Municipals improve amid solid demand, stronger Treasuries; Detroit Water brings $1.79 billion

By Sheri Kasprzak

New York, Aug. 27 – Municipals rounded out a busy session on a firmer note, pushed by solid demand for new issues, particularly a Detroit water and sewer deal from the Michigan Finance Authority, market insiders reported.

Yields were firmer by 2 to 4 basis points, particularly out long, said a trader. Similarly, Treasuries were better Wednesday, helped by a positive auction of five-year notes.

Meanwhile, the largest deal of the week was a $1,791,865,000 offering from Michigan Finance, which funded the Detroit Water and Sewerage Department’s recently announced tender offer.

Deal done in 14 tranches

The massive deal was conducted in 14 tranches through Citigroup Global Markets Inc.

The deal included $123.22 million of series 2014C-1 water bonds, $27.47 million of series 2014C-2 AMT water and sewer bonds, $447,325,000 of series 2014C-3 water bonds, $95,165,000 of series 2014C-5 water and sewer bonds, $143.88 million of series 2014C-6 water bonds, $76,715,000 of series 2014C-7 water and sewer bonds, $23.24 million of series 2014C-8 water and sewer bonds, $206.54 million of series 2014D-1 water and sewer bonds, $188,455,000 of series 2014D-2 water and sewer bonds, $62.7 million of series 2014D-3 water and sewer bonds, $307,645,000 of series 2014D-4 water bonds, $9.27 million of series 2014D-5 taxable bonds, $65,425,000 of series 2014D-6 water bonds and $14,815,000 of series 2014D-7 water bonds.

The 2014C-1 bonds are due July 1, 2044 and have a 5% coupon priced at 100.96.

The 2014C-2 bonds are due July 1, 2044 and have a 5% coupon priced at 98.468.

The 2014C-3 bond are due 2020 to 2033 with 5% coupons.

The 2014C-5 bonds are due 2017 to 2020 with 5% coupons.

The 2014C-6 bonds are due 2015 to 2016 and 2032 to 2033 with 2% to 5% coupons.

The 2014C-7 bonds are due 2019 to 2036 with 5% coupons.

The 2014C-8 bonds are due 2015 to 2018 with 2% to 5% coupons.

2014D bonds have 2% to 5% coupons

The 2014D-1 bonds are due 2015 to 2023 with term bonds due in 2035 and 2037. The serial bonds have 5% coupons. The 2035 bonds have a 5% coupon priced at 104.251 and the 2037 bonds have a 5% coupon priced at 103.767.

The 2014D-2 bonds are due 2023 to 2028 with 5% coupons.

The 2014D-3 bonds are due 2018 to 2020 with 5% coupons.

The 2014D-4 bonds are due 2015 to 2017 and 2029 to 2032 with a term bond due in 2034. The serial coupons range from 2% to 5%. The 2034 bonds have a 5% coupon priced at 102.095.

The 2014D-5 bonds are due July 1, 2019 and have a 2.85% coupon priced at par.

The 2014D-6 bonds are due 2019 to 2034 with a term bond due in 2036. The serial bonds have 5% coupons. The 2036 bonds have a 5% coupon priced at 100.998.

The 2014D-7 bonds are due 2015 to 2018 with 2% to 5% coupons.

Proceeds from the bonds (//BBB+) will finance the city’s tender offer, as well as refund existing water and sewer bonds and make improvements to the city’s water and sewer infrastructure.

Virginia Public Building sells debt

In other new issues, the Virginia Public Building Authority hit the market with $468.29 million of series 2014 revenue bonds.

The offering included $129.17 million of series 2014A public facilities revenue bonds, $29,735,000 of series 2014B taxable public facilities revenue bonds and $309,385,000 of series 2014C public facilities refunding revenue bonds, said a pricing sheet.

The 2014A bonds are due 2015 to 2034 with 3% to 5% coupons.

The 2014B bonds are due 2015 to 2034 with coupons from 0.2% to 3.77%, all priced at par.

The 2014C bonds are due 2015 to 2027 with 3% to 5% coupons.

The bonds (Aa1/AA+/AA+) were sold competitively. BofA Merrill Lynch took the series 2014A and 2014C bonds at a 2.45% true interest cost. Wells Fargo Securities LLC won the series 2014B bonds at a 3.23% TIC.

Proceeds will be used to finance the construction, improvement, reconstruction and equipment of public facilities utilized by the commonwealth, including jail and juvenile correctional facilities.

Fayetteville brings bonds

Elsewhere, the City of Fayetteville, N.C., brought $111,455,000 of series 2014 public works commission revenue bonds, said a pricing sheet.

The bonds (Aa2/AA/AA) were sold competitively with Piper Jaffray & Co. winning the bid at a 3.307106% true interest cost, said Nathan Walls, spokesman for the city.

The bonds are due 2016 to 2037 with a term bond due in 2039. The serial coupons range from 3% to 5% with 0.28% to 3.64% yields. The 2039 bonds have a 4% coupon priced at 103.429 to yield 3.57%.

“The city can sell either negotiated or competitively,” Walls said Wednesday.

“We fit the profile of a credit that would sell bonds competitively in the current market to get the lowest all-in true interest cost. Low issuance volume nationwide, combined with low interest rates and our strong Aa2/AA/AA credit ratings were all factors that we took into consideration.”

Proceeds will be used to acquire, construct and equip certain improvements to the public works system.

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