Transportation deals boosted Southeast volume in 2019

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The Southeast saw the largest year-over-year percentage increase in bond issuance of any region last year, with a 32.6% hike in volume boosted by refundings and a surge in large transportation deals.

The region’s issuers sold $75 billion of bonds compared to $56.5 billion in 2018, according to data from Refinitiv. All four quarters recorded positive results.

Nine of the region's 11 states had year-over-year volume increases, while only Kentucky and West Virginia saw their issuers sell fewer bonds than in 2018.

Low interest rates drove an 83.4% surge in refundings to $18 billion and a 97% increase in combined new money and refunding deals to $8.1 billion.

Taxable issuance swelled by 72% to $9.8 billion, although tax-exempt financing remained on top with $57.7 billion, an uptick of 16.5%. Debt subject to the alternative minimum tax soared 469.7% on $7.4 billion in sales.

The region's issuers preferred negotiated deals, stepping up borrowing by 44.7% to $51.3 billion. Competitive issuance also increased 32% to $19.4 billion. Private placements were off to $4.3 billion, a decline of 33%.

Transportation was the top borrowing sector with a 153.5% hike to $17 billion. Debt for general purposes totaled $14.1 billion, an increase of 30%, while bonds financing education projects totaled $13.3 billion, an increase of 30.7%.

The nine largest transportation deals in the region resulted in combined issuance of $9.26 billion. They financed a passenger train project, five airport expansion programs, and port and toll road improvements.

The Florida Development Finance Corp. brought both the single-largest one-day deal to market and was the region's largest issuer for the year.

The FDFC, a state-created agency that issues private activity bonds, sold $1.75 billion of PABs on behalf of the privately owned Virgin Trains/Brightline passenger train project in April, the region’s largest deal.

For the year, FDFC’s total volume was $2.85 billion, including another $950 million for the Virgin/Brightline train project in June, and smaller deals for charter schools and solid waste projects.

“This was certainly a welcomed issuance year for the FDFC, and our board was pleased to see more diversity in the types of private activity bonds issued for qualifying projects,” said Executive Director Bill Spivey. “We look forward to reaching out to a variety of borrowers such as small manufacturers in the near future to let them know of this option and increasing our support of economic development efforts in the state through PABs.”

Spivey said the FDFC only issues PABs upon request by borrowers, and the agency “has no way to anticipate future bond issuance.” FDFC also has an active PACE (property assessed clean energy) program.

FDFC’s train deals elevated its financial advisor, Larson Consulting Services, to its debut appearance in the Southeast’s financial advisor league table.

PFM Financial Advisors took its usual top spot in the chart, credited by Refinitiv with advising on $14 billion in 153 deals. Hilltop Securities came in second with $4.8 billion in 38 deals, while Public Resources Advisory Group was third with $4.13 billion, Davenport & Co., was fourth with $3.8 billion, and Frasca & Associates was fifth with $3.14 billion.

Larson ended the year in sixth place, advising on $2.7 billion.

BofA Securities was the Southeast’s top senior manager, credited with $15 billion in 117 deals. Morgan Stanley came in second with $9 billion in 63 deals. JPMorgan was third with $7.77 billion in 70 deals.

Greenberg Traurig rose from third place last year to become the top bond counsel with $5 billion in 63 deals. Kutak Rock dropped to second from first last year with $4.46 billion in 37 deals. McGuireWoods was third with $4 billion in 70 deals.

Southeast issuers preferred revenue bonds last year, selling $59.1 billion, up 37.6%. General obligation issuance rose 16.7% to $15.8 billion.

Fixed rate debt soared 48% to $65.8 billion, while variable rate long-no put obligations fell off 20% to $6.3 billion and short put bond deals were down 0.1% to $1.8 billion.

Zero coupon bond issues were up 1991% to $320 million, while linked rate bonds were off 68.6% to $743.5 million, and the use of convertible debt was down 77.1% to $9.6 million.

Florida remained the largest source of municipal bond debt in the region last year at $21.8 billion, up 74.2% from $12.5 billion in 2018.

Sunshine State sales were bolstered by four issuers who sold the region’s largest deals starting with FDFC’s $1.75 billion train bonds, followed by Broward County’s $1.2 billion of aviation bonds, Miami-Dade County’s $1.2 billion of airport bonds, and the Greater Orlando Aviation Authority’s $1.13 billion deal in support of its $4.12 billion capital improvement and expansion program at Orlando International Airport.

Georgia issuers brought the second-largest amount of bonds last year with $11.24 billion, up 35.4% from $8.3 billion in 2018.

The state of Georgia sold the region's fifth-largest single deal with $950.6 billion of general obligation bonds issued in June. The state's largest issuer was Main Street Natural Gas, which sold $2 billion of bonds in three separate series throughout the year. The Brookhaven Development Authority issued $736.8 million in July and Atlanta sold $707 million of aviation bonds in August.

Virginia issuers took advantage of last year’s market selling $9.2 billion, an upswing of 65%. The state's largest deal was $513.2 million in May from the Virginia College Building Authority, which was Virginia's top issuer, credited with $914.3 million for the year.

North Carolina issuers sold $7.2 billion of bonds, a 20.5% hike. The volume was supported by the state of North Carolina’s $1.2 billion of GO bonds in two separate deals.

Tennessee issuers saw deals rise in 2019 with $6.2 billion, a 14.3% increase. The Metropolitan Nashville Airport Authority issued the state’s largest deal with $919 million of aviation bonds in December. The Tennergy Corp. issued $545 million of natural gas supply revenue bonds in February.

Alabama issuers also stepped up their market presence selling $5.1 billion of debt, up 9.5%. The Black Belt Energy Gas District issued $747 million, while the Tuscaloosa County Industrial Authority sold $612 million.

South Carolina issuers sold the seventh-highest amount of debt in the region with $4.4 billion, an increase of 11.6% The South Carolina State Ports Authority issued the state’s largest deal with $505.3 million in September.

Kentucky issuers brought $3.65 billion of bonds, reducing year-over-year sales by 27.5%. The Kentucky Public Energy Authority issued the state’s largest deal with $556.2 million in gas supply revenue bonds in December.

Louisiana issuance soared by 84.6% last year to $2.8 billion compared to $1.52 billion the prior year. The state of Louisiana sold the two largest deals during the year, $307.9 million of general obligation bonds in February and $185 million of grant anticipation revenue vehicle bonds, or Garvees, in April.

Mississippi issuers increased sales 85.6% to $2.8 billion. The state of Mississippi sold the largest amount of debt in two sales, $405.5 million of GO bonds in September and $268.8 million of gaming tax revenue bonds in January.

West Virginia issuers saw debt sales plummet 45.6% to $1.13 billion compared to $2.08 billion in 2018. The state of West Virginia had the largest deal issuing $600 million of GOs in December.

Across the Southeast, local authorities sold the most debt at a combined $21 billion, an increase of 41.7%, while state agencies came in second with $18.7 billion, up 27.2%. Counties and parishes saw a whopping 75.8% increase in issuance at $10.9 billion compared to $6.2 billion the prior year.

Cities and towns stepped up issuance to $9.3 billion, up 25.5%. Special districts saw a 6.6% decline to $6.5 billion. State governments sold $4.7 billion, up 40.5%.

Issuers increased their use of bond insurance with $3.16 billion, up 21.6%. Bank qualified bonds increased by 10.1% to $956.9 million.

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Bond volume Rankings Florida Development Finance Corp. Greater Orlando Aviation Authority Broward County Miami-Dade County State of Georgia Main Street Natural Gas Inc. City of Atlanta, GA Virginia College Building Authority State of North Carolina South Carolina State Authority Public Energy Authority of Kentucky State of Louisiana Alabama Florida Georgia Kentucky Louisiana Mississippi North Carolina South Carolina Tennessee Virginia West Virginia