Citigroup Global Markets Inc. clinched the top spot in the negotiated and competitive categories in the first quarter of 2005, serving as lead underwriter on $15.91 billion in municipal bonds through 162 issues.
The firm has taken the early lead this year, beating Merrill Lynch & Co. the leading manager in competitive underwriting since 1992 for the position among competitive deals in the first quarter, according to data from Thomson Financial.
Citigroups climb in the competitive category continued from its improved performance in 2004 when it increased its volume by 45.6% during the year to $12.76 billion through 281 issues, from $8.76 billion through 282 competitive issues in 2003, according to Thomson data.
In the first quarter of 2005, Citigroup served as lead manager on $4.15 billion through 80 competitive issues, almost doubling the $2.17 billion it underwrote through 62 issues in the first quarter of 2004, according to Thomson.
Merrill Lynch retreated to the number two position in the competitive category during the first quarter as it served as lead manager on $3.29 billion through 44 issues significantly short of the $4.09 billion through 31 issues on which it was lead manager in the first quarter of 2004.
Paul Kuhns, managing director of underwriting at Merrill Lynch, said the difference between the number one and number two firms in the competitive category was Citigroups winning bid on the $944 million California deal on Feb. 16.
Kuhns noted that Citigroups bid was 4.226%, while Merrills bid was 4.232% a difference of .006%. He pointed to Merrills longevity in the number one position and said that he would anticipate Merrill being number one at the end of the year.
Despite the shuffling in the competitive sector, negotiated deals dominate. Over the past few years, competitive bonds as a proportion of all sales have decreased due to a movement away from competitive and toward negotiated deals, said Mark D. Robbins, associate professor of public policy at the University of Connecticut. He said that in some locations, however, many are looking to change that.
Aaron Moreno, legislative assistant in the California Assembly, said that Assemblyman Joe Canciamilla of the 11th District has introduced AB 1482 that would require school districts to sell bonds solely by competitive bidding, except if the district faced extraordinary circumstances. Such a decision would be made by the state treasurer or the treasurer of that district, he said.
Currently schools have the option to sell bonds through negotiated and competitive issues. The bill is set to be voted on by the Assembly Education Committee on April 13, Moreno said.
In the negotiated category, number one ranked Citigroup served as lead manager on $11.76 billion through 82 issues in the first three months of 2005, significantly higher than the $7.53 billion through 81 issues on which it served as lead in the first quarter of 2004. Overall, Citigroup moved up one spot from second place at year-end, serving as lead manager on $43.95 billion through 637 issues in all of 2004.
The firm surpassed UBS Financial Services Inc., which was the number one managing underwriter at the end of 2004, lead managing $44.52 billion through 809 issues.
In the first quarter of this year, UBS served as lead manager on $10.54 billion in 162 negotiated issues for second place down one slot from number one in the first quarter of 2004 when it served as lead on $10.3 billion through 138 issues. So far this year, UBS holds second position overall as it served as lead manager on $11.81 billion in bonds through 216 issues the most deals by a lead manager in the first quarter of the year.
Francis Chin, managing director at Citigroup, said through a spokesman that in terms of recent activities, we are especially proud of underwritings weve done for rural hospitals.
Overall, Merrill slid one notch to number four in the first quarter of 2005 from number three in all of 2004. The firm served as lead manager on $6.9 billion in bonds through 79 issues in the first quarter, according to Thomson Financial.
Underwriters took advantage of the heavy volume of bond sales in the first quarter. Issuers started off 2005 with a bang as municipalities, states, counties, cities, and others across the U.S. sold $96.6 billion through 3,093 issues, setting a new first quarter record as many tapped the market for refundings.
In addition to the California deal sold on Feb. 16th, number one ranked Citigroup served as lead on New York Citys $950.8 million deal on Feb. 17th.
In an impressive move within the rankings, Lehman Brothers, which underwrote far fewer deals than its top competitors in the first quarter of 2005, moved up to third from seventh place. The firm served as lead manager on only 69 deals in the quarter totaling $7.67 billion. The firms new position was bolstered by its participation in a lead position on three of the ten largest municipal deals of the quarter.
Lehman served as lead on New York City Transitional Finance Authoritys $920.64 million deal on March 18 and as the top manager on an $801.9 million deal in a combined new-money and refunding issue for the California State University Trustees on March 23. Lehman also served as co-lead with Morgan Stanley on the $777.4 million deal for Massachusetts on March 17 solidifying its third place finish.
A spokeswoman at Lehman did not return calls before press time.
Banc of America Securities, which has raised its position in the midst of some high profile hires in the last year moved up to sixth position from ninth in the first quarter of 2005. The firm served as lead manager on $4.73 billion through 86 issues. Banc of Americas lead position on Brazos, Tex., Higher Education Authoritys $1.03 billion deal on March 1 contributed to its move in the rankings.
One major retreat in the rankings came from Goldman, Sachs& Co., which moved down seven notches to number 11 in the first quarter from number four in all of 2004. The firm got a slow start for the quarter as it served as lead manager on $2.47 billion in municipal bonds through 28 issues. In the first quarter of 2004, it served as lead on $5.8 billion in bonds through 37 issues.
A spokesman at Goldman declined to comment.
The top three players on issues of $10 million or less in the first quarter of 2005 RBC Dain Rauscher Inc., Morgan Keegan & Co., and Piper Jaffray & Co., respectively remained the same from the comparable period of 2004. Top-ranked RBC served as lead on $583.1 million through 105 issues, up from $469.6 million through 102 issues in the first quarter of 2004. RBC held the top spot at the end of last year as it served on $1.65 billion through 352 issues.
In the financial advisory category, Public Financial Management held the top position, ahead of number two ranked Public Resources Advisory Group and number three ranked First Southwest Co. PFM advised on $8.06 billion in deals through 201 issues. PFM also finished in the top spot for 2004 as it served as lead on $33.29 billion in deals through 770 issues. Public Resources and First Southwest finished respectively in second and third position in all of 2004.
Kaufman Hall & Associates, which focuses specifically on health care credits, moved up to sixth position from eighth at the end of last year. In the first quarter of 2005, the firm served as adviser on $1.51 billion in deals through 11 issues.
