TD Securities expands its public finance footprint as it sets its sights nationwide

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TD Securities LLC is growing rapidly right now, according to officials from the firm.

Gary Martz, managing director of public finance banking at TD Bank N.A., and Ken Gambone, director and western regional head of public finance investment banking at TD Securities, spoke with The Bond Buyer on how the firm has moved steadily to expand its presence in the public finance sector.

Over the past three years, TD Securities has expanded its New York City-based team to 16 people in public finance and sales and trading. Two people were hired this year and the firm expects to hire a few more next year.

“We’re a relatively small team that’s growing,” Gambone said. “And we cover the entire country — all 50 states —and we cover every sector." But they are selective about which RFPs to respond to over time.

Martz said TD Bank has had a long history within the municipal market from Maine to Florida in its physical brick-and-mortar locations.

“A few years ago the bank made a decision to leverage that experience that we have within our footprint and translate that into a national effort,” Martz said.

While TD Bank has been in public finance for a long time, TD Securities really began to get involved in munis in 2009 when the bank acquired Commerce Bank, which had a municipal bond trading area.

“At that time, they liked the business and they started growing it from there,” Gambone said. “And about three years ago, they pivoted from looking at just inside — at what they call their footprint from Maine to Florida — it was an East Coast Bank — saying they want to cover accounts nationally and that’s when the national calling effort really began.”

Gambone said they have been bidding on more competitive muni sales and been involved in more negotiated deals.

“The clients that we are covering are our top priority. So if a client is out with a competitive sale, then we’re going to be there to support them,” he said. “Our trading desk does bid on many competitive deals for accounts that we’re either not involved with or we haven’t had a real calling effort on as well. And we have hired a new competitive trader that does nothing but that right now.”

In May, TD Securities was the sole manager for Main Street Natural Gas, Inc.’s $675 million of Series 2019B gas supply revenue bonds. It was “the largest deal that the municipal bond department has ever been a lead manager and a sold senior manager on,” he said.

He said that TD has started taking on more of a leadership role in the green bond space.

“We have a separate green bond team that works with taxable and tax-exempt investors to best position them in bonds to take advantage of that,” he said, adding they have been on a couple of transactions because of that. “I think that it’s something we’re trying to use as a differentiator for our franchise.”

Gambone added they have seen more investors “show up for the green tranche versus the non-green tranche. But we have not seen a real change in yield yet. Will that happen over time? I believe that it will and it will because as green becomes a larger part of the index then portfolio managers are going to be forced to balance themselves versus that index and they’re going to have to pay up for that over time.”

The Toronto-Dominion Bank is the seventh-largest U.S. bank by deposits and is the eighth largest in the U.S. by total assets. It is rated Aa1 by Moody’s Investors Service and AA-minus by S&P Global Ratings and Fitch Ratings.

“We know we’re not as large as many of our competitors, but our strategy is really to be able to deliver the entire firm to every account we’re working with,” Gambone said. “And we can do that in a very meaningful way because our balance sheet is so large and we’re the highest-rated bank in public finance right now.”

Looking ahead, he said municipals will remain in demand for the foreseeable future.

“In general, we continue to see a pretty healthy demand for municipal bonds,” he said. “With the SALT deductions going away, we’ve finally gotten through a full tax year with the new law that’s in place now. And one way to try to find ways around that is to increase your holdings of tax-exempt securities.”

Where do they want to be in the next few years?

Gambone said the focus at TD Securities now was to work with larger municipal issuers that are highly rated in economically dense areas of the country.

He said that some of TD’s biggest markets, such as Texas and California, were fairly new to the firm, but that they were making inroads into both of those markets. “I’d like to think that in three to five years that we can have all of those accounts covered and be able to prove the types of coverage that we think we need to be successful with all of those accounts.”

Gambone added that TD has taken a leadership role in the transition to SOFR from LIBOR.

“We do sit on the ARRC [Alternative Reference Rates Committee], TD was on the first agency SOFR deal, the first corporate SOFR deal, the first SSA-secured SOFR deal and the first tax-exempt SOFR deal,” he said. “We’ve also done the first SOFR direct placement that that’s a CUSIP security for a municipal issuer — it was a taxable deal but it was done for a municipal issuer. So we’ve had our finger on the pulse of SOFR as a new index and are trying to find ways of mitigating LIBOR over the next two years to a large extent.”

Martz said it was important to know that the bank was a highly rated institution and was looking to grow the business nationally.

“Although we’re fairly new to the national market, we have a long history within out footprint here of delivering to municipal clients and working in conjunction with TD Securities we can provide a one-stop solution for our clients with liquidity, direct placements, remarketing and underwriting, SWAPs — a full product set.”

They said they look on a case-by-case basis at what their client needs and come up with the best solutions for them, whether its in the capital markets or on the bank side.

John Hallacy contributed to this story.

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