North Texas Tollway Authority Set to Price US$679m of Revenue Refunding Bonds
Supply in the U.S. municipal bond market is set to tick higher in the week ahead, as demand remains ripe for tax-exempt issuance.
Market participants anticipate anywhere from US$7bn to US$9bn worth of deals to price in the week ahead, including nearly US$679m of revenue refunding bonds from the North Texas Tollway Authority (NTTA).
The NTTA aims to use the proceeds from the sale, which is expected to price Tuesday, July 16, in large part for refunding certain outstanding indebtedness, as well as paying for issuance costs.
The transaction is comprised of US$448.7m of first tier bonds, Series 2019A and US$230.23m of second-tier bonds, Series 2019B, and is being lead-managed by Barclays.
(Click on image to enlarge)
Moody’s Investors Service assigned an investment-grade ‘A1’ and ‘A2’ credit rating to the first tier and second tier notes, respectively, based on the NTTA’s “essential roadway network.” Moody’s noted that this network is “located in one of the fastest growing US service areas that will experience continued traffic growth and combine with automatic biennial toll increases to produce strong revenue growth.”
Moody’s analyst Earl Heffintrayer estimated that the authority’s debt service coverage ratios (DSCRs) will narrow to 1.22x over the next two fiscal years to under the authority’s budgeted revenue outlook but will begin a long-term strengthening given the flattening debt service profile to 1.32x in fiscal 2023.
Also, while NTTA’s leverage is currently elevated, it is likely to moderate as revenues grow and debt steadily amortizes. Heffintrayer observed that adjusted debt to operating revenue has decreased to 10.5x based on unaudited fiscal 2018 results and will fall below 8.0x by fiscal 2023 based on the authority’s planned growth.
Moody’s added that the authority’s ability to fund its five-year growth needs without additional debt and minimal reduction liquidity additionally supports its rating.
(Click on image to enlarge)
The NTTA manages a multi-asset tollway system in the Dallas-Fort Worth area, with assets that include two bridges, one tunnel, and five highways, spanning more than 140 miles.
The authority anticipates transaction and revenue annual growth rates from 2019 through 2020 of 2% and 5%, respectively, and from 2020-2030 of 2.1% and 5%, respectively.
The issuance falls against a backdrop of continued strong demand for municipal deals.
(Click on image to enlarge)
For the week ended July 10, Thomson Reuters/Lipper U.S. Fund Flows reported a net inflow of roughly US$885m into municipal bond funds – not including ETFs such as the iShares National Muni Bond Fund (NYSEARCA: MUB) and the Vanguard Tax-Exempt Bond Fund (NYSEARCA: VTEB).
Analysts at Janney Montgomery noted that while U.S. Treasury note yields “finished higher for the week in all but the shortest maturities, tax-free yields ended last week lower, highlighting muni outperformance across the curve.” They expect the uptick in anticipated supply in the week ahead to “meet solid demand, fueled in large part by incoming cash flows to mutual funds and ETFs which are continuing at the strong pace we’ve seen since January.”
(Click on image to enlarge)
The yield on the 10-year U.S. Treasury note was last bid at around 2.09%.
Other muni deals on the radar in the week ahead include US$915m worth of revenue bonds from the Children’s Healthcare of Atlanta, Brookhaven Development Authority, US$300m of Massachusetts School Building Authority subordinated dedicated sales tax bonds and almost US$265m of revenue bonds from the Virginia Small Business Financing Authority.
In the meantime, select the Event Calendar option in the IBKR Trader Workstation for a full list of the U.S. and global corporate events and earnings, dividend schedules, economic data, IPOs and more.
Comments
Log in or sign up to join the conversation.