The $575 million revenue bonds the Illinois Finance Authority is selling for the University of Chicago on Tuesday will not be impacted by Illinois' recent credit troubles, a trader in Chicago said.
Barclays Capital is expected to price the deal on Tuesday. Illinois credits have been under pressure lately after Standard & Poor's revised its outlook on the state's A-minus rating to negative.
When the Illinois Sports Authority issued $292.5 million refunding bonds last week there were unsold balances on the intermediate and long maturities, and traders attributed the lack of demand for those bonds to problems with Illinois trickling down to credits from state issuers. After the outlook change, yields spiked on the state's general obligation bonds as wells as those from Chicago and the Chicago Board of Education.
"[The University of Chicago] is a frequent borrower, it's highly rated. It won't be affected," the trader in Chicago said.
The University of Chicago bonds are rated Aa2 by Moody's Investors Service, AA by Standard & Poor's, and AA-plus by Fitch Ratings, and will mature serially from 2019 to 2035, with a term bond in 2038.
The Illinois Sports Authority bonds, on the other hand, had a split rating with S&P rating the deal A while Fitch gave the issuer a BBB-plus.
The trader in Chicago said the upcoming Illinois-related deal also differs because the University of Chicago does not rely on state reimbursement.
"[The Illinois Sport Authority bonds were backed by a] 60% share and a 5% hotel tax, but they had an appropriation," he said. "They had to be appropriated by the governor, so he had to approve the funds to get used by that debt service. It's not automatic; there is some [potential] human error. You don't want governor of Illinois making decision on revenue streams; you want it to be automatic."
Monday's primary market was mainly dominated by housing deals, with the $123.1 million Connecticut Housing Finance Authority mortgage finance program bonds priced for retail order by J.P. Morgan Securities.
The bonds were priced at par with a 0.40% coupon in 2016 maturity, ranging to a 1.85% yield with a 4% coupon in 2044. The 2034 and 2038 maturities were not available for retail order, and there was a sealed bid on the two 2015 maturities.
"The deal has been doing fairly well, [the underwriter] terminated the orders on maturities ranging from 2016 to 2024, that always is a good sign is doing well," a trader in New York said.
The bonds have an optional call at par in 2023, and have four sinking funds on term bonds in 2029, 2034, 2038, and two in 2044. The bonds earned triple-A ratings from S&P and Moody's.
Raymond James is expected to price $153.9 million of Dripping Springs, Texas, Independent School District general obligation bonds on Monday. The deal is rated Aaa by Moody's Investors Service and AAA by Standard & Poor's.
Citigroup will bring a two-part deal totaling $593.7 million of Rhode Island Tobacco Settlement Financing Corporation asset backed revenue bonds on Tuesday, the largest deal of the week.
Jefferies will bring $344.5 million of New York Metropolitan Transportation Authority taxable revenue bonds on Thursday. The deal is rated Aaa by Moody's.
RBC Capital will issue a two-part deal totaling $328.2 million of Wisconsin GOs on Tuesday. The deal is rated Aa2 by Moody's and AA by Fitch.
In the competitive market, Connecticut will auction a two-part deal totaling $500 million of GOs on Wednesday, the second largest deal of the week. The deal is rated Aa3 by Moody's and AA by both S&P and Fitch.
Portland, Ore., will sell $288.1 million of revenue bonds on Tuesday. The deal is rated Aa2 by Moody's and AA by S&P.
Muni yields were steady across the curve on Monday, according to the Municipal Market Data's triple-A scale.
Treasuries were mostly steady Monday, with the 30-year yield and the two-year note remaining at 3.28% and 0.48%, respectively. The 10-year benchmark fell two basis points to 2.48%.
