Midwest in a nutshell: borrowers found ways to refund in 2020
March 3, 2021 11:02 AM
Low rates helped drive a refunding boom
Refunding volume swelled in the Midwest by 53% in 2020, driving bond issuance in the Midwest to a 15.8% year-over-year increase, to more than $83.5 billion.
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Many bonds were sold with little infrastructure to show for it
"It was a pretty paltry year for infrastructure and that was in part due to borrowers feeling under pressure by the COVID-19 pandemic and wanting to preserve balances and whatever powder they had in their treasury," said Richard Ciccarone, president of Merritt Research Services.
Issuance was spread around the region
Issuers in Illinois, Michigan, Ohio pushed each state above $10 billion overall for municipal bond sales, with Wisconsin close at $9.12 billion.
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Chicago uses big bond deals to grapple with budget
Even before the pandemic struck, Chicago sought budget relief in the bonds market, through a $1 billion January Sales Tax Securitization Corp. deal that was combined with about $500 million of GOs to generate $310 million of budget relief.
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O'Hare uses capital markets for operational breathing room
With air travel, and the fees it generates, decimated by the COVID-19 pandemic, Chicago in September sold $1.2 billion of tax-exempt and taxable new money and refunding for O’Hare International Airport, generating $257 million of upfront savings.
Buckeye Tobacco was nation’s largest municipal bond deal in 2020
The Buckeye Tobacco Settlement Financing Authority priced a $5.3 billion deal to restructure 2007 bonds, taking the paper off a default track and setting up the long-term possibility that the state will regain the revenues after the debt is paid off. “The Authority delivered on its objectives, lowering debt service costs and creating a more resilient structure. As a result, future tobacco settlement payments now have an opportunity to benefit Ohioans.” said Kim Murnieks, director of the Ohio Office of Budget and Management.
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Wisconsin takes advantage of market conditions
The Wisconsin state government was the Midwest’s second-most prolific issuer by volume in 2020, reflecting not only new money sales for capital projects but also opportunistic refundings driven by low market interest rates. The state also eliminated risk exposures related to Libor-based variable rate obligations and swap agreements, said David Erdman, its capital markets director.
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Citi tops the Midwest underwriting league table
Citigroup Global Markets took the top spot among senior managers in the 11-state region, credited by Refinitiv with 46 deals valued at $7.1 billion, ahead of JPMorgan and Stifel.
