Municipals firm ahead of $10.5 billion new issue volume; California organizes $2 billion G.O. deal

By Sheri Kasprzak

New York, April 8 - Municipals closed out the session with a firmer tone on Monday, even as trading action remained light and Treasuries weakened, market sources reported.

Secondary action may have been light, but the new issue volume in the week ahead will be rather heavy, with about $10.5 billion of deals expected to price, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

Investors seemed to be skipping the middle of the yield curve in secondary, with trading action seen heavier in the shorter and longer maturities, said a trader.

"There's not a lot trading today, but what is seems to be either on one extreme or the other. Not a lot trading in intermediate maturities," he noted.

California preps $2 billion

Leading the pack of new issues during the week, the State of California will price $2 billion of series 2013 general obligation bonds on Thursday.

BofA Merrill Lynch is the senior manager for the bonds (A1/A/A-).

Proceeds will be used to finance capital improvements within the state and refund existing debt.

Sutter Health deals set

Also out of California, Sutter Health is slated to hit the market during the week with two offerings.

The health care system plans to price $300 million of series 2013A-C taxable bonds through Morgan Stanley & Co. LLC and BofA Merrill Lynch.

That deal includes $100 million of series 2013A bonds, $100 million of series 2013B bonds and $100 million of series 2013C bonds.

Proceeds will be used to finance capital improvement projects, including reimbursement for prior capital expenditures.

The system will also price, through the California Health Facilities Financing Authority, $450 million of revenue bonds, also via Morgan Stanley and BofA.

Those bonds will also be used to finance the costs to construct, renovate and equip health care facilities.

Fitch: PR pension reform a boon

Looking to ratings news, the Commonwealth of Puerto Rico is taking steps toward pension reform, something Fitch Ratings considers "positive" and "an important step toward achieving credit stability," according to a report from public finance senior director Karen Krop.

"However, Fitch's rating on Puerto Rico's general obligation bonds (BBB- with a negative rating outlook) assumed enacting pension reform to support the solvency of the pension system while controlling the demands that pensions place on the budget," Krop wrote on Monday.

"The commonwealth continues to face several challenges, including a very large structural budget gap that is unlikely to be resolved before fiscal 2015. The reforms, signed into law last week, aim to reduce future cash flow deficits in the plan, both by increasing payments into the plan and reducing future cash payments out of the plan."

Krop wrote that the commonwealth must still address an operating imbalance and the widening budget gap in its upcoming budget deliberations.

"While Fitch does not expect the fiscal 2014 budget to be structurally balanced, the rating assumes substantial progress toward structural balance," she wrote.

© 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.