Municipals improve substantially; Iowa Fertilizer brings largest high-yield tax-exempt issue

By Sheri Kasprzak

New York, May 1 - The month got off to a positive start for municipals, with yields dropping across the curve, market sources reported. Secondary action was robust, and Treasuries were strong as well, said traders.

In the mid-afternoon, traders reported yields were improved by 5 basis points to 8 bps.

The market's attention turned to the Iowa Finance Authority's $1,184,660,000 sale of series 2013 Midwestern disaster area revenue bonds for the Iowa Fertilizer Co.

The offering is notable for being the largest non-investment-grade offering in the U.S. tax-exempt market, said a statement from OCI NV, the parent company of Iowa Fertilizer.

"The bond issuance transaction is rated BB- by both Standard & Poor's and Fitch, and represents the largest non-investment-grade transaction ever sold in the U.S. tax-exempt market," the statement said.

The bonds were sold through Citigroup Global Markets Inc. and BofA Merrill Lynch.

The bonds are due 2019, 2022 and 2025. The 2019 bonds have a 5% coupon and priced at 101.109, the 2022 bonds have a 5.5% coupon and priced at 101.907, and the 2025 bonds have a 5.25% coupon and priced at 99.543.

The 2019 bonds were priced to yield 4.8%, the 2022 bonds to yield 5.1% and the 2025 bonds to yield 5.3%.

Interest rates on the bonds were cut by up to 10 bps, resulting in an average rate of 5.12%, said the OCI statement. The 2025 bonds were initially priced with a 5.25% coupon to yield 5.4%.

The issue received interest from more than 75 institutional purchasers, Citigroup managing director Peter Bartlett said in a statement.

Proceeds will be used to construct a nitrogen-based fertilizer and industrial production facility in southeastern Iowa near the Illinois border.

New Jersey brings G.O. bonds

The market was also interested in the State of New Jersey's $350 million offering of series 2013 various purpose general obligation bonds.

The bonds (Aa3/AA-/AA-) were sold competitively with BofA Merrill Lynch winning the bid.

The bonds are due 2014 to 2033 with 3% to 5% coupons.

Proceeds will be used to finance various capital projects within the state.

The state hit the market in November 2010 with $82.63 million of G.O. refunding bonds with 5% coupons.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.