Miami-Dade $523 Million Bond Is Week's Biggest Issue as Muni Yields Dive
Florida’s largest county and second- largest city will compete for investors this week with $627.1 million of bond sales as municipal yields fell to a record low.
Miami-Dade County will offer $523.5 million of revenue bonds to finance its expansion of Miami International Airport, the largest U.S. gateway to Latin America. The City of Miami will sell $103.6 million of revenue bonds for a parking garage at a baseball stadium being built for the Florida Marlins.
Municipal borrowers plan about $6.3 billion of sales this week, according to data compiled by Bloomberg, down from $6.9 billion last week, when cash from maturing debt helped push yields on top-rated tax-exempt securities to a six-week low relative to benchmark Treasury rates.
“The trend is our friend, and I could see them going lower,” said Alan Schankel, director of fixed-income research at Janney Montgomery Scott LLC in Philadelphia. “There’s a lot of pent-up investor demand -- visible supply is under $8 billion at the moment, which is lower than average -- so I think it will be a good week.”
Yields on top-rated, tax-exempt general obligations fell 1 basis point July 16 to an average of 2.88 percent, the lowest in at least nine-and-a-half years, from about 3.2 percent in mid- June, according to Municipal Market Advisors data dating to January 2001. A basis point is 0.01 percentage point.
The Miami-Dade bonds, the largest sale of the week, will finance an expansion of Miami International Airport of about $6 billion that includes two new terminals, a transportation hub and additional cargo areas. Revenue backing the interest payments will come mostly from fees generated by the airport, American Airlines’ largest international hub.
“Interest rates have come down over the last 10 days, so it’s our anticipation that they’ll continue to be good for us,” said Frank Hinton, a bond analyst with the county who said maturities on the bonds will be for as long as 40 years.
The bonds, marketed by a group led by JPMorgan Chase & Co., are rated fourth-lowest, at A-, by Standard & Poor’s, and fifth- lowest at Moody’s Investors Service, at A2, and Fitch Ratings, at A.
Miami-Dade County sold $600 million of aviation revenue bonds in January. A segment of that issue maturing in 2035 sold on July 12 at an average yield of 5.07 percent, or 40 basis points lower than when they were first offered, according to Bloomberg data.
Twenty-five-year transportation revenue bonds with a similar rating yield about 5.14 percent on average, down from 5.21 percent on the day of the Miami-Dade January sale, according to Bloomberg Fair Value data.
The sale by Miami, the state’s second-biggest city by population after Jacksonville with about 400,000 residents, was originally authorized in October. It was delayed in December after the Securities and Exchange Commission began investigating Miami bond sales in 2007 and 2009 over whether the city properly disclosed budget gaps to investors.
The parking issue consists of $86.7 million of tax-exempt and $16.9 million of taxable bonds. Revenue for interest payments will come from fees on as many as 6,000 parking spaces in a garage the city will build as its contribution to the $642 million stadium project underway in the Little Havana section of downtown Miami. The stadium is scheduled to open in time for the 2012 baseball season.
Miami added insurance to the issue after S&P and Moody’s cut their credit ratings on the city, citing operating deficits and rising pension and health-care costs.
The sale’s biggest portion is $39.4 million of bonds due in 25 years, according to a deal summary forwarded by the city’s communications office. Insured revenue bonds with a comparable maturity and rating yield about 4.87 percent, the lowest since January, according to Bloomberg Fair Value Indexes. The fair value yield is about 59 basis points above top-rated, tax-exempt 25-year municipals, about double the level from a year earlier, according to MMA data.
The underlying bonds are rated third-lowest investment grade by S&P, at BBB+, and fifth-lowest, at A2, by Moody’s. The insured bonds took on the ratings of their insurer, Assured Guaranty Municipal Corp., rated highest by S&P, at AAA, and fourth-highest, at Aa3, by Moody’s.
Following are descriptions of pending sales of municipal debt in the U.S.:
NEW YORK CITY, the third-largest U.S. municipal borrower, plans to sell $800 million in general-obligation bonds the week of July 26 to refinance debt. The bonds, rated Aa2 by Moody’s and AA by S&P and Fitch, all third-highest, will be marketed by a group led by Barclay’s Plc. (Added July 15)
PORT AUTHORITY OF NEW YORK AND NEW JERSEY, which operates transportation services in 17 counties between the two states, plans to sell $400 million in tax-exempt bonds as early as this week. The securities, rated third-highest, at Aa2, by Moody’s, will be used for capital-improvement projects. (Added July 19)
THE PUBLIC UTILITIES COMMISSION OF THE CITY AND COUNTY OF SAN FRANCISCO, the third-largest municipal utility in California and which provides water to more than 2.4 million customers, plans to issue about $454 million in bonds as early as this week. The majority of the offering, about $387 million, are scheduled as Build America Bonds. Securities from the utility company are rated third-highest, at Aa2, by Moody’s, and fourth- highest, at AA-, by S&P. (Added July 19)