Elvis Museum Draws on $372 Million Mississippi Build Americas: Muni Credit

The Elvis Presley Museum in the rock ’n’ roll legend’s birthplace of Tupelo, Mississippi, is tapping into $651 million in taxable state debt for a makeover.

Mississippi leads taxable issuers this week with offerings including $372 million in Build Americas, $234 million in traditional taxables and $45 million in recovery-zone debt to finance capital improvements. The state hasn’t borrowed since October 2009, creating a relative dearth of Mississippi notes, that may boost market demand, said Mike Pietronico, chief executive officer of Miller Tabak Asset Management in New York.

“There’s some scarcity to it,” said Pietronico, who oversees $315 million in municipal debt. “Given the size and the fact that it doesn’t come to market frequently, I could make a case that it’ll be well-received.”

The issue will price Oct. 20 and 21, and early indications suggest “very good response” from the market, according to Treasurer Tate Reeves’s office.

In the 2009 sale Mississippi’s 25-year Build Americas were priced to yield 5.67 percent, or 138 basis points above U.S. Treasuries maturing in May 2039. The bonds traded Oct. 12 at an average yield of 5 percent, 114 basis points above the federal debt.

Outstanding Debt

This week’s borrowing will increase the state’s outstanding general-obligation debt 19 percent to $4.11 billion, according to preliminary offering documents. Mississippi has third-highest ratings from Moody’s Investors Service and Standard & Poor’s, two levels below top-rated Maryland.

“Though Mississippi may not be as strong as Maryland, it’s still a state without a lot of debt outstanding,” Pietronico said.

States and local governments are poised to sell about $7 billion in the next five days, the lowest total for a regular trading week since the period ended Sept. 3, according to data compiled by Bloomberg. About $3.3 billion will be offered as taxables, a three-week low, Bloomberg data show.

Build America Bonds, the fastest-growing part of the $2.8 trillion U.S. municipal debt market, were first sold in April 2009 as part of the economic-stimulus package and include a 35 percent federal subsidy on interest-rate costs. Legislation introduced by Senate Finance Committee Chairman Max Baucus would extend the program, which expires Dec. 31, by one year with the subsidy reduced to 32 percent. Previous extension attempts stalled in Congress. About $146 billion have been issued to date.

Less Common

Recovery Zone Economic Development Bonds, also part of last year’s stimulus, provide the issuer with a 45 percent subsidy. About $3 billion have been sold.

Though recovery bonds are less common than Build Americas, Mississippi should see the same demand for both products, Pietronico said.

“Ultimately, the market judges deal on the issuer’s ability to repay,” he said. “Because it’s a state G.O., it’ll get the benefit of the doubt.”

While the state’s pension funding ratio has fallen to 67 percent from 73 percent in 2007, this year Mississippi raised employees’ contributions to 9 percent from 7.25 percent. The state has the potential to increase foreign investment, according to an Oct. 14 report from Moody’s. Nissan Motor Co. and Toyota Motor Corp. are projected to supply the state with more than 6,000 jobs, Moody’s said.

Stable Outlook

“The outlook for Mississippi is stable, based on expectations the state’s conservative fiscal practices will enable it to effectively manage budgetary stress associated with economic challenges,” wrote Edward Hampton and Edith Behr of Moody’s.

The Elvis Presley museum, which includes the house where he was born in 1935 as well as a chapel added in 1979, will receive about $3 million for renovations as part of a statewide tourism project.

Elvis Presley Birthplace, Museum and Chapel attracts 50,000 to 100,000 visitors a year, according to Judy Schumpert, a tour guide since 1996. The money will be used to build a theater at the 15-acre (6.07-hectare) facility, which the museum will use to screen movies and host other activities.

“They saw the importance of tourism for the city and the state,” Schumpert said.

Following are descriptions of pending sales of municipal debt in the U.S.:

DISTRICT OF COLUMBIA WATER AND SEWER AUTHORITY, which serves 600,000 people in Washington, plans to sell $300 million of Build America Bonds as soon as this week. The obligations are backed by revenue from consumer water bills and will be used to preserve and upgrade the district’s water and wastewater systems. Underwriters led by JPMorgan Chase & Co. will market the issue, which is rated Aa3 by Moody’s and AA- by both S&P and Fitch Ratings, all fourth-highest. (Updated Oct. 18)

PORT AUTHORITY OF NEW YORK AND NEW JERSEY, which owns the World Trade Center site in addition to operating Newark Liberty International, John F. Kennedy International and LaGuardia airports, will sell $850 million in taxable bonds as early as this week. The issue will fund construction at the trade center site. Citigroup Inc. will market the issue, which is rated Aa2 by Moody’s, third-highest, and AA- by S&P and Fitch, both fourth-highest. (Updated Oct. 18)

To contact the reporters on this story: Brendan McGrail in New York at bmcgrail@bloomberg.net; Alexandra Harris in New York at aharris48@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net.

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