Friday

April 29, 2016

www.bloombergbriefs.com

 

Bloomberg AAA Benchmark Yields

DESCRIPTION CURRENT PREVIOUS NET CHANGE

BVAL Muni Benchmark 1T 0.59 0.60 -0.01

BVAL Muni Benchmark 2T 0.70 0.72 -0.02

BVAL Muni Benchmark 3T 0.81 0.84 -0.03

BVAL Muni Benchmark 4T 0.94 0.97 -0.03

BVAL Muni Benchmark 5T 1.05 1.08 -0.03

BVAL Muni Benchmark 6T 1.18 1.19 -0.01

BVAL Muni Benchmark 7T 1.29 1.31 -0.02

BVAL Muni Benchmark 8T 1.41 1.43 -0.03

BVAL Muni Benchmark 9T 1.54 1.56 -0.02

BVAL Muni Benchmark 10T 1.66 1.69 -0.02

BVAL Muni Benchmark 20T 2.30 2.31 -0.01

BVAL Muni Benchmark 30T 2.56 2.60 -0.03Source: GBY<GO>

 

Prepa Gets Another Debt Restructuring ExtensionBY MICHELLE KASKE, BLOOMBERG NEWS

Puerto Rico’s main electricity provider will prolong a bond-purchase agreement with its creditors, averting a potential termination of a larger debt-restructuring deal.

The Puerto Rico Electric Power Authority and its creditors will extend the accord to the end of May 2, according to a statement yesterday from the utility.

Under the pact, bondholders and insurance companies agree to buy $111 million of three-year bonds from Prepa, as the utility is known. The contract expired late Wednesday and is part of Prepa’s plan to restructure $9 billion of debt. The larger restructuring pact would end if the bond-purchase agreement failed to continue.

The utility, hedge funds, bond-insurers, and mutual funds reached the debt-restructuring accord in December. It allowed Prepa to avoid defaulting Jan. 1 on a $196 million interest payment, with bondholders and insurers agreeing to purchase the three-year bonds to free up cash for the utility.

Creditors have been reluctant to lend Prepa money since Governor Alejandro Garcia signed a debt-moratorium law on April 6 that allows him to skip principal and Padilla

interest payments to pay for essential services instead.Puerto Rico’s House of Representatives passed a bill on April 18 that would exempt

certain debt, including Prepa’s restructuring bonds, from the moratorium. The Senate Tuesday failed to vote on that bill. The next voting session is Monday at 1:00 p.m.

The $111 million of bonds will carry a 10 percent coupon and mature July 2019.The $9 billion debt-restructuring plan will reduce Prepa’s debt load by $600 million and

offer debt-service relief for five years of more than $700 million.Bondholders would take a 15 percent loss on their securities in return for bonds repaid

with a new customer fee, called a securitization charge. The island’s energy commission is reviewing that proposed fee.

MUNICIPALITY AMOUNT

Alameda Corridor CA $662 million Rev

New York Thruway $850 million Rev

Port Authority NY/NJ $475 million Rev

North Texas Tollway $947 million Rev

Disney Museum CA $46 million RevSource: Bloomberg CDRA <GO>

AMOUNT OUTSTANDING

($MLNS)

MATURING NEXT 30

DAYS ($MLNS)

ANNOUNCED CALLS NEXT 30 DAYS ($MLNS)

3,566,871 11,233 8,260  Source: MBM<GO>

MUNI SHOW WITH TAYLOR & JOE

PRIMARY FIXED RATE

30-Day Supply Fixed: $11.6 Bln (LT)30-Day Supply Fixed: $128 Mln (ST)Sold YTD Fixed: $91.9 Bln (Neg LT)Sold YTD Fixed: $19.1 Bln (Comp LT)Sold YTD Fixed: $6.1 Bln (ST LT)

SECONDARY MARKET

MSRB: $14.1 BlnPICK: $18.7 Bln

VARIABLE RATE

SIFMA Muni Swap Rate: 0.41%Bloomberg Weekly AAA Rate: 0.408% Bloomberg Weekly AA Rate: 0.431% Daily Reset Inventory: $1.3 Bln  Weekly Reset Inventory: $1.8 Bln  

IN THE PIPELINE

SIZE OF MARKET

SUPPLY & DEMAND

April 29, 2016 Bloomberg Brief Municipal Market 2

 

SUPPLY & DEMANDWeekly Inflows Into Muni Bond Funds Reach Highest Level in 2016

Showing no signs of letting down, municipal bond investors flooded muni bond funds with cash for the 30th week and the most so far this year as an uptick in supply provided investment opportunities.

Funds that report weekly to Lipper US Fund Flows recorded $1.17 billion of net cash, the highest since the week ended Dec. 30 when $1.3 billion was added. Supply has consistently hovered above $8 billion for the last two weeks — pushing the weekly average yield to 1.68 percent — and enticing investors with the highest yields in four weeks.

High-yield funds that report weekly saw inflows of $283 million, the most since the week ended Feb. 10 and above the four-week moving average of $179 million.

— Taylor Riggs, Bloomberg Radio

DIARYNew York's Port Authority Says It Seeks SEC Bond Probe AccordBY DAVID VOREACOS AND ROMY VARGHESE, BLOOMBERG NEWS

The Port Authority of New York & New Jersey is seeking to resolve an investigation by the Securities and Exchange Commission into the agency’s bond statements on the financing of tunnel, bridge and road projects.

Settlement of the probe could spare New Jersey Governor , a Chris ChristieRepublican, from potentially embarrassing revelations if the SEC were to sue the Port Authority.

The regulator has been investigating whether the bi-state agency improperly financed $1.8 billion in renovations to the Pulaski Skyway and three other road projects after Christie pushed the authority to back a funding arrangement its lawyers opposed.

“Discussions have been initiated between the Port Authority and the staff of the SEC regarding a potential resolution of the investigation,” the agency said Wednesday in offering documents ahead of a $475 million bond sale.

SEC spokesman Kevin Callahan declined to comment. , a Ron Marsicospokesman for the Port Authority, said in an e-mail that the agency wouldn’t comment further.

Port Authority lawyers questioned whether the agency could finance improvements to the Pulaski Skyway, which connects Newark to Jersey City. It leads to the Holland Tunnel, and the lawyers argued that the agency isn’t legally authorized to build access roads to that Hudson River crossing, records show.

In internal discussions over several months, lawyers said the agency was permitted to improve access roads only to the Lincoln Tunnel, several miles to the north. After months of debate among officials from the agency, New Jersey’s transportation department and its attorney general, authority commissioners in March 2011 approved the funding as a Lincoln Tunnel improvement.

In April 2014, Christie said publicly that “dozens and dozens of lawyers from both

sides of the river reviewed that financing plan and approved it, as did the commissioners at Port Authority. So I relied upon the advice of lawyers from both sides of the river to come to that conclusion and I’m confident that if the SEC reviews it — that’s what they’re doing — they’ll come to the same conclusion.”

Manhattan District Attorney Cyrus has also been conducting a Vance Jr.

criminal investigation.In 2010 Christie canceled a project to

build a rail tunnel to New York, known as Access to the Region’s Core. The SEC has also subpoenaed documents relating to the ARC tunnel termination, according to the Port Authority bond offering. Money that had been intended for the ARC tunnel was used for the Pulaski Skyway and other improvements.

Christie has said he ended the ARC tunnel  to protect New Jersey taxpayers from billions of dollars in potential cost overruns.

Q&A

Flows, Supply, Yields

April 29, 2016 Bloomberg Brief Municipal Market 3

Q&A

Chattanooga, Tennessee, Goes High-Tech, Rebuilds Downtown

Chattanooga, Tennessee, might not be the place

you think of when you hear gigabit networks and

tech startups. But don’t be fooled. Chattanooga

rolled out a city-wide gig network in 2010 and just

last fall introduced 10-gig speeds. Chattanooga’s

mayor sat down with Bloomberg Andy Berke

Radio’s Taylor Riggs. His comments have been

edited and condense.

Q: Andy, the 10-gig network has generated jobs and put in almost $1 billion into your economy. Where are the jobs coming from and what’s the bigger impact of this?A: This is a huge impact for our city and 10 years ago nobody would have said Chattanooga was a tech community and here we are today talking about the incredible gains we’ve made. We see that particularly in a lot of startups, and these are companies that are on the cutting edge of what’s going on in our country. And then we also see the ramifications of having startups that succeed. OpenTable has purchased a startup in our city and is growing its own business in the middle of our innovation district. So we have both growing companies that are new to our community and also ones that are huge established names because they see the potential in a place like Chattannooga.

Q: What other cities are following you here? And how were you able to lead the way on this?A: We weren’t looking to anyone because we were essentially the first and ultimately the fastest. There was another city – Lafayette, Louisiana, that has also started its own gig city — and since then you’ve seen a lot of communities look at this. Particularly with Google fiber and some other options. The difference is our fiber-optic network is owned by the city. And that gives us more opportunities to do things like economic development and

 

digital equity, making sure our city is fair.

Q: I was in Nashville a year ago and struck by the amount of construction going on downtown. With this spur in

innovation and business, how has your downtown changed?

A: What we need is a workforce that supplies these entrepreneurs and tech industries. By the end of next year we will have doubled the number of people living in our downtown area from just two years ago. That’s an incredible boom in your economy and also changes the landscape of your downtown. So we have apartments going in everywhere, there are cranes, new buildings, and also old buildings that have been underutilized are now being retrofitted to be apartments, and it’s an incredible difference and ultimately is going to make a big quality-of-life difference for the restaurants, bars and music scene and everything else that’s going to continue to grow around it.

Q: There are some companies that you mentioned that are being

attracted to your so-called innovation district. What's the innovation district

and what companies are investing inyour town?

A: The innovation district is a place where new companies are born and old companies interact with entrepreneurs and researchers and students are thinking up the new ideas that are driving our economy. It’s really an attempt to densify our assets that we have in the innovation economy. It literally starts at one location and we’ve told everybody come as close as you can to that — a five-minute walk — so we can have everybody together.   A city like Chattanooga can be too spread out and if we want to get the interactions that bread new ideas, we have to get everyone close together. We want coders talking to other coders. That can happen when people are close by. If you have a new product and it’s not very good, you want to hear about that from an existing business. Again, changing the nature of interactions and making them happen more often is important. Just like Silicon valley is taking out its cubes and they want open space, you want to do that in a city. The innovation district brings everybody as close in as possible so new businesses are getting there and existing businesses are interacting with them and you create more economic opportunity.

Career history: Following law school, worked as a law clerk for Judge of the United States Court of Appeals for the Deanell TachaTenth Judicial Circuit in Denver, Colorado. During this time also taught at Kansas University Law School as an adjunct professor. Elected to the State Senate in 2007 and re-elected to a second term in 2008. At that time, became the vice-chairman of the Senate Democratic Caucus and was elected as Mayor of Chattanooga Tennessee in 2013. Education: Graduated from Stanford University with honors and worked as a legislative assistant for U.S. Congressman Bart

before attending University of Chicago Law School. GordonLast book you read: "The Prize: Who's in Charge of America's Schools?" by Dale Russakoff

 

CREDIT CLOSE-UP

April 29, 2016 Bloomberg Brief Municipal Market 4

CREDIT CLOSE-UPWhich Puerto Rico Bond Defaults Next? A 1,600% Yield Says It All    BY BRIAN CHAPPATTA, BLOOMBERG NEWS

As far back as December, Puerto Rico Governor Alejandro Garcia Padillawarned that May would be the month when it could no longer pay bondholders. It’s almost here.

The commonwealth owes $470 million in payments on May 1, including $422 million on securities sold by its Government Development Bank, which has already frozen some deposits to preserve cash. Because May 1 falls on a Sunday, the island has until Monday to come through.

The failure to pay what’s owed on the development bank bonds would mark the biggest default yet by Puerto Rico, whose fiscal crisis has been steadily building for the past 10 months. With the government nearly drained of its cash, Moody’s Investors Service says such a lapse is a virtual certainty. Investors appear to agree: The securities last traded for 32 cents on the dollar, just weeks before the government was scheduled to pay them off at full face value. That effective yield: About 1,600 percent.

The Caribbean island of 3.5 million residents faces the next major hurdle in July, when $2 billion of bond payments are due, including those on general obligations that the constitution says should be paid above all else.

Its defaults so far have been relatively small, limited to about $143 million of missed payments, according to Moody’s. None of the securities were backed by the government’s full taxing power, nor are the development bank’s, leaving bondholders with little legal recourse.

The Public Finance Corp., which borrowed to help cover the government’s deficits, hasn’t met its debt-service bills since August, leaving the bonds trading at about 7 cents on the dollar. The commonwealth’s Infrastructure Financing Authority followed in January, defaulting on debt backed by rum taxes. Bonds maturing in 2028 with insurance from Financial Guaranty Insurance Co., which only covered 22 percent of what it owed, traded this month for an all-time low of 26.7 cents on the dollar.

Here’s the market’s best guess for which other securities are most at risk.

What follows are the amount of debt outstanding per Puerto Rico issuer, along with the most recent trading prices of bonds that aren’t insured against default, according to data compiled by Bloomberg. When possible, the securities with the highest volume over the past month were used. They are listed from the highest yields (which represents the most risk) to the lowest.

Puerto Rico Government $7.7 billion. The Development Bank:

GDB lends to the commonwealth and its localities. When those loans are repaid, the bank can pay off its debt. With $422 million due in May, and officials saying there’s not enough money to make it, tax-exempt bonds maturing in 2023 last traded for an average yield of 37 percent.

Puerto Rico Highways & $5.4 billion. Transportation Authority:

The highway agency repays its debt with gas-tax revenue. It owes less than $1 million in May, which will probably be paid with reserve funds because the commonwealth has been using the agency’s revenue to pay general obligation bondholders. Moody’s said there’s still a chance that they’ll default. Bonds maturing July 2033 last traded for an average yield of 29.4 percent.

Puerto Rico Pension-Obligation $2.8 billion. The taxable debt Bonds:

was sold to bolster the island’s nearly depleted pension fund. The bonds are repaid from contributions that the commonwealth and municipalities make to the retirement system. The system owes $13.9 million of interest every month in this budget year. Securities maturing in 2038 last traded for an average yield of 21.9 percent.

Puerto Rico Convention Center $397.7 million. The District Authority:

agency oversees the convention center, as well as other facilities, and receives hotel-room tax receipts to repay its debt. It will make its July payments in full by using reserve funds, according to Standard & Poor’s. Like the highway securities, they’re subject to clawback. Bonds insured by FGIC maturing in 2023 last traded for an average yield of 21 percent.

$12.9 billion. General-obligations: The debt is backed by the island’s full faith and credit. Its constitution says general

obligations must be repaid before other expenses. Puerto Rico owes just $3 million on all commonwealth-guaranteed debt in May, before $805 million of principal and interest is due July 1. Securities with a 5 percent coupon and maturing in 2041 last traded for an average yield of 9.5 percent. Debt with an 8 percent coupon and due in 2035 last traded for an average yield of 13 percent.

Puerto Rico Public Buildings Authority: $4.2 billion. The PBA bonds are repaid with lease revenue that public agencies pay for their office buildings. The debt is more secure than typical revenue bonds because the commonwealth has guaranteed repayment. Bonds maturing in 2042 last traded for an average yield of 11 percent.

Puerto Rico Sales Tax Financing Corp.: $16 billion. The bonds, know by the Spanish acronym Cofina, are repaid from dedicated sales-tax revenue and come in two types: senior, with the first claim on revenue, and subordinated, which are second in line. The authority will make debt payments in August because revenue has already been delivered to the bond trustee, according to a Standard & Poor’s report. Senior Cofinas maturing in 2057 last traded for an average yield of 9.7 percent, while subordinate ones maturing in 2042 yielded 15.8 percent.

Puerto Rico Electric Power Authority: $8.6 billion. Prepa, as it’s called, is the island’s main supplier of electricity and repays the debt from what it charges customers. The utility is the only government entity that has cut a deal with creditors to reduce what it owes, a step that Garcia Padilla wants to do on a broader scale for all of the island’s obligations. That restructuring has yet to be completed, with some procedural hurdles yet to be overcome. Tax-exempt bonds maturing in 2030 last traded at an average yield of about 11 percent.

Puerto Rico Aqueduct & Sewer Authority: $3.6 billion. The utility, called Prasa, supplies most of the island’s water. The debt is repaid from water rates charged to customers. The water agency owes $2.6 million in May. Bonds maturing in 2042 last traded at an average yield of 9.2 percent.

FOCUS: U.S. CONGRESS

April 29, 2016 Bloomberg Brief Municipal Market 5

FOCUS: U.S. CONGRESSPuerto Rico's Likely Default May 1 Not Fazing House Republicans    BY BILLY HOUSE AND LAURA LITVAN, BLOOMBERG NEWS

Ahead of a one-week recess, House Republicans are showing little urgency to act on a bill to help Puerto Rico deal with its debt crisis as the island hurtles toward a potential default Sunday on a $422 million payment.

"They got into this mess over the years. I don’t think we need to add to their bad decisions," said Representative Raul Labrador of Idaho, a Republican who was born in Puerto Rico. "I think we have to do this bill right." Labrador is a member of the House Natural Resources Committee, which is working on legislation to aid the island.

The territory could still strike a last-minute deal to defer the payments due in three days, but Puerto Rico will likely default on some or all of the debt payments coming due on May 1.

Democrats and the White House

continue to blast the Republicans for not acting faster.

"Some people get accused of being mañana people," said Representative

of Arizona, the top Raul GrijalvaDemocrat on the Natural Resources panel. "There’s no sense of urgency with Republicans on this."

White House Press Secretary Josh Earnest said yesterday that the longer Congress drags out the debate, “the more likely it becomes that they will have to resort to a bailout."

Lawmakers said yesterday they were not oblivious to Sunday’s deadline for the island. But most, like Labrador, said they are more focused on July 1. That’s when a $2 billion payment by Puerto Rico is due, including $805 million for its general-obligation bonds.

Earlier this week, House Majority Leader of California Kevin McCarthy said he was "hopeful” the bill will pass the

lower chamber by July 1.The House Natural Resources

Committee has released a draft bill, H.R. 4900, which would create a new oversight board for Puerto Rico and provide mechanisms for a forced restructuring of its $70 billion debt. The measure had been scheduled for committee action April 14, but was suddenly shelved after various objections raised by Republicans, Democrats and Treasury officials in the U.S.

Speaker — who last fall Paul Ryancalled for a plan by March 31 — told reporters yesterday that the Natural Resources panel and Treasury officials "are actually getting close" on a revised bill. Ryan said that he hopes members will have the new version of the bill to consider when they return to session May 10.

The full version of this article is available .here

 

Puerto Rico's Fate in Congress Rests With Ex-High School Teacher    BY BILLY HOUSE AND LAURA LITVAN, BLOOMBERG NEWS

Before being elected to the U.S. House, taught American Rob Bishophistory, government and German in a public high school. Now, the Utah Republican is at center of a swirling debt crisis that is pitting Puerto Rico against hedge funds and sparring groups of bondholders.

With Congress about to blow through a Sunday deadline, when the island is likely to default on a $422 million debt payment, the chairman of the House Natural Resources Committee doesn’t sound thrilled about being the chamber’s point man on the issue.

"Now, in hindsight, if I’d never been involved in this, I’d be happy," Bishop joked this week. At least, it seemed like he was kidding.

The fact that he even has the Puerto Rico debt portfolio is something of an accident, partly the product of Judiciary Committee chairman Bob Goodlatte ceding jurisdiction, with the blessing of party leaders. More typically, Bishop’s panel deals with issues touching on wildlife, energy production, parks and

other public lands, and Native Americans, although it does also handle territorial and insular law.

But Bishop is winning plaudits from both Republican leaders and House Democrats for being a serious and honest broker in trying to hash out compromise legislation.

"I do appreciate that Chairman Bishop and his staff have been willing to work in good faith on a viable solution," said

of Arizona, the top Raul GrijalvaDemocrat on the Natural Resources panel. "The door remains open for us to work with Chairman Bishop to develop a truly bipartisan piece of legislation.”

Time is starting to run short. Committee Republicans and Democrats, along with U.S. Treasury officials and top party leaders, continue to haggle over rewrites of a bill, H.R. 4900, which was scuttled earlier this month amid disagreements.

Democrats remain unhappy that Republicans have included provisions to lower the minimum wage on the island, exempt it from overtime regulations, and to make a land transfer involving a wildlife

refuge — things that are difficult for a lot of Democrats to accept.

One of Bishop’s biggest challenges has been to counter the fears among his own caucus that the bill amounts to some kind of government bailout.

Representative a Tom Marino,Pennsylvania Republican who initially worked on his own version of Puerto Rico legislation as a subcommittee chairman on the Judiciary Committee, said that Bishop is being asked to manage a bill to with "enormous complexity," including "politically."

In the U.S. House, Bishop has been a reliable conservative, even joining the Tea Party Caucus in 2010. But now, he finds himself a target of advertising in his own district by groups opposed to any congressional help in restructuring Puerto Rico’s debts — ads that accuse him of standing with the Obama administration to support a bailout of Puerto Rico.

"It is bizarre that the number one issue in the First District of Utah is Puerto Rico," said Bishop.

The full version of this article is available .here

CREDIT CLOSE-UP

April 29, 2016 Bloomberg Brief Municipal Market 6

CREDIT CLOSE-UP

Citi, Morgan Stanley Crack High-Yield Muni Market With Own MoneyBY BRIAN CHAPPATTA AND DARRELL PRESTON, BLOOMBERG NEWS

To price a high-yield municipal bond deal that’s been in limbo for nearly half a year, underwriters Citigroup Inc. and Morgan Stanley took matters — and the debt — into their own hands.

In a rare move, the banks last week purchased about $250 million of junk-rated bonds for a methanol plant in Texas before offering the securities to institutional investors starting yesterday.

That leaves them on the hook to hold the debt, backed by OCI N.V.’s Natgasoline LLC, if they can’t find enough buyers. It’s a departure from the norm in the municipal market, where underwriters routinely avoid taking risky bonds into their inventories by cutting the size of a deal — or delaying it altogether — if buyers can’t be found.

“This deal is in an area where there’s not a lot of history of investment expertise, so there’s a lot of new knowledge that needs to be gathered to get comfortable with it,” said Dan

, who oversees $18 billion as Solenderhead of municipals at Lord Abbett & Co. The underwriters “definitely have to have confidence that they’re going to make money on the deal, or they wouldn’t own them.”

The arrangement shows the length that speculative-grade borrowers have to go to issue municipal debt, particularly for projects that could be undermined by low commodity prices. This year, wood pellet facilities in Louisiana and Texas defaulted and an OCI-backed fertilizer plant in Iowa received its firstdowngrade.

Natgasoline tried to borrow $1.4 billion in November to build the methanol compound near Texas’s Gulf Coast in Beaumont, only to delay it and scale back the amount of debt amid concern the venture could falter because of the drop in oil and natural-gas prices.

The bonds, issued through the Mission Economic Development Corp., a local Texas agency, are part of the riskiest subset of the municipal market in which so-called conduit borrowers sell debt for companies. Because governments aren’t

on the hook if the projects fail, they offer higher payouts than state or city obligations.

Citigroup and Morgan Stanley priced $203 million of methanol bonds at 95.6 cents on the dollar to yield 6.2 percent, while the $50 million portion yielded 6.1 percent, data compiled by Bloomberg show. Both mature in 2031. Scott

, spokesman for Citigroup, and Helfman, spokeswoman for Lauren Bellmare

Morgan Stanley, declined to comment.Only “qualified institutional buyers” can

purchase them, with a minimum order of $250,000, a higher hurdle than other risky deals. Puerto Rico’s general-obligation offering in 2014 and the Chicago Board of Education’s sale this year each had $100,000 cutoffs.

"They come to the muni market, and

some of them do get done."

— DAVID AMBLER, ALLIANCEBERNSTEIN

Standard & Poor’s rates the securities BB-, three steps below investment grade. Investors should have some comfort because the deal is one-fifth the size of the initial offering and construction is already more than halfway done, the rating company said in a report last week.

Yet it also faces “substantial market risk” if prices climb for natural gas, an input of methanol production, or oil prices remain depressed, which curbs demand from companies that blend it with gasoline. The project, which is expected to produce 5,000 metric tons of methanol a day, should begin operating in late 2017.

Solender at Lord Abbett said his firm is evaluating the deal. So are high-yield muni funds at AllianceBernstein Holding LP, City National Rochdale and

NuveenAsset Management.“A complex deal like this usually has

more lead time,” said , David Amblerwho analyzes high-yield munis at AllianceBernstein. “But as an institutional investor, if you don’t feel like you have enough time, don’t buy it.”

Since failing to market the bonds last year, OCI secured an equity investment from the Proman Group so it wouldn’t need to borrow as much, an effort to make the securities more appealing. Wollerau, Switzerland-based Proman, through subsidiaries Consolidated Energy Ltd. and G2X Energy, acquired a 50 percent stake in Natgasoline by investing $630 million in the project and extended it a $50 million loan.

Consolidated Energy is one of the world’s largest methanol producers and it's the controlling shareholder of G2X, which already owns and operates a plant in Texas. The offering documents include an independent engineer report that says adding Proman and its subsidiaries “would benefit Natgasoline financially, operationally and strategically.”

With the additional equity infusion, the project shifts from being funded 70 percent with debt to 35 percent, offering documents show. It suggests that high-yield muni investors have learned from recent cases of project-finance mishaps.

Wood pellet facilities in Louisiana and Texas that were backed by now-insolvent German Pellets and financed with $483 million of debt defaulted this year.

Iowa Fertilizer Co., an OCI-sponsored enterprise that borrowed $1.2 billion in 2013 for a new facility, was cut one step to B+, four notches below investment grade, by Fitch this week because of persistent construction delays. It was the first downgrade for the bonds.

“A lot of these commodity, heavily cyclical project finance deals would have trouble getting placed into the corporate market, and that market is closed to a lot of those transactions,” AllianceBernstein's Ambler said. “They come to the muni market, and some of them do get done.”

RESULTS OF SALES

April 29, 2016 Bloomberg Brief Municipal Market 7

Long-Term Bond Sales Results

SELLING DATE

ISSUE STATE RATING TAXAMT

($Mlns)1 YEAR 5 YEAR 10 YEAR 20 YEAR STATUS TYPE SENIOR MANAGER

04/25Ca Stwd Cmnty Dev Auth -A

CA /BB/BB+ N 947.625.000/3.490

5.000/4.270

Final NegtBank Of America Merrill Lynch

04/25 District Of Columbia -Ref DC A2/AA-/ N 70.085.000/1.350

5.000/2.200

Repriced Negt Morgan Stanley & Co Llc

04/25 New Hanover Cnty    -Ref NC Aaa/AAA/ N 55.083.000/0.620

5.000/1.120

5.000/1.760

Final Negt PNC Capital Markets Llc

04/25La Paz Co Indl Dev Auth-A

AZ /BBB/ N 42.375.000/2.570

5.000/3.200

5.000/3.950

Final NegtRaymond James & Assocs

04/2810:45

Ri Providence Plantations RIAa2/AA

/AAN 58.84

2.000/0.590

2.000/1.140

5.000/1.920

3.000/98.500

Awarded Comp Wells Fargo Bank Na

04/2810:45

Ri Providence Plantations RIAa2/AA

/AAN 53.80

5.000/0.610

5.000/1.170

Awarded Comp Wells Fargo Bank Na

04/2811:15

Salt Lake & Sandy Met Wtr

UT/AA+/AA+e

N 59.205.000/1.720

Awarded CompJP Morgan Chase Bank Na

*Moody's/S&P/Fitch

Most Active Bonds

DESCRIPTION STATE DATED COUPON MATURITY VOLUME PRICED AVERAGE YIELD AVERAGE NO. OF TRADES

Wisconsin St-A-Ref WI 05/11/16 4.000 11/15/46 104,185,000 105.583 3.338 41

Wisconsin St-A-Ref WI 05/11/16 4.000 11/15/39 66,500,000 106.537 3.230 32

Wisconsin St-A-Ref WI 05/11/16 5.000 11/15/39 61,450,000 118.743 2.836 21

Mi Fin Auth-Ref-E-1 MI 05/11/16 N.A. 11/15/46 55,880,000 100.011 1.100 25

Wi Hsg & Econ Dev-C WI 04/27/16 N.A. 03/01/38 46,000,000 100.000 N.A. 11

Wisconsin St-A-Ref WI 05/11/16 5.000 11/15/36 44,250,000 119.573 2.750 11

Wisconsin St-A-Ref WI 05/11/16 4.000 11/15/34 43,700,000 108.357 3.024 19

Scioto Co Hosp Facs OH 05/10/16 3.500 02/15/38 38,240,000 98.292 3.612 43

Wisconsin St-A-Ref WI 05/11/16 4.000 11/15/36 37,685,000 107.260 3.149 22

Ca Txb-Var Purp CA 04/28/09 7.550 04/01/39 37,300,000 152.378 4.028 17

Riverside-Ref CA 05/25/16 4.250 08/01/36 34,215,000 100.347 4.203 28

Alabama Fin Auth AL 05/11/16 5.000 11/15/46 33,000,000 117.484 2.974 12

Wisconsin St-A-Ref WI 05/11/16 4.000 11/15/35 32,500,000 107.795 3.085 20

Hills Hlth Var-Mery IA 04/29/08 N.A. 08/01/35 29,000,000 100.000 N.A. 8

Wisconsin St-A-Ref WI 05/11/16 5.000 11/15/35 27,750,000 120.155 2.690 8

Miami-Dade Co-A-Ref FL 05/11/16 5.000 07/01/30 27,085,000 124.695 2.260 10

Denver Sd #1-Ref CO 05/10/16 5.000 12/01/24 26,935,000 126.446 1.671 34

Denver Sd #1-Ref CO 05/10/16 5.000 12/01/25 26,875,000 127.765 1.822 25

Ca St Univ-A CA 04/20/16 4.000 11/01/34 25,875,000 111.744 2.655 14

Ohlone Ca Cmnty Clg D CA 05/18/16 4.000 08/01/45 25,655,000 108.463 3.029 15

Cntrl Fl Expwy-A-Ref FL 04/26/16 3.000 07/01/32 25,560,000 99.285 3.052 27

Scago-A-Cops SC 05/17/16 3.000 03/01/17 25,500,000 101.883 0.582 6

Denver Sd #1-Ref CO 05/10/16 4.000 12/01/26 24,215,000 117.199 2.008 24

RESULTS OF SALES

TRADING

April 29, 2016 Bloomberg Brief Municipal Market 8

 

 

PEOPLE

April 29, 2016 Bloomberg Brief Municipal Market 9

PEOPLE

Dustin McDonald Departs GFOA, Heads to California for Cannabis StartupBY AMANDA ALBRIGHT, BLOOMBERG BRIEF

Dustin McDonald will miss certain parts of the municipal bond market: the issuers, the broker-dealers, the bond lawyers and the financial advisers. Today marks McDonald's last day with the Government Finance

Officers Association, where he has worked as director of the GFOA's federal liaison center since January of 2013.

McDonald is headed to Orange County, California, to join Weedmaps, which is a marijuana technology company that develops software for the cannabis industry.

Weedmaps also owns Weedmaps.com, a website similar to Yelp that allows users to find and review weed dispensaries, and news website Marijuana.com.

"What I'll miss most is the folks that I've had the chance to work with in the industry," he said. "You meet a lot of folks that are very dedicated to their place in the market and seeing the market do well." McDonald, 40, will be vice president of government relations for Weedmaps, and will work with state and local governments on their medical and

recreational marijuana policies and regulations.

"It'll be a cool opportunity to work in an area where there's a lot of emerging policy where either no policy exists or the policies that exist isn’t very well informed," he said. "There's overlap with the muni world, with a lot of state and local governments still kind of feeling their way out of '08 and preparing for what potentially could be next."

Recreational marijuana is legal in Oregon, Alaska, Washington, Colorado and Washington, D.C., McDonald said. After generating about $70 million in revenue from marijuana taxes in fiscal 2015, Colorado is expected to generate $125 million in tax revenue from the marijuana industry during fiscal 2016, he said. "There's significant upsides for state and local governments to be considering reforming their marijuana policies," he added.

McDonald says his work in municipals help him understand state and local governments' perspectives and fiscal health as they consider new policies and regulations.

"There's a lot of kind of misperception out there among folks in government that needs to be addressed," McDonald said.

"And with that comes concerns about public health, about public safety. Weedmaps is certainly interested in working with state and local governments to organize a comprehensive regulatory strategy that is good for the industry and also addressees those public health and public safety concerns."

McDonald said he hopes the muni market continues to improve voluntary continuing disclosure, which is an issue he worked on with the GFOA.

"I hope that regulators will be kind of willing to participate in those discussions and see (where) we're going and see what we're doing and not jump to try to organize some complex, one-size-fits-all regulatory scheme that ultimately will not be anywhere near as effective as enforcement in achieving their goal of improving continuing disclosure," he said.

McDonald doesn’t know how he'll celebrate his last day in the municipal market — movers are coming today and he'll drive across the country with his wife on Saturday, he said.

"Everything has happened so fast that I haven't had time to process it," he said. "And I don’t know that I will until I get in the car to get on the road."

 

ACCORDING TO

McDonald

April 29, 2016 Bloomberg Brief Municipal Market 10

 

Top Traded Borrowers in the Municipal Market 4/22/16 to 4/28/16 ($Mln)

ISSUE BORROWER VOLUME CUSTOMER SELLS CUSTOMER BUYS NET DEALER TO DEALER VOLUME

1 New York City Water & Sewer System 479 275 197 77 7

2 Chevron USA Inc 324 184 140 44 0

3 State of California 284 76 153 -77 54

4 City of New York NY 283 146 135 11 2

5 Exxon Mobil Corp 261 170 84 85 6

6 Exxon Capital Ventures Inc 211 87 57 30 67

7 Los Angeles Department of Water & Power 206 72 54 18 80

8 New York City Transitional Finance Authority 191 125 63 62 3

9 Triborough Bridge & Tunnel Authority 119 57 54 3 7

10 Metropolitan Transportation Authority 88 55 31 25 2

  Total   6,308   2,913   2,867   46   528Source: MFLO<GO>* Volume numbers treat trades>$5MM as $5MM due to MSRB reporting restrictions

ACCORDING TO

Land-secured municipal bonds are making a comeback. The real estate development financing tool, often referred to as "dirt bonds," was hit hard by the housing crisis in 2008.

Eight years later, the market for land-secured bonds in Florida, Nevada, California and Colorado has changed in response, said , the co-head John Millerof fixed income for Nuveen Asset Management. "Post '08, new issuance has come back, pricing has come back," he said. "Even some of those larger deals are starting to rebuild again."

Between 2005 and 2007, many land-secured bond issuers sought to build 1,000 to 2,000 homes in "third-tier locations," he said. The larger deals often had a time horizon ranging between 10 and 12 years. After 2008, many developers had to abandon some of these projects, Miller said.

 Now, land-secured bonds tend to be smaller and aim to add 50 to 150 homes to an existing community, he said. These projects, which range between $10 and $15 million, often have a shorter time horizon, Miller said.

 That makes them less vulnerable to softness in the real estate market, Miller

Dirt Bond Comeback added. "That's what we like better and that's what we're seeing more of," he said. "They're not necessarily these big sort of headline-grabbing deals, like Chicago Public Schools or Lucas Museum or something like that. These are small add-ons. But it does make for a more resilient sector getting ready for the next downturn."

Land-secured bonds in California and Florida have also benefited from recovering housing markets, Nuveen analysts led by said in a Thomas Berrynew report.

In California, community facilities district bonds have performed well due to improved disclosure and structuring practices, the analysts said. Development on these projects often occurs before land-secured bonds are issued, according to the report.

Florida has also strengthened its underwriting standards after a wave of the state's community development district bonds defaulted between 2008 and 2011, the analysts said.

"Concern still revolves around the fact that many communities at the time of new issuance remain incredibly raw with very little vertical build-out and highly concentrated land ownership," the report

states. "However, underwriting standards have adjusted in other areas to address issues that decimated the sector during the last cycle."

— Amanda Albright, Bloomberg Brief

Jobless claims last week hovered around four-decade lows, showing the labor market remains the strongest part of the economy.

Initial applications for unemployment benefits climbed by 9,000 to 257,000 in the week ended April 23, a report from the Labor Department showed yesterday. The prior week’s revised 248,000 claims were the fewest since 1973.

“We’re seeing things in the labor market hold up well,” , an Sarah Houseeconomist at Wells Fargo Securities LLC, said before the report. “Businesses are feeling pretty comfortable with where the economy is going, so they don’t feel like they have to make those cuts” in headcount.

The median forecast of 50 economists surveyed by Bloomberg called for claims to rise to 259,000.

— Victoria Stilwell, Bloomberg News

Jobless Claims Climb

MSRB MARKET FLOW

TWEET OF THE DAY BY JOE MYSAK, BLOOMBERG BRIEF

April 29, 2016 Bloomberg Brief Municipal Market 11

 

Find Muni Data on the Bloomberg Terminal

DATA FREQUENCY ON THE TERMINAL

AAA Benchmark Valuation Daily GC I493 <GO>

Benchmark State Yields Daily MBM <GO>

VRDO Rates, Inventory Daily MBIX <GO>, ALLX BVRD <GO>

Upcoming Sales Daily CDRA <GO>

Volume, MSRB, PICK Daily SPLY <GO>, YTDM <GO>, MSRB <GO>, MBIX <GO>

Results of Sales Daily CDRA <GO>

Most Active Daily MSRB <GO>

Most Searched DES Every Wednesday SECF <GO>

Variable-Rate Calendar Every Thursday CDRV <GO>

Most Traded Borrowers Every Friday MFLO <GO>

Week-Ahead Calendar Every Monday CDRA <GO>

Supply and Demand Every Friday SPLY <GO>, BVMB <GO>

Muni Credit Risk Every Monday MRSK <GO>

TWEET OF THE DAY BY JOE MYSAK, BLOOMBERG BRIEF

Quarterly Return: 0.76%. Annual Assumption: 7.5%

katherine gregg@kathyprojo

RI pension fund returns 0.76% in first quarter - News - providencejournal.

- Providence, RI com m.providencejournal.com/news/20160427/…Details

The State House Bureau Chief of the Providence Journal tweets a link to a story about how the state's pension investments "posted mediocre returns in the first quarter of the year and managers are now preparing to re-evaluate how the fund's $7.5 billion in assets are allocated.''

 

  

 

 

 

 

Bloomberg Brief:Municipal Market

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