Municipals still a touch off; Tarrant County Regional Water sells $150.38 million of bonds

By Sheri Kasprzak

New York, Feb. 8 - Municipals were yet again weaker even as investors flocked to new offerings, market insiders reported.

"Treasuries were off, and there's still not a lot moving in secondary, so we had those factors to contend with," said one trader.

The trader noted that there was some spotty weakness, but the softness in the market was not nearly as bad as it has been for the past few sessions. Attention to new issues could have kept the market from slipping too far, the trader noted.

Supply could rise next week

Even though demand has been strong, supply has recently been very light, but that might all change next week, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"New issue supply continues to slack, but next week's deals will include $1 billion Puerto Rico Aqueduct and Sewer [revenue bonds]," Schankel wrote in a report released Wednesday.

"Although the bonds are revenue-backed, liquidity provided by the Puerto Rico Government Development Bank and annual Commonwealth subsidies are the underpinnings of credit for this issuer. Moody's notes that the authority, which covers 98% of the island's population, loses 63% of water produced through leaks or nonpayment."

The offering will be sold in two tranches, but the exact breakdown of the tranches was not available Wednesday.

The bonds (Baa2/BBB-/BBB-) will be sold through lead manager Bank of America Merrill Lynch.

Proceeds will be used to fund the authority's five-year capital improvement plan.

Tarrant Regional Water prices

Heading up the day's primary action, the Tarrant County Regional Water District of Texas brought $150.38 million of series 2012 revenue bonds, said a pricing sheet.

The bonds (Aa1/AAA/AA+) were sold competitively, and J.P. Morgan Securities LLC won the bid, said Sandy Newby, the district's chief financial officer. The true interest cost came in at 3.476%.

"Generally, we only do competitive offerings," said Newby.

"The only time [we do negotiated] is for a refunding, because they're just a little trickier. Otherwise we do competitive."

Newby said the last time the district came to market was in 2010, when it sold three offerings, including a deal privately placed through the county's water development board.

Wednesday's pricing, Newby said, was even better than the Build America Bond sale the district conducted in 2010.

"The pricing conditions are fantastic," she noted.

The bonds are due 2014 to 2022 with term bonds due in 2031, 2032, 2037, 2042 and 2052. The serial coupons range from 2% to 5%. The 2031 bonds have a 5% coupon and priced at 117.212. The 2032 bonds have a split maturity with a 4% coupon priced at 105.121 and a 5% coupon priced at 116.275. The 2037 bonds have a 5% coupon and priced at 112.977. The 2042 bonds have a 5% coupon and priced at 112.349. The 2052 bonds have a 5% coupon and priced at 110.139.

Proceeds will be used to pay for the design, acquisition and construction of the Dallas Project Component of an integrated pipeline to serve the city and district and to make a deposit to a debt service reserve fund.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.