Hurricane Fund Selling $2 Billion as Florida Spared: Muni Deals

Florida’s catastrophe fund is set to sell $2 billion of taxable revenue bonds this week, the biggest municipal-debt offer since 2007 in the state, which hasn’t been struck by a major hurricane in seven years.

The Florida Hurricane Catastrophe Fund Finance Corp., a state-run nonprofit that sells protection to in-state insurers, will have a cash balance of about $9.8 billion by year-end, compared with a maximum liability of $17 billion, said Jack Nicholson, its chief operating officer. Bond proceeds will boost cash on hand before the storm season begins in June.

From 1851 to 2004, 273 hurricanes hit the U.S., according to the National Hurricane Center. Florida was pounded the most with 110 strikes, of which 35 were major storms of Category 3 or stronger, packing winds of at least 111 miles (179 kilometers) per hour. Wilma was the last major storm to strike the U.S., hitting the fourth-most populous state in 2005.

The lack of such storms “has been great for us because we started 2006 with zero cash balance,” Nicholson said in an interview. “We’re just preparing so we have a little cushion built into our situation.”

The bonds will be offered with maturities of three, five and seven years. The sale will be the second-largest of 2013, trailing only California’s $2.1 billion deal in March, data compiled by Bloomberg show. Taxable muni issuance surged to $9 billion through March 29, compared with $5.8 billion for the same period last year, the data show.

The fund has $1.3 billion in debt sold in 2008 and 2010, Bloomberg data show. It issued $3.5 billion in 2007 that matured last year. Standard & Poor’s and Moody’s Investors Service both give the entity their fourth-highest grades, according to offering documents.

Florida’s benchmark of destruction is Hurricane Andrew, which struck in 1992 as a Category 5, the most powerful, according to the NHC. It caused about $46 billion in damage in the U.S., according to an inflation-adjusted NHC estimate.

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