BRADENTON, Fla. – Bond issuance in the Southeast slipped by 31% to $26.6 billion in the first half of 2017 compared to the same period last year due to a precipitous drop in refundings.
Issuers across the region brought 637 deals to market between January and June, while they sold $38.6 billion in 939 transactions in 2016, according to data from Thomson Reuters.
Refundings, totaling less than $8.5 billion, were down by half from $16.9 billion last year. Deals that combined new money and refunding totaled $4.5 billion, a 32.2% decrease.
New-money issuance lagged by only 8.8% to $13.58 billion, compared with $14.9 billion in sales the year before.
Only three of 11 states in the region saw an increase in issuance over the prior year – Georgia, Louisiana and Mississippi.
Georgia surpassed Florida as the top issuer in the Southeast as issuers there sold $4.77 billion of municipal bonds, a 7.6% increase over the first half of 2016.
The state of Georgia was the single-largest issuer in the region with a $1.4 billion, triple-A rated deal awarded June 20, of which $1.06 billion was new-money for capital needs in keeping with the state’s annual financing strategy. The remainder of that deal was a refunding piece.
The $1.4 billion Georgia deal -- the Southeast's largest single transaction during the first half -- helped propel the boutique law firm Gray Pannell & Woodward LLP to the top of the Southeast bond counsel rankings. The firm was credited with $1.7 billion in total transactions.
Foley & Judell LLP came in second with $1.47 billion, while Bass, Berry & Sims PLC was third with $1.3 billion.
“One of the things I’ve seen the last 12 to 18 months is a lot of refundings have been done” already, said Jon Pannell, a partner at Gray Pannell. The firm, which works solely in Georgia, became bond counsel for the state about two years ago.
Pannell said he believes the recession has impacted the way some issuers view borrowing, particularly those that are not regular issuers or those averse to using debt even when interest rates are historically low.
In much of Georgia it’s a different story, he said, as good economic and job data bolsters issuers’ borrowing comfort levels. “I think there’s pretty good optimism at least from what we are seeing,” he said.
In Florida, issuance across the state was down 58.1% to $4.25 billion, compared to $10.1 billion in the first half of 2016.
Refundings from the Sunshine state totaled $1.56 billion, a drop of 57.8%, while combined new money and refundings were down 68.1% to $419 million. New-money issues totaled $2.26 billion, a decrease of 55.7%.
In March, the Florida Cabinet approved the issuance of $1.16 billion of bonds, with all but $195 million earmarked for refundings. In the first half, the Florida Division of Bond Finance refinanced about $500 million of bonds.
On Tuesday, the Greater Orlando Aviation Authority prices up to $1.1 billion of subordinated bonds subject to the alternative minimum tax. Proceeds will refinance lines of credit and pay for a portion of the costs of a new terminal complex at Orlando International Airport.
Virginia was the third-largest issuer in the Southeast in the first half with $3.1 billion of bond sales, a decrease of 36% over last year.
Louisiana issuers priced $2.5 billion of bonds, an increase of 80%. The volume was supported by two Citi-led deals on May 11 with the Louisiana Public Facilities Authority issuing $421.6 million of bonds and the New Orleans Aviation Board selling $420.7 million of revenue and refunding bonds.
Mississippi was the only other state in the region to see a pickup in issuance this year with $1.2 billion of bonds, an increase of 130% over last year.
North Carolina issuers brought $2.5 billion of bonds to market, a decrease of 38.8%. Charlotte issued $302 million of new money and refunding bonds on May 19.
Alabama saw $2.42 billion of issuance, 17% lower than in the first half of 2016. The state’s volume was highlighted by the Alabama Federal Aid Highway Finance Authority’s $556.6 million refunding on June 26 – the region’s second-largest transaction.
In Tennessee, issuers sold $2.4 billion of bonds, a 16% drop from last year. The Nashville-Davidson County Metropolitan Government’s sale of $455.5 million of bonds Jan. 24 was the region's fourth biggest.
Kentucky issuers brought $1.85 billion of bonds to market, a 38% decrease. The Kentucky Economic Development Finance Authority’s $472.6 million of bonds that sold May 3 was the region's third-largest transaction.
Issuers in South Carolina sold $1.2 billion of bonds for a decline of 69% over last year.
West Virginia maintained a low volume of issuance with $333.6 million of bonds, down 24%.
Across the region, general purpose bonds represented $6.28 billion of deals, a decrease of 38.6%. Education came in second with $6.2 billion, a drop of 33% from last year.
The only sectors experiencing an uptick over last year were transportation with $3.39 billion, up 17.6%, housing with $1.27 billion, an increase of 21%, and public facilities with $725 million, up 43%.
Issuers again preferred tax-exempt financing with a total of $24.2 billion of bonds, a decrease of 29.4%. Taxable issuance totaled $1.56 billion, down 61.2%.
Bonds with interest subject to the Alternative Minimum Tax totaled $825.5 million, a 214.5% increase.
Most deals were negotiated with $15.88 billion of bonds issued, a drop of 31.6%. Competitive transactions were also down at $8.8 billion, decrease of 26.3%. Private placements totaled $1.87 billion, a 43.8% cut over last year.
Deals classified as revenue bonds totaled $18 billion, down 33.8%, while general obligation bonds came in at $8.59 billion, down 24.2%.
Issuers preferred fixed-rated debt with $24.7 billion, down 40%. Variable-rate long/no put bonds totaled $896 million, an increase of 45%, while variable-rate short put issuance was $798 million, down 41%.
Insurance-wrapped bonds totaled $1.98 billion for an increase of 39.6% over last year. Guaranties totaled $1.32 billion, a drop of 33.9%. No letters of credit or standby purchase agreements were used in the region, according to Thomson Reuters.
State agencies were the most prolific issuers with $6.9 billion, although that was a decrease of 32.4%. Local authorities came in second with $6.2 billion, down 16.3%.
Bond sales by special districts were $3.63 billion, a 47.2% decrease.
Bank-qualified bond issuance totaled $614.3 million, a decrease of 52.5%.
PFM remained the top financial advisor in the first half, credited with $4.23 billion of deals. Public Resources Advisory Group was second place on the FA table, advising on $1.55 billion of bonds.
Hilltop Securities jumped into the third financial advisory spot, up from ninth last year, advising clients on $1.3 billion of bonds.
Bank of America Merrill Lynch remained the region’s top senior manager as it had during the same period last year, credited by Thomson Reuters with $4.7 billion in sales, followed by Citi with $4.3 billion and Morgan Stanley with $2.6 billion.