Seattle Sells $792 Million in Bonds After First Yield Decline in a Week
Seattle City Light, the municipally owned electricity supplier for some 1 million people in Washington state, sold about $791.8 million of revenue bonds as tax-exempt yields fell for the first time in a week.
The ninth-largest public power utility in the U.S. issued about $597 million in tax-exempt obligations to refinance debt, as well as taxable Build America and Recovery Zone Economic Development bonds to finance construction, according to Moody’s Investors Service, which rated the debt Aa2, third-highest.
Yields on top-rated general obligations fell at virtually every maturity yesterday following the European Union’s almost $1 trillion plan this week to shore up the region’s finances and keep Greece’s sovereign-debt crisis from spreading. Yields on AAA rated 10-year securities slipped 1 basis point, or 0.01 percentage point, the first decline since May 7, according to a daily survey by Municipal Market Advisors Inc.
“We felt the market had strengthened enough and stabilized enough for this transaction,” Michael van Dyck, Seattle’s director of debt financing, said in a telephone interview.
Municipal mutual funds added $280 million from May 5 through May 12, about $120 million more than the four-week average, said Chris Holmes, a fixed-income strategist for JPMorgan Chase & Co. in New York, in a report yesterday citing Lipper FMI data.
“In a typical flight-to-quality situation, people generally move into money-market funds,” Holmes said in a telephone interview. “We didn’t see that as much last week, which is a good sign.”
A 10-year segment of Seattle’s tax-exempt issue, rated AA- by Standard & Poor’s, priced to yield 3.41 percent, below the 3.57 percent for general obligation debt with comparable ratings and maturity, according to Bloomberg Fair Market Value index data.
Seattle’s 30-year Build America Bonds were priced to yield 5.57 percent, 45 basis points below the Wells Fargo Build America Bond Index. The average yield on Build America Bonds jumped 9 basis points, to 6.02 percent, on May 12, the highest this month, according to Wells Fargo.
“Early this week we saw investors drawn to higher credits again after the liquidity crisis last week,” van Dyck said. “This is the convergence of a market stabilizing and a strong credit.”
Seattle Light last sold debt in December 2008, with bonds due in 2020 priced to yield 5.5 percent, 76 basis points above an MMA index of similar maturities. Those securities last traded with an average yield of 3.48 percent, 28 basis points over top- rated general obligations, according to Municipal Securities Rulemaking Board data.
“It’s well-recognized, not just in our area but nationwide, as one of the better utilities,” Sean Kelly, a municipal bond trader at Rainier Securities LLC in Bellevue, Washington, said of Seattle Light. “They’ve always been well- received.”
Seattle’s sale was the second-largest issue in six weeks, behind $3 billion from California Department of Water Resources, and represented about 11 percent of this week’s $7.3 billion in total issuance, according to data compiled by Bloomberg.
Florida Hurricane Catastrophe Fund Finance Corp., the week’s largest tax-exempt deal, finished pricing on about $676 million in revenue bonds. The state-run reinsurer, rated Aa3 by Moody’s, offered notes maturing in five years priced to yield 3.6 percent, 179 basis points above top-rated debt. Six-year securities were priced to yield 3.85 percent, 161 basis points over comparable top-rated debt in MMA data.
Following are descriptions of pending sales of municipal bonds in the U.S.:
NEW YORK CITY TRANSITIONAL FINANCE AUTHORITY, which helps the most populous U.S. city raise funds for capital projects, plans to sell $1.14 billion in taxable and tax-exempt debt as soon as next week for refinancing and school renovation and construction. Build America Bonds comprise two issues totaling $420 million. Qualified School Construction notes, which come with a 100 percent U.S. subsidy on borrowing costs, are $250 million, with another $90 million in traditional taxables. Tax- exempt issuance makes up the remaining $380 million. Underwriters led by Bank of America Merrill Lynch will market the securities, rated AAA by S&P, its highest grade, and AA+ by Fitch and Aa1 by Moody’s, their second-highest ratings. (Added May 13)
MASSACHUSETTS DEPARTMENT OF TRANSPORTATION, created last year in a merger of state agencies, plans to sell about $1.1 billion in fixed-rated bonds and variable-rate demand obligations as early as next week to refinance existing debt. The agency will issue about $207.7 million in VRDOs to match a swap agreement with UBS AG from 2008, with the remainder coming as fixed-rate to refinance bonds from 1997, preliminary offering documents show. The bonds were originally sold by the Massachusetts Turnpike Authority to finance Boston’s $15 billion “Big Dig,” the largest public works project in U.S. history. The subordinated bonds are secured by turnpike tolls and other revenue, such as state aid, and were rated AA-, fourth-highest, by Fitch on March 16. Citigroup Inc. will market the debt to investors. (Updated May 13)
METROPOLITAN WASHINGTON AIRPORT AUTHORITY, which operates Ronald Reagan Washington National and Washington Dulles International airports near the nation’s capital, will offer $650 million in revenue bonds as early as next week. The sale, originally scheduled for this week, will occur after two delays because of market volatility, the authority said. The securities are part of $2.9 billion of debt the authority plans to issue to help fund an extension of the Washington Metropolitan Area Transit Authority’s rail system, according to S&P. Citigroup will market them to investors. The debt is rated Baa1 by Moody’s and BBB+ by S&P, the third-lowest investment grades. (Updated May 14)
COLUMBUS-FRANKLIN COUNTY FINANCE AUTHORITY, home to Ohio’s capital, plans to sell $158 million in taxable revenue bonds next week. The securities will mature semiannually from February 2015 through August 2021. Proceeds from the issue, rated AA- by S&P, will be deposited into a reserve fund and will help finance future capital needs, according to preliminary offering documents. RBC Capital Markets will market the issue to investors. (Added May 12)
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