Biggest Muni Sale of 2013 Set to Price for Texas RoadwayMichelle Kaske
Grand Parkway Transportation Corp.’s $2.6 billion debt offering, the biggest municipal-bond sale in more than a year, will price today, one day early, according to data compiled by Bloomberg.
Texas has pledged to support all but $200 million of the deal by providing an advance called a toll-equity loan to Grand Parkway of as much as $9.6 billion, according to sale documents. The corporation can use those funds if toll revenue falls short. Proceeds will finance construction on 55 miles (89 kilometers) of four-lane roadway in the Harris and Montgomery counties in the northwestern Houston area.
Debt maturing in 2053 and rated AA by Standard & Poor’s is pricing with a preliminary yield of 5.185 percent, Bloomberg data show. Those bonds are supported by the toll-equity loan. Bonds with the same maturity that don’t have the state security and are rated BBB by S&P are pricing with a preliminary yield of 5.625 percent, Bloomberg data show.
“From a long-term perspective, relative to other double-A Texas paper, it looks OK,” Lyle Fitterer, managing director at Wells Capital Management, said about the initial yields. “Everybody loves Texas paper.”
Fitterer, who helps oversee $31 billion in munis from Menomonee Falls, Wisconsin, is buying some of the bonds.
Veronica Beyer, spokeswoman for the state’s Transportation Department, didn’t immediately respond to an e-mail about the sale’s pricing.
The deal is the largest municipal-bond offering since Michigan Finance Authority sold $2.9 billion of revenue debt in June 2012 to repay federal unemployment-benefit loans, Bloomberg data show.
Grand Parkway’s sale is leading states and localities planning to borrow more than $10 billion of long-term debt this week, the most in three months, data compiled by Bloomberg show. The transaction includes taxable bonds, tax-exempt debt, short-term securities and capital-appreciation debt whose principal and interest aren’t paid until maturity.
Grand Parkway’s offering priced as yields on benchmark 30-year munis fell by about 0.2 percentage point to 4.34 percent, at 2 p.m. in New York today, data compiled by Bloomberg show. The yield climbed to 4.42 percent last week, the highest in more than two years. Yields move in the opposite direction of prices.