There will be a significant and noticeable bulge in note issuance this week when a $6.4 billion Texas note deal makes its way to the municipal market amid the dog days of summer.
By comparison, last week the largest deal was a $327.9 million District of Columbia general obligation sale that was priced by Merrill with a final 2033 maturity yielding 5.02%. Most of the bonds were insured by Berkshire Hathaway Assurance Corp.
The Texas tax and revenue anticipation note sale - which is the state's largest since it sold $6.6 billion in 2004 - should appeal to money market fund managers and retail investors eyeing the short end of the market. It will anchor this week's primary market, which is expected to see an estimated $5.90 billion of long-term volume, and surpasses last week's total revised long-term volume of $5.52 billion, according to Thomson Reuters.
Texas issues the notes annually to cover cash-flow gaps caused by uneven revenue collections. Last year, the state's Trans issue totaled $4.9 billion.
This week's deal will be sold in the competitive market tomorrow and, due to the state's strong economy marked by rising employment and increasing sales taxes, has garnered top ratings from all three major rating agencies - MIG1 by Moody's Investors Service, SP1-plus by Standard & Poor's, and F1-plus by Fitch Ratings.
The notes are backed by deposits into a sinking fund that is made up of investment earnings and transfers from the general revenue fund.
Switching gears to the long-term market, the largest deal on the negotiated calendar will be a $912.1 million Arizona Health Facilities Authority revenue sale on behalf of Banner Health.
One of the largest nonprofit hospital systems in the country, Banner operates in Arizona and six other states, including Alaska, California, Colorado, Nebraska, Nevada, and Wyoming.
Morgan Stanley is expected to price the offering on Wednesday with ratings of AA-minus from Standard & Poor's and Fitch, with serial maturities ranging from 2009 through 2038. Proceeds from the sale will finance hospital acquisition, construction, and expansion projects, as well as refund Series 2002 A to C sold by the authority on behalf of Banner Health, and Series 1999B, which was issued by the Mesa, Ariz., Industrial Development Authority on behalf of Discovery Health System.
The Arizona deal will headline a handful of health care offerings taking place around the country.
For instance, also planned is a $274.1 million sale of certificates of obligation from the Bexar County Hospital District in Texas.
Merrill Lynch & Co. is expected to price the offering today with ratings of Aa2 from Moody's, AA from Standard & Poor's, and AA-plus from Fitch, however the structure was not available at press time on Friday.
Jackson, Tenn., will sell $298 million of hospital improvement and revenue refunding bonds in an offering being priced tomorrow by Citi that includes serial bonds maturing from 2009 to 2028 and term bonds maturing in 2033, 2038, and 2041. The bonds are expected to be rated A1 by Moody's and A-plus by Standard & Poor's.
In addition, a $200 million deal from Harris County, Tex., is also planned on behalf of the Baylor College of Medicine. Citi will price that offering on Wednesday with a structure of serial bonds maturing from 2009 to 2018 and term bonds scheduled to mature in 2028 and 2032. Bonds are rated A by Moody's.
Meanwhile, there will also be a fair amount of activity in the transportation sector as a result of sizable deals taking place in the Northeast.
The New Jersey Transportation Trust Fund Authority will issue $345 million of transportation system revenue bonds tomorrow in a deal being led by Goldman, Sachs & Co., with a structure that includes three maturities - 2017, 2018, and 2019. The deal is a remarketing of Series 2003 B, which was issued as auction-rate securities and is now being converted to fixed-rate. The bonds are expected to be rated A1 by Moody's, AA-minus by Standard & Poor's, and AA-plus by Fitch.
The New York State Thruway Authority, meanwhile, will offer a $339.5 million sale of second general highway and bridge trust fund bonds.
The Goldman-led deal, which is slated for pricing on Wednesday, will be structured to mature from 2009 to 2028 and is rated AA by Standard & Poor's and AA-minus by Fitch.
A $280 million sale of consolidated transportation revenue bonds is also on tap from the Maryland Department of Transportation on Wednesday in the competitive market. The bonds, which carry ratings of Aa2 by Moody's, AAA by Standard & Poor's, and AA by Fitch, are expected to mature from 2011 to 2023. Backed by pledged tax revenues, such as a portion of the excise tax on motor vehicle fuel, the proceeds of the issue will be used to finance a combination of highway, transit, port, and aviation projects under the authority's Consolidated Transportation Program.
Elsewhere, a Southeast pollution control revenue bond issue will round out the activity in the negotiated market.
The Burke County, Ga., Development Authority will issue $255 million of PCRs on behalf of the Oglethorpe Power Corp.
The deal will consist of five series and will be priced by JPMorgan on Thursday with ratings of A3 from Moody's and A from Standard & Poor's and Fitch.
The Series A to D will be structured as bullet maturities each totaling $50 million and maturing in 2032, 2033, 2041, and 2042, respectively. Series 2008 E totals $55 million and matures in 2043.