DALLAS — Buoyed by a strong fourth-quarter finish, 2014 municipal bond issuance in the Southwest region was 15% higher than 2013 at $64.7 billion, according to Thomson Reuters data.
Refunding volume was up 26% in the region; new money was down 1.2%.
On a percentage basis, the Southwest recorded the strongest growth among The Bond Buyer's five regions. In dollar terms, the Southwest ranked third behind the Northeast and the Far West.
Southwest volume was the highest since 2010 when federally subsidized Build America Bonds were available. In that year, issuance hit $66.5 billion in the Southwest, only to fall to an 11-year low a year later. The highest volume on record came in 2008 when issuers combined for $72 billion.
Nationally, total long-term municipal bond sales were up 0.7% year over year to $336.51 billion.
The Southwest's 131% year-over-year fourth-quarter increase was a complete inversion of the same quarter in 2013 when volume plunged 55% from 2012, curtailing a positive growth trend for that year and leading to predictions of lower volume in 2014.
"I was surprised that interest rates remained very low in 2014, despite the end of the Fed's QE3 program and robust growth in the stock indexes," said Oklahoma State Bond Advisor James Joseph.
Kristine Ward, chief financial officer at the Arizona Department of Transportation, said the refunding opportunities were particularly beneficial to agencies like hers that are struggling to meet demands for infrastructure. ADOT refunded more than $740 million of excise-tax revenue bonds in 2014.
"Low interest rates provided the Department the opportunity to save money at a time when strained transportation funding lags far behind the transportation needs of Arizona's economy," Ward said. "The 2014 refunding resulted in an additional $27.6 million being available for investment in Arizona's transportation system and will facilitate improvements on some key commerce corridors."
Texas accounted for nearly two-thirds of the region's issuance with $41 billion, ranking second among all states behind California.
In 2014, the Texas Transportation Commission ranked second among issuers nationally behind the California state government. The TTC's record $5.52 billion of debt provided strong growth for its financial advisors, underwriters and bond counsel.
The TTC deals also helped senior manager JPMorgan retain the top rank among underwriters in the Southwest, and transportation remains a focus in the Lone Star State.
The state began 2015 with a $1.68 billion January restructuring of debt for the Central Texas Turnpike System, which is managed by the TTC.
The overall outlook for 2015 is somewhat murky, as the prospect of a mid-year interest-rate hike by the Federal Reserve hangs over the market while oil prices remain deflated by nearly 50%.
"The rate environment as we enter 2015 will offer issuers additional opportunities to both refinance outstanding debt at a savings and address needed infrastructure improvements with low-cost funds," Joseph said. "Of course, the financial health of state and local issuers will dictate how much of this essential capital borrowing actually takes place."
The TTC's deals cemented financial advisor Estrada Hinojosa & Co.'s second-place finish in the regional league table, credited by Thomson Reuters with $8.75 billion.
Estrada Hinojosa's strong finish never threatened perennial front-runner First Southwest Co., which ended the year with more than $14.7 billion of business.
First Southwest's volume grew 33% and appears destined to gain an even larger market share with its acquisition of Dallas-rival Southwest Securities, the sixth-ranked financial advisor in 2014.
RBC Capital Markets placed third among financial advisors in the Southwest with $3.54 billion, followed by Public Financial Management with $2.86 billion and BOSC with $2.53 billion.
The TTC's four 2014 issues helped keep McCall, Parkhurst & Horton atop the Southwest's bond counsel table, credited with transactions valued at more than $13 billion. McCall Parkhurst's managing partner in Austin, Carol Polumbo, was credited with much of the work.
Andrews Kurth ranked second among bond counsel at $6.1 billion, followed by Norton Rose Fulbright at $5.9 billion. Bracewell & Giuliani ranked fourth, credited with $5.1 billion of deal volume, followed by Gilmore & Bell with $2.7 billion.
Among the states, New Mexico saw the highest percentage growth, with volume rising nearly 48% to $2.92 billion. Neighboring Colorado saw the largest decline at nearly 39% to $4.25 billion.
Arizona's volume grew more than 39% to $6.73 billion. The Arizona Transportation Board ranked first among issuers with $754 million. The Phoenix Civic Improvement Corp. was close behind with $725.7 million. Bank of America Merrill Lynch & Co. captured the top spot among Arizona underwriters, credited with $1.047 billion, while Piper Jaffray's $851.8 million took top spot among financial advisors. Squire, Patton & Boggs claimed the crown as bond counsel with $2.053 billion, followed by Greenberg Traurig.
Arkansas' total bond issuance was down more than 19% from 2013, to $2.01 billion. The state government ranked first among issuers with $371.5 million. Crews & Associates led senior managers in the state with $548.2 million, while Stephens remained top financial advisor with $577 million. Friday Eldrege ranked first among bond counsel, credited with $1.7 billion.
Colorado's Regional Transportation District was tops in bonds for the state in 2014 with $440.9 million. Stifel Nicolaus was the state's top senior manager with $720.5 million. First Southwest Co. ranked first among financial advisors, credited with $730 million of business, and Butler Snow led the bond counsel rankings with $1.2 billion.
Kansas' volume rose nearly 26% to $3.28 billion. Wichita was the largest issuer with $469 million. Piper Jaffray was first among underwriters with deals valued at $599.5 million. Springsted topped the state's financial advisors with $519.3 million, while Gilmore & Bell easily outdistanced other bond counsel with the lion's share of all issuance in the Sunflower State at $2.67 billion.
The New Mexico Municipal Energy Acquisition Authority, a pre-paid gas provider, represented nearly a third of that state's bond volume in the state with a single $727 million deal that was the Southwest's largest outside Texas.
RBC Capital Markets led New Mexico senior managers at $1.03 billion of volume, more than the other members of the top five combined, and also led among financial advisors with $756.3 million. Modrall Sperling earned top spot among bond counsel with deals valued at $1.584 billion.
Oklahoma's volume fell 8.5% to $2.68 billion. The Grand River Dam Authority, a wholesale provider of water and electric power, was top issuer with $375.5 million of bonds. JPMorgan led senior managers with $437 million, while Public Financial Management led financial advisors with $494.7 million. The Floyd Law Firm topped bond counsel rankings with $642.5 million.
While JPMorgan led the Southwest's senior manager table, Bank of America Merrill Lynch was tops in Texas, credited with $5.27 billion. The two banks both worked on Texas Transportation Commission deals.
First Southwest Co. led financial advisors while McCall Parkhurst led the Texas bond counsel table.
Houston's $2.5 billion of combined issues placed the Bayou City in second place behind the TTC among Texas issuers. The Texas Public Finance Authority came in third with $1.7 billion.
Utah notched a 13% rise in volume to $2.44 billion. The Utah State Board of Regents earned top spot among issuers with deals valued at nearly $640 million. RBC Capital Markets emerged first among underwriters with $485 million of volume, while George K. Baum & Co. topped financial advisors with $660 million of debt. Ballard Spahr captured more than half of Utah's bond counsel volume at $1.28 billion.
Utilities led growth in the sectors, rising more than 75% to $10.4 billion while environmental facilities fell 94% to $30 million. Education saw steady growth of better than 11% to $22.96 billion and represented the largest of the sectors in dollar terms.
With big deals coming from Texas, Arizona and Arkansas, transportation volume grew more than 29% to almost $13.3 billion.
