The U.S. Week Ahead (July 15-19): Muni Bond Sales Start To Swell

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.

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Estimated Debt Service Coverage Ratios

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.

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The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this ...

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