Puerto Rico Electric Power Authority bonds traded tighter on Monday, showing the market's confidence in the authority's new chief restructuring officer, investors said.
PREPA debt has strengthened since the authority appointed Lisa Donahue, a managing director of AlixPartners, as its CRO.
PREPA 5s of 2025, were trading at 11.68%, 227 basis points lower than the 13.95% they were trading on August 19, the last day they traded before PREPA announced its new CRO.
"Right now, I think from an investor's point of view, having a well-directed CRO to administer PREPA is the best case for everyone," a trader on the west coast said. "In regards to that they can take comfort the CRO will come in and balance the two sides," so the restructuring won't benefit either side.
The PREPA 5.05s of 2042 were trading at 9.31%, 105 basis points tighter than they were trading on Thursday.
PREPA trading was 25.4% above its 100-day average on Monday morning, according to data provided by Bloomberg.
The trader on the west coast acknowledged that simply hiring a CRO does not mean PREPA is out of the woods yet, and described the potential restructuring as "a pony race."
Chicago Water Grabs Investors' Attention
The deal to watch this week is the $372.7 million Chicago second lien water revenue bonds PNC Capital is expected to price.
A trader in Florida said it will be interesting to see how well the Chicago water deal is received to gauge the market's appetite for the city's paper.
"Chicago has been a difficult region to take with its pension issues," he said.
The deal earned ratings of A3 from Moody's Investors Service, AA-minus from Standard & Poor's and AA from Fitch Ratings.
The trader on the west coast predicted it will do well.
"For Chicago that's a high rating," he said "It's kind of weird Chicago has gotten such a tough name, but that credit won't have a problem. Based on what we have seen in Detroit, anything that is dedicated revenues gets much more sponsorship than GOs these days."
The Broader Market
Municipal bonds strengthened by as much as two basis points for bonds maturing in 12 to 30 years, and up to one basis point for bonds maturing in eight to 11 years, according to Municipal Market Data's triple-A scale. The front end of the curve held steady.
The 30-year Treasury yield fell by one basis point to 3.22% on Monday. The 10-year and the two-year note held steady at 2.46% and 0.51%, respectively.
