SAN FRANCISCO — The San Francisco Public Utilities Commission postponed a competitive sale Wednesday of $523 million of mostly Build America Bonds by at least a week due to the slouching market.
The SFPUC delayed the deal, which consists of $173 million of tax-exempt and $350 million of revenue BABs, from Wednesday until at least Dec. 15, according to commission debt manager Marc Hughes.
"The market was just really bad [Tuesday] and it pushed outside of the realm of where we wanted it," Hughes said. "We don't have to do this right now."
The Municipal Market Data triple-A scale rose six basis points to a 2.87% yield in 10 years Tuesday, while the 20-year scale rose nine basis points to 4.11%. The scale for 30-year debt widened 12 basis points to 4.48%.
The muni market continued to weaken Wednesday morning, following Treasury losses, as the New Jersey Turnpike Authority priced an $1.85 billion sale of taxable Build America Bonds.
The delay comes after SFPUC advanced the deal date to this week to capture the BAB subsidy set to expire Dec. 31, according to Hughes. If the commission misses the BAB window because of poor market conditions, he said they will have little reason to do the deal until March.
"We have plenty of money in the bank," Hughes said.
Uncertainty has clouded the potential extension of the BAB program since federal lawmakers left it out of year-end legislation extending tax cuts.
The Senate's lead Republican negotiator for the bill, Jon Kyl of Arizona, has been a harsh critic of BABs. He has complained that BABs reward state and local governments with lower credit ratings because they sell BABs at higher interest rates and receive higher federal subsidy payments.
The SFPUC's tax-exempt paper maturities would run roughly from 2017 to 2030, while the BABs would run from 2031 to 2050. The utilities' net water revenues back both. The bonds would be used to finance and refinance capital projects as part of a campaign to improve San Francisco's water system.
"On our front everything is going well," said Todd Rydstrom, the commission's chief financial officer. "Our water supply looks great and our bids are still coming in under engineers' estimates."
Moody's Investors Service rates the bonds Aa2 and Standard & Poor's rates them AA-minus. Moody's said in a recent note that the utility is facing less water use by Bay Area residents and rising debt service, which the SFPUC plans to tackle by increasing rates.
The utility, which had planned a wholesale water rate hike of 29% in 2012, will now raise rates 34%.