Munis finish out week unchanged amid light trading; New Jersey cigarette, Kaiser deals planned

By Sheri Kasprzak

New York, March 30 - Friday was a slow session for the municipals market, leaving yields mostly unchanged, said market insiders.

The week ahead of the Easter holiday should pick up substantially, traders said, and most offerings are expected to price early in the week ahead of Good Friday.

"Everyone's getting ahead of the holiday, and I think there will be a flood of new stuff near the beginning of the week," one trader said.

"After the middle of the week, things should slow down again. I suspect there's still enough demand to handle the new deals."

About $7 billion of new offerings will come to market, according to Alan Schankel, managing director with Janney Montgomery Scott LLC.

The offerings will be led by a $1.5 billion sale of series 2012A revenue bonds from the California Statewide Communities Development Authority for Kaiser Permanente.

In broader muni news, mutual fund flows were negative for the first time in 29 weeks, said Schankel.

"After 29 weeks of positive flows added $29 billion of assets to municipal mutual funds since August, funds lost $135 million in the week ending March 21, which may be attributable to pre-April 15 tax payment selling. Another element of demand, proceeds from maturing and pre-refunded bonds, will total about $11.5 billion in April, well below the $15 billion average month of the first quarter."

Kaiser, New Jersey deals ahead

Kaiser Permanente will sell its $1.5 billion of bonds earlier in the week, said one trader. Citigroup Global Markets Inc., Goldman Sachs & Co. and J.P. Morgan Securities LLC are the senior managers.

The bonds (/A+/A+) will be used to finance the construction, acquisition, equipment and furnishing of hospitals, health facilities and offices operated by Kaiser.

Also ahead, the New Jersey Economic Development Authority will bring $1.08 billion of series 2012 cigarette tax revenue refunding bonds (/BBB+/BBB+) through Bank of America Merrill Lynch on Tuesday.

Puerto Rico deal faces problem

Also in the coming week, the Puerto Rico Electric Power Authority plans to come to market with $475 million of series 2012 power revenue and refunding bonds (Baa1/BBB+/BBB+) through Morgan Stanley & Co. LLC.

That offering, however, may run into some problems.

"One negative factor is PREPA's very high level of accounts receivable, which according to Fitch, stand above 23% of revenues, twice the median for all Fitch-rated electricity systems," said Schankel.

"The commonwealth and local PR governments account for about 45% of the $1 billion plus in unpaid bills."

Proceeds from the deal will be used to finance capital improvements, repay advances made to the authority by the Puerto Rico Government Development Bank, repay interest on some outstanding bonds and pay principal on outstanding bonds.

© 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.