After the deluge of supply last week, the municipal market will see a noticeable lull in new-issue activity this week.
Volume is expected to dip to $5.93 billion — less than half of last week’s revised total and the lowest in three weeks — due to Monday’s Columbus Day holiday, according to Ipreo LLC and The Bond Buyer.
The market was home to a revised $11.05 billion of long-term bond financings last week, even though $13.13 billion was originally anticipated, according to Thomson Reuters.
The bevy of supply came on the heels of a revised $9.89 billion the week of Sept. 27.
A $1.59 billion New Jersey Transportation Trust Fund Authority offering of transportation system revenue bonds is the largest deal expected to come to the negotiated market this week — part of an estimated $5.04 billion versus last week’s revised $8.82 billion.
Scheduled for pricing by Barclays Capital on Thursday, the three-pronged sale is rated Aa3 by Moody’s Investors Service and AA-minus by Standard & Poor’s.
The structure consists of $929 million of Series 2010C taxable Build America Bonds maturing in 2027; $464.4 million of Series 2010D tax-exempt bonds maturing from 2014 to 2024; and $199 million of traditional taxable debt maturing in 2013 and 2014.
Billion-dollar deals dominated the primary market last week — the largest was a $1.76 billion California Department of Water Resources power supply revenue bond offering that was priced last Thursday.
Bank of America Merrill, Lynch priced the final 2020 maturity with a 5% coupon to yield 2.94% — 51 basis points higher than the generic, triple-A general obligation bond in 2020 tracked by Municipal Market Data at the time of the pricing.
The bonds are rated Aa3 by Moody’s, AA-minus by Standard & Poor’s, and AA by Fitch Ratings.
The generic, 30-year, triple-A MMD GO scale saw little movement throughout the week, closing at 3.73% on Monday, and at 3.71% on Friday.
One of the week’s other billion-dollar deals was a $1.32 billion offering of state personal income tax revenue bonds from the Dormitory Authority of the State of New York that was priced by M.R. Beal & Co. last Wednesday with four series of bonds — tax-exempt debt and taxable BABs that were relatively attractive.
The $562.5 million tax-exempt Series 2010 E had a final 2040 maturity that came with a 5% coupon and was priced to yield 4.07% — 35 basis points higher than the comparable 2040 generic triple-A GO at the time, according to MMD.
At the same time, the 2040 maturity from $549.4 million of 2010 Series H BABs was priced with a 5.389% coupon at par, which came at a spread of 165 basis points to the Treasury yield.
The bond has a an average life of 26.554 years and is subject to a make whole call at the U.S. Treasury rate plus 25 basis points. The deal also included $149.4 million Series G traditional taxable bonds and $55.49 million Series F tax-exempt bonds.
A handful of smaller financings this week will hail from the Midwest and Far West.
Bank of America Merrill Lynch is gearing up to price $275 million of revenue debt from Novi, Mich., on behalf of Trinity Health Care.
The bonds, which are rated Aa2 by Moody’s and AA by Standard & Poor’s and Fitch, are expected to be priced on Wednesday, following a retail order period on Tuesday, but details about the deal’s structure were still being hammered out at press time, according to a source at the firm.
Nearby, two Chicago issuers are planning to bring over $500 million combined in the education and transportation sectors this week.
The larger of the pair is a $257.1 Chicago Board of Education taxable GO sale of direct-pay qualified school construction bonds expected to be priced by Loop Capital Markets LLC on Thursday.
In addition, Chicago will sell $251.2 million of second-lien airport revenue bonds on behalf of Chicago Midway Airport when JPMorgan prices the deal in the negotiated market on Wednesday following a retail order period scheduled for Tuesday.
The bonds, which are payable by second-lien revenues and additionally secured by a pledge of customer facility charge revenues, are rated A3 by Moody’s and A-minus by the two other major rating agencies.
The four-pronged deal consists of $88 million of taxable BABs maturing in 2041, $66.7 million of traditional taxable bonds maturing serially from 2016 to 2025 and in 2041; and two series of traditional taxable bonds totaling $96.5 million and both maturing in 2041, according to information on the preliminary official statement. However, a source at the firm said the structure is subject to change prior to the pricing.
Meanwhile, in the Far West, Los Angeles will sell a total of $451 million of wastewater system revenue bonds to finance improvements and construction to the city’s wastewater collection and treatment system and to refund a portion of outstanding commercial paper notes.
Rated Aa2 by Moody’s, AA-plus by Standard & Poor’s, and AA by Fitch, the deal will be priced in three series — two of which total $267 million and will be priced by Siebert Brandford Shank & Co., on Wednesday after taking indications of interest on Tuesday.
That portion of the deal consists of $186.7 million of Series 2010 A senior-lien taxable BABs maturing in 2039 and $80 million of Series 2010 B taxable recovery zone economic development bonds maturing in 2040.
Cabrera Capital Markets, meanwhile, will price an additional $184 million series structured as tax-exempt subordinate-lien revenue bonds rated Aa3 by Moody’s, AA by Standard & Poor’s, and AA-minus by Fitch.
The firm will price the bonds for retail on Tuesday and for institutions on Wednesday. However, the structure of the debt offering was still being determined at press time.
Switching gears to the competitive market, the only sizable deal is a two-pronged $606.5 million Tennessee GO sale planned for Wednesday in the competitive market, where the expected total volume of $889.1 million is a far cry from the revised $2.23 billion that came last week, according to Thomson Reuters.
Rated triple-A by Moody’s and Fitch and AA-plus by Standard & Poor’s, the deal consists of $437 million of GO refunding debt in Series 2010 A and $169.5 million of new-money debt in Series 2010 B.
The Series A bonds are structured to mature from 2012 to 2031, with the 2019 through 2031 maturities subject to a May 1, 2018 call at par.
Series B is structured to mature from 2012 to 2023, with the 2019 to 2023 maturities subject to call on Aug. 1, 2018 at par.
The deal’s proceeds will retire a portion of the state’s outstanding commercial paper and finance capital projects.