56 billion in Southeast volume. JPMorgan rose to second place from third with $5.57 billion. Citi, the top ranked senior manager in 2013, dropped to third place last year with $5.53 billion.

Georgia has the region's third highest issuance level in 2014 with $5.3 billion, a decrease of 10.2% from 2013.

Its state government sold the largest single deal in Southeast with the June 17 competitive offering of $982.9 million in general obligation bonds. Atlanta had the second-largest transaction with the March 26 sale of $846.5 million in refunding bonds for Hartsfield-Jackson Atlanta International Airport.

Louisiana issuers sold $4.43 billion in bonds.

The Louisiana state government was the largest overall issuer in the region with deals totaling $1.47 billion.

North Carolina saw $3.94 billion in sales, a drop of 38% over the previous year. The state government issued $805.3 million in various transactions.

In South Carolina, total sales were $3.91 billion, a year-over-year decline of 22.2%. Volume was boosted by two offerings totaling $1.37 billion by the South Carolina Public Service Authority, also known as Santee Cooper.

Alabama issuance totaled $3.22 billion in 2014, a decline of 26.4%. The Alabama Public School & College Authority had the sixth-largest deal in the region with the July 1 sale of $546.8 million.

Tennessee issuers saw a 16% drop in volume with total sales of just a tick under $3 billion.

Issuers in Kentucky sold $2.77 billion in bonds, a drop of 41.6% from the previous year.

In West Virginia, volume declined by 7.8% to $680 million. Mississippi deals plummeted by 58.9% on sales of $583.8 million.

The vast majority of the region's bonds were issued on a tax-exempt basis, with $43.6 billion sold for a year-over-year decline of 5%. Taxable issuance plunged 64.7% on volume of $3.44 billion. The amount of bonds subject to the alternative minimum tax rose 34.8% on $1.76 billion in transactions.

Sales by negotiation totaled $27.6 billion, down 25.6%.

The amount of bonds sold competitively rose by 18% to $16.3 billion. Private placements were down by 18.8% to $4.8 billion.

Revenue bond issuance declined 12.9% to $36.26 billion, while GO deals dropped 18% to $12.5 billion.

Only two sectors saw issuance on the plus side last year. Debt issued for transportation projects totaled $6.58 billion, a 2.7% year-over-year increase. Issuance for public facilities saw a 20.9% increase on $1.52 billion in volume. Bonds for financing development, utilities, and housing projects saw volume declines in double-digit percentages.

Issuers preferred fixed-rate debt with $45.24 billion in volume. The use of variable rate short put bonds was up 33.1% to $1.75 billion. Variable rate long put bond issuance was down 24.1% on sales of $356 million.

The use of bond insurance rose by 36.1% to $1.89 billion, while letters of credit declined 78.4% to $436.4 million.

Issuance by state agencies dropped by 34.7% to $11.1 billion, while deals brought by counties and parishes dropped by 31.7% to $6.08 billion. Local authorities issued $10.36 billion in bonds, a decline of 14.3%, while cities and towns saw issuance rise by 20% to $8.28 billion.

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