Municipals flat as market awaits $5.4 billion supply; Puerto Rico proposes deal with creditors

By Sheri Kasprzak

New York, Feb. 1 – Municipals closed mostly flat on Monday as the market readied for about $5.4 billion of new issues this week, traders said.

The 10-year triple-A bond yield closed at 1.81%, and the 30-year yield ended at 2.79%.

Looking ahead this week, the roughly $5.4 billion of supply will be led by two significant transit offerings, a $482.53 million refunding deal from Dallas Area Rapid Transit (Aa2/AA+/) and $247,735,000 of refunding bonds from the Metropolitan Atlanta Rapid Transit Authority. Both are slated for Thursday.

Puerto Rico eyes debt relief

Looking to the distressed markets, Puerto Rico proposed a plan late Friday to ease its debt burden and give its creditors new bonds worth an average of 54% of their existing holdings. The plan would give bondholders extra returns if the commonwealth’s economy improves rapidly.

The proposal was made at a meeting between Puerto Rico Gov. Alejandro Garcia Padilla and holders of $49 billion of the island’s $72 billion of outstanding debt.

The plan would cut Puerto Rico’s debt service to 15% of its budget from 36%.

BofA wins King County deal

Heading up the day’s light primary action, King County, Wash., hit the market with $279,075,000 of series 2016A sewer refunding revenue bonds.

The bonds (/AA+/) were sold competitively with BofA Merrill Lynch winning the bid at a 3.25% true interest cost, said Nigel Lewis, the county’s debt manager, in an interview. There were nine bidders for the deal.

The bonds are due 2016 to 2041 with 3% to 5% coupons.

“The spreads represented by BofA’s pricing appear very aggressive compared to our last similar issue last fall,” Lewis said.

Back in November, the county sold $93.35 million of sewer refunding revenue bonds due 2016 to 2038 with term bonds due in 2040 and 2046. The coupons range from 4% to 5% with yields from 0.24% to 3.75%.

Proceeds will be used to refund the county’s series 2007 revenue bonds. The refunding, Lewis said, will lower future debt service by $65 million with a present value savings of $39.6 million.

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