Southeast Volume Falls Amid Rise in New Money

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BRADENTON, Fla. – Southeast issuers sold $37.63 billion of municipal bonds in the first half of 2016, a decline of 10.9% from the same period last year, according to Thomson Reuters data.

2016 Midyear Southeast Statistics

The region experienced an uptick in new money issuance amid overall lower volume driven by fewer refinancings and the sustained drop in oil prices that impacted revenues in some states, market experts said.

The Southeast saw the lowest volume of any region during the first half.

Sales were down by 13.8% in the first quarter and by 8% in the second quarter, compared to 2015.

New money bond deals totaled $14.75 billion, an increase of 9% from a year earlier.

Refundings totaled $16.3 billion, a decline of 22.4%, while deals that combined new money and refunding totaled $6.57 billion, a 14.5% drop.

"The Southeast certainly has had some significant issues," such as energy prices, said Jonathan Nordstrom, municipal bond manager for Raymond James and Associates Inc.

Raymond James maintained 6th place in the region's first-half senior manager ranking credited with $2.67 billion in sales. As financial advisor, the firm landed in 4th place, up from 6th, credited with advising on $1.93 billion of deals.

Nordstrom said low oil prices affected a number of states, including Louisiana and Mississippi where bond issuance was off by more than half compared to the first half of 2015.

Louisiana's state government sold a $361.9 million scoop-and-toss refunding in April for budget relief due to lower revenues and persistent budget gaps.

"It gives you a picture overall in the Southeast that oil had an impact in certain states on their revenues and therefore their willingness to add new money projects," he said.

Nordstrom said the volume of refundings in the region likely will continue to decline. Although interest rates remain historically low, most refinancings have already been brought to market.

Bank of America Merrill Lynch was the region's top senior manager, credited by Thomson Reuters with $6.3 billion in sales in the first half, followed by JPMorgan with $4.68 billion and Citi with $4.15 billion.

The uptick in new bond issuance is a sign that discussions the last few years about financing pent-up need for capital are coming to fruition, according to David Moore, managing director of the southern region financial advisory practice at Public Financial Management Inc.

"I'm encouraged for the future based on seeing the pickup in new money during the first part of this year," he said. "We see good volume heading through the fall."

Moore said issuers have stepped up planning for new facilities, while others are reassessing projects that were delayed because of the recession.

Refundings are winding down, he said, and it appears that the region is shifting to a more typical new issuance cycle.

PFM remained the Southeast's top financial advisor in the first half, credited with advising on offerings totaling $7.73 billion.

Public Resources Advisory Group was second place on the FA table, advising on $2.57 billion of bonds.

Ponder & Co. jumped into the third financial advisory spot, up from eighth last year, advising clients on $2.04 billion of bonds.

Greenburg Traurig PA remained the top bond counsel, credited with $2.1 billion in transactions.

Nabors Giblin & Nickerson PA came in second with $2.07 billion in sales. McGuireWoods LLP was third with $2.03 billion in sales.

Across the region, deals for education funding came in second with $9.03 billion, a drop of 22.2% over last year. Utility financing was down 2.7% to $5 billion.

Healthcare transactions increased by 20.6% with $4.87 billion in sales. Electric power bonds deals rose by 23% over last year with $2.61 billion. Housing bonds increased by 18.1% with $1.05 billion in deals.

The transportation sector saw its volume plummet to $2.52 billion, off 47.1%.

Some $33.36 billion of tax-exempt bonds were issued, 13.1% less than last year, while the use of taxable debt was up 77.7% to $4 billion.

Issuers sold $23.22 billion through negotiation, a 14.8% decline.

Deals sold by competition totaled $12 billion, a 0.5% decrease. Private placements dropped by 17.4% to $2.4 billion.

Some $35.37 billion in fixed-rate bonds were issued, a drop of 11.9%.

The use of variable-rate, short put bonds totaled $1.35 billion, an increase of 38.1%. The volume of long, variable variable-rate no put bonds increased by 296.4% to $618.4 million.

Issuers used bond insurance on $1.42 billion of deals, a drop of 17.9%. Some $1.27 billion of bonds were bank qualified, a 6.7% increase.

State agencies issued the most debt with $9.69 billion, followed by $7.33 billion issued by local authorities. Districts sold $6.79 billion of bonds, and municipalities issued $5.37 billion.

Florida issuers sold the most debt in the region issuing $9.96 billion of bonds, although the volume was down 19.9% from last year.

The Florida State Board of Administration offered the second-largest single transaction with a $1.2 billion taxable bond issuance in February.

The bond proceeds are being used by the Florida Hurricane Catastrophe Fund as liquidity to support making timely payments on insurance claims from damages caused by hurricanes.

Virginia issuers came to market with 58 transactions totaling $4.88 billion, a 3.3% increase over the same period last year.

The Virginia College Building Authority was the largest issuer in the state with a total of $681.6 million in sales.

Georgia issuers sold $4.43 billion, 10.7% less than in 2015.

The state of Georgia sold the single-largest transaction in the region with $1.37 billion of general obligation bonds in early June.

North Carolina issuers sold $3.84 billion during the first half, an uptick of 4.5%. The University of North Carolina Board of Governors was the top issuer in the state with $653.6 million.

South Carolina debt sales totaled $3.42 billion, a 6% decline over last year. The state-owned South Carolina Public Service Authority, known as Santee Cooper, issued $1.37 billion of bonds in two transactions, making it the region's largest issuer.

Kentucky saw 11% increase in bond sales in the first half with $2.97 billion. The Kentucky State Property & Building Commission sold $679 million of bonds in March, followed by $44.5 million in two transactions in May.

Alabama issuers brought $2.91 billion of bonds to market, a 20.6% increase. The Lower Alabama Gas District sold the fifth-largest transaction in the region with the sale of $599.4 million of bonds in February.

Tennessee issuers sold $2.86 billion of bonds, a 2.3% decline. The Nashville and Davidson County Metro H and E Facilities Board issued $1 billion of bonds in several tranches, making it the Southeast's fourth-largest issuer.

In Louisiana, issuers sold $1.36 billion of bonds, a decline of 55.3% over last year.

Mississippi issuers sold $519.7 million of bonds, a 62.4% tumble over last year.

West Virginia issuers sold bonds totaling $439.2 million, off 20.6%.

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