DALLAS – Municipal bond issuers in the Southwest sold almost 20% more debt in 2015 than during 2014, reaching a record $77.7 billion.

Southwest Yearend Review

It was also a record year for Texas, which saw issuance rise 12.4% to $46.27 billion, about $7 billion behind California, the volume leader among states in 2015, according to data from Thomson Reuters. Texas accounted for more than 62% of the Southwest region's bond issuance volume.

The eight states that make up the Southwest ranked third in volume behind the Northeast and Far West.

Growth in the region outpaced the national rate of 19%.

The 2015 volume broke the region's previous record of $72 billion in the financially disastrous year of 2008, after which volume fell to the 2011 low of $42 billion.

It was a year in which governments across the region began adjusting to falling oil and gas revenues.

But Jack Addams, head of public finance for the region's leading financial advisor, First Southwest Co., said the economic perils of falling oil prices have not yet been felt in the muni market.

"Business is booming," he said. "There are still a lot of refunding opportunities."

While refunding issues in the region were up 26% year-over-year to $31.9 billion, new money also rose nearly 13% to $29.5 billion.

Deals in which issuers combined new money and refunding bonds climbed 21% to $16.3 billion.

Issuers in the region, rushing to take advantage of near-record low interest rates, ramped of their volume by 61% year-over-year in the first quarter of the year.

Strong growth continued in the second and third quarters but the region was down nearly 23% year-over-year in the fourth quarter as the Federal Reserve appeared increasingly certain that it would raise overnight rates.

While the corporate side of the financial market went into a tailspin after the December rate hike, a flight to safety increased demand for munis, industry executives said.

"People are scared to death about what's going on in the market," said Hill Feinberg, chairman of Hilltop Securities, the name of the recently merged First Southwest and Southwest Securities.

The strong demand for munis actually led to lower interest rates after the Fed raised its overnight rate to 25 basis points.

"They had been talking about rates for quite some time," said Noe Hinojosa Jr. chief executive of Estrada Hinojosa. "If you look at what happened, in the first month of 2016, interest rates dropped by a quarter of a percent. Munis were down pretty significantly in January compared to December."

Despite the year's record volume, only two deals surpassed $1 billion, including the Kansas Development Finance Authority, which ranked second with a $1 billion pension obligation bond deal, the region's second largest in 2015.

Such a large issue from Kansas is a rarity, and the decision to issue the bonds to reduce the state's unfunded obligation led to heated debate in the state legislature.

The Texas Transportation Commission once again had the region's largest issue, with $1.6 billion in a negotiated deal Jan. 21 through Barclays and JPMorgan. TTC, the governing board for the Texas Department of Transportation, was also the largest issuer overall with $2.39 billion in 2015.

While the TTC led among issuers, its volume was only about half of the $5.52 billion TTC issued in 2014.

"We had a great year because of TxDOT," said Hinojosa, whose firm worked as financial advisor on those deals.

The Arizona Salt River Project's $924.5 million negotiated deal with Goldman Sachs May 15 ranked as the region's third largest.

The North Texas Tollway Authority ranked fourth among issuers with $862.9 million, all in one April deal.

Following close behind came the Utah Transit Authority, all in one $860.7 million Jan. 27 deal through Morgan Stanley.

The NTTA and TTC deals lifted JPMorgan to the top of the senior manager ranks. For the year, the firm was credited with managing $4.56 billion of deals, well ahead of Citi, which managed $3.86 million.

Rounding out the top five senior managers were RBC Capital Markets with $3.78 billion, Morgan Stanley with $3.43 billion, and Wells Fargo with $3.14 billion.

While First Southwest retained its perennial ranking atop the Southwest's financial advisors with just over $10 billion, its volume slipped 31%. Nationally, First Southwest rose to the No. 2 position behind Public Financial Management in terms of volume.

RBC Capital Markets narrowly eclipsed Estrada Hinojosa for the No. 2 spot among FAs in the Southwest with $3.91 billion.

With the TTC issuing about half the previous year's volume in 2015, Estrada Hinojosa saw its volume drop 57% to $3.7 billion.

PFM ranked fourth among FAs in the region with $2.21 billion, followed by BOK Financial Corp. with $1.85 billion.

McCall Parkhurst & Horton was credited with $8.2 billion, keeping the law firm atop the bond counsel ranks, while Norton Rose Fulbright trailed with $4.95 billion.

Andrews Kurth ranked third with $3.94 billion, followed by Bracewell & Giuliani with $3.05 billion, and Ballard Spahr with $2.83 billion.

Going forward Bracewell & Giuliani will be known simply as Bracewell after former New York mayor Rudolph Giuliani parted ways with the firm in 2015. Also threatening to shake up the rankings is the arrival of Orrick, Herrington & Sutcliffe, the nation's top bond counsel, with a new Houston office.

For every state in the region, the depressed oil and gas market threatens to seriously impair revenues. However, the damage did not appear in 2015 bond issuance statistics.

Aside from New Mexico, which saw volume dip 4.9% to $2.18 billion, every state recorded an increase in volume.

Even New Mexico volume soared 213% in the first quarter before falling 52.8% in the third and 8.4% in the fourth quarter.

The top gainer on a percentage basis was Kansas with a 56% volume increase from 2014.

Piper Jaffray ranked first among senior managers in the Sunflower State, while Columbia Capital Management topped the financial advisors. Gilmore & Bell came out on top among bond counsel.

Colorado's nearly 46% increase in volume came on 248 issues worth a combined $6.26 billion. The University of Colorado Hospital Authority topped issuers with $265.6 million of bonds, while RBC Capital Markets earned top spot among senior managers. North Slope Capital's $496 million of deals made it No. 1 among FAs, while Kutak Rock outdistanced other bond counsel with $1.23 billion.

Utah issuers posted a 35% increase to $3.27 billion, aided by top issuer Utah Transit Authority's $861 million of bonds. Morgan Stanley topped senior managers while Zions First National Bank retained its place atop FAs.

Ballard Spahr remained in first among bond counsel.

Arkansas, the second smallest source of issuance in the region behind New Mexico, saw its volume jump nearly 26% to $2.53 billion. Arkansas' new money deals grew by more than 11% while refundings fell nearly 41%.

Crews & Associates led senior managers with $548 million, while Little Rock-based Stephens remained top FA. Friday Eldrege was top bond counsel.

Oklahoma, one of the states hit hardest by the oil and gas market, managed to increase bond volume 6.3% to $2.85 billion, helped by a 488% increase in healthcare debt and 433% increase in transportation. Morgan Stanley was the state's top underwriter, while Stephen H. McDonald led financial advisors. Hilborne & Weidman headed the state's bond counsel rankings.

Arizona eked out a 0.4% gain in volume to $6.77 billion, thanks in part to the Salt River Project's $924.5 million deal. Goldman Sachs was top underwriter in the Grand Canyon State while RBC Capital Markets led financial advisors. Squire Patton and Boggs topped the bond counsel table.

Across all the states, education represented the major source of debt, climbing nearly 33% to $30.5 billion. Rapidly growing Texas accounted for two-thirds of that total.

While transportation bond issuance fell about 25% year-over-year, electric power bonds doubled.

Deals wrapped by bond insurance also increased 46% in the Southwest, to $5.1 billion.

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