Bank of America Merrill Lynch used a big second quarter to overtake Citi at the top of the league tables for municipal bond underwriters, while Morgan Stanley, RBC Capital Markets and Goldman Sachs jumped higher in the first-half rankings.

Public Financial Management Inc. led the financial advisor league table through June 30 of 2017, while the state of California was the largest municipal issuer, according to Thomson Reuters data.

The top 12 underwriters combined for $187.24 billion in 5,274 transactions, down from the $215.07 billion in 6,448 deals in the first six months of 2016. RBC, Goldman and Jefferies were the only firms credited with a higher par amount than in the same period last year.

BAML underwrote $15.79 billion for first place in the second quarter, after coming in second place during the first quarter. That brought BAML's year-to-date total to $26.69 billion or 14.3% market share. Some of the larger deals it ran the books on in the second quarter included Hawaii’s $849 million, the County of Cuyahoga, Ohio’s $945 million and the New Jersey Health Care Facilities Financing Authority’s $588 million.

For the second quarter alone, Citi underwrote $10.27 billion and so far this year accounted for a par amount of $24.23 billion or 12.9% market share. Citi was lead-manager on the Houston Independent School District’s $849 million, the Commonwealth of Massachusetts’ $767 million and the Alabama Federal Aid Highway Finance Authority’s $556 million.

JPMorgan came in third place both for the quarter and for the half with $10.11 billion and $17.88 billion, or 9.6% market share, respectively.

“It was a very good second quarter for J.P. Morgan, where we essentially doubled our new issue volume from the first quarter,” said Jamison Feheley, JPM's head of public finance banking. “Our market share has grown versus this time last year, with particularly strong results when taking into account our volume of corporate CUSIP transactions, not reflected in the traditional municipal league table.”

Jamison Feheley, JPM's head of public finance banking.
Jamison Feheley

JPM’s biggest deals of the quarter were California’s $648 million and Energy Northwest’s $587 million.

“Transactions we've led to market so far this year have ranged from the more typical high-grade credits all the way down to the low-investment grade and non-rated space, inclusive of a variety of different sectors,” he said. “Interest rates have continued to stay low resulting in outstanding pricing results for our issuer clients across the entire credit spectrum.”

Jamison also said that the firm expects the new issue volume to be manageable the balance of this year continuing the favorable market conditions for issuers in this low rate environment.

Morgan Stanley moved up one spot up to fourth, after finishing in fifth place at this time last year. The firm so far in 2017 underwrote a par amount of $14.30 billion, compared with $14.74 billion in the same period last year.

RBC moved up one spot to fifth as its volume increased to $13.38 billion from $11.03 billion, and its market share climbed to 7.1% from 5.1%.

“In a six month period where overall negotiated municipal issuance declined by approximately $18 billion, RBC increased its senior managed par underwritten by $2.4 billion,” said Chris Hamel, head of public finance. “We are grateful to the many clients who entrusted the firm with their financing.”

Chris Hamel, head of municipal finance at RBC Capital Markets.
Chris Hamel

Wells Fargo dropped once again, this time from fourth to sixth place as some issuers cut off business with the firm following its fake account scandal. Wells has a par amount of $10.27 billion for the first six months of this year, compared with$14.95 billion for the first half of 2016.

Goldman saw the biggest leap, rising to seventh place after finishing in 11th at this point last year. Goldman has underwritten $9.58 billion, compared with $6.29 billion. Goldman was busy during the quarter, running on the books on the $1.1 billion American Dream sale, $2.1 billion for Hudson Yards and California Health Facilities Financing Authority’s $1.75 billion of green bonds.

“Our increased volume and success in the first half of 2017 was driven by six transactions with par amounts greater than $1 billion and [in general] a broad array of significant transactions for clients across all sectors,”said Kevin Willlens, managing director of the investment banking division at Goldman. “Although the general municipal market was technically strong in the first half, evolving credit issues were continually in the headlines. Nevertheless, we were able to complete complex transactions by executing credit intensive roadshows and site visits, bringing together our issuers and investors.”

Willens also said that after interest rate volatility following the 2016 election, interest rates trended lower throughout the first half of 2017, particularly in the tax-exempt market due to low supply and positive investor cash flow. He said the second half of 2017 may bring more of a rising rate environment as the market reacts to the Federal Reserve's rate increases and balance sheet reduction.

“Our pipeline of transactions remains strong so we look forward to continuing a high level of activity throughout the second half of 2017," Willens said. "We are also monitoring the developments in Washington around the potential expansion in infrastructure investment for additional opportunities.”

Willens said that Goldman’s higher municipal underwriting volume is one of its strategic goals, but the firm also "focuses its efforts on a wide range of client financing and strategic activities, many of which do not show up in the league tables, such as sports financings, healthcare strategic advisory, infrastructure advisory and P3 transactions.”

Stifel was next with $9.05 billion, followed by Piper Jaffray with $7.11 billion, Raymond James with $6.43 billion and Barclays with $5.77. Jefferies rounds out the top 12 with $4.92 billion, climbing from 16th place at this point last year .

Financial Advisors

Public Financial Management finished the half with a par amount of $27.24 billion in 518 deals, good for a 17.2% market share. That compares with $40.71 billion in 685 deals or 22.2% market share during the same time period of 2016.

“Uncertainty abounds in municipal finance at the present time," said John Bonow, chief executive officer and managing director for the PFM Group. "While there have been some promising signals from Washington, D.C., about improvements to transportation infrastructure loan programs and the like, many states and localities require details before they can move forward on badly needed infrastructure improvements. We hope that with increased policy and associated funding certainty the innovations and enhancements we have suggested can be implemented soon. As for the rest of the municipal market, we see overall issue volume remaining modest as financing for new projects accelerates and refunding volume continues to decline.”

John Bonow, chief executive officer and managing director for the PFM Group.
John Bonow

Public Resources Advisory Group ranked second with $24.81 billion and Hilltop Securities was third with $16.48 billion, as the two firms switched spots from the first half of 2016. Acacia Financial Group held its spot in fourth, even as its par amount decreased to $6.69 billion from $8.44 billion.

The three biggest movers in the ranking were KNN Public Finance, Lamont Financial Services Corp. and Urban Futures Inc.

KNN moved up to fifth from ninth with $5.67 billion, up from $3.46 billion. Lamont climbed to eighth place from No. 20 with $2.44 billion, up from $1.66 billion. And Urban hurdled to 10th place 25th with $1.77 billion from $1.30 billion.

Municipal Issuers

California finished the first half with the most issuance, out of the hundred thousands of municipal issuers across the country, something the state did at the end of the first quarter of the year and also at the end of 2016.

The Golden State leads the ranking with a par amount of $4.64 billion in spans five deals.

According to the California Treasurer’s Office, the breakdown of the issuance is roughly $1.7 billion for new money purposes and $2.9 for refunding purposes. This compares to 2016 volume for the same period of $4.4 billion, of which $1.6 billion was new money and $2.8 billion was refunding.

“California has almost $74 billion of outstanding GO debt authorized by scores of voter-approved bond acts,” according to the office of the Treasurer. “The State can fund thousands of individual projects in a particular offering—or group of offerings—of general obligation bonds. The largest uses for GO bonds in the outstanding category were for K-12 education purposes, followed by transportation and clean air purposes, clean water and disaster preparation purposes, and higher education purposes. As of June 1, 2017, there were GO bonds authorized in the approximate amount of $34 billion, which have not yet been issued.”

The office of the Treasurer also said that the state issues GO debt as individual projects require disbursements for construction or acquisition, so none of those events are driven primarily by interest rates or market conditions for the state’s bonds.

“We are preparing now for our fall 2017 issuance cycle, which will be announced once the FY 2017-18 Budget is fully implemented and individual agencies and departments complete their analysis of what they will require to support individual programs. The first issuance is typically in late summer or early fall. We do not anticipate that this year will be different.”

The Dormitory Authority of the State of New York finished the half in second place with $3.58 billion, followed by the California Health Facilities Finance Authority with $3.13 billion. The New York City Transitional Finance Authority is next with $2.99 billion and the city of Chicago rounds out the top five with $2.57 billion.

Rounding out the top 10 were: Hudson Yards Infrastructure Corp. with $2.14 billion; the State of Wisconsin with $2.11 billion; The Empire State Development Corp. with $1.84 billion; the Los Angeles Department of Water and Power with $1.75 billion;and the Wisconsin Public Finance Authority with $1.68 billion.

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Aaron Weitzman

Aaron Weitzman

Aaron Weitzman is a markets reporter for The Bond Buyer, focusing on the sell side of the municipal bond market.