The New York City Municipal Water Finance Authority will return to the market this week.
The refunding deal comes just one month after the authority's last issuance, which was upsized by more than $300 million.
"I would expect that [the deal's underwriters] would not be counseling the authority to come to market unless they thought that they would see good demand," said Patrick Luby, senior municipal strategist at CreditSights. "Which is kind of remarkable, given that investors had an opportunity to buy the name just a month ago."
The $600 million negotiated deal will have a retail order period Monday and institutional pricing on Tuesday.
The second general resolution bonds will have maturity dates in 2027 through 2032, 2037 through 2039, and 2046.
"Most of this principal is going to be front loaded at 11 years in," Luby said, "where there's been really strong demand from investors."
The deal is rated Aa1 by Moody's Ratings and AA-plus by S&P Global Ratings and Fitch Ratings.
Raymond James and Siebert Williams Shank are senior managers with 22 co-managers. Frasca & Associates is the deal's municipal advisor and Nixon Peabody and HLF are co-counsels.
The authority's deal in late February was
The authority may be swimming against the current this time around, Luby said. For one thing, this week has a busy calendar. And while New York issuers redeemed billions of dollars of bonds in February and March, Luby expects redemptions to be light in April and May.
"I would expect people would be looking, hopefully, to get a little bit more spread out of the deal," Luby said.
"New York City Waters is one of the strongest credits among the New York issuers. New York investors tend to have a preference for more yield, though," Luby said. "I wouldn't expect it to come super cheap to the market, but maybe a slight concession, considering how much they borrowed recently and the pace of issuance right now."
Compared to other municipal water providers, New York Water is uniquely large, with a capital program and debt burden to match, according to Jenny Poree, managing director at S&P Global Ratings.
"One year of capital spending for New York Water is more than some of the largest issuers' entire capital plans over a 30-year period," Poree said.
The authority is the sole provider of water to New York City and some areas upstate, with a service area population of 9.5 million people. It provides one billion gallons of water on an average day, according to an investor presentation, as well as sewer service to most of the city.
New York Water is at the outset of an 11-year capital improvement program, according to an investor presentation for the deal. The capital program is projected to cost $36.1 billion and end in 2035.
The authority has $34.2 billion of outstanding debt, a high debt burden compared to most municipal utilities, Moody's noted in its credit opinion. But the authority has also established a "bondholder-friendly flow of funds," the opinion said.
Poree highlighted the flow of funds as well.
"They use their cash balances as set-asides well in advance of debt service, which we view positively," Poree said. "We actually adjust the rating upward to incorporate what we believe is an extraordinary financial-slash-security strength related to their coverage."
The authority is restarting lien sales, Poree added, which is positive for its revenue collections.
"Fitch believes NYW bondholders benefit from strong legal protections that include the statutorily defined nature of the authority, bankruptcy remoteness and the gross pledge of system revenues. While these layers of legal protection do not completely shield bondholders from the operational risks of the city's massive water and sewer enterprise, they limit diversion of revenues to general city operations," the agency said in its rating report.
New York Water raised rates by 8.5% this year and has another 8.5% hike planned next year, the investor presentation said.
While many municipal utility providers have
"There's no significant outstanding or costly project that they have to undertake that they're not already planning to undertake," Butler said.
And although the chaotic federal environment, with the Trump administration abruptly
Some chemicals necessary for water treatment are produced in Canada and Mexico, Poree said, so tariffs could raise the cost of operations.
"But right now, our view is that they tend to budget conservatively, and we expect that they would take the right steps, from a rate making standpoint, to pass through any cost increases," Poree said. "So it's not something that we're concerned about for their credit profile."
The biggest source of uncertainty for the authority may be its place in New York City's governance structure, Butler said. The Trump a
Poree said that S&P considers the affiliation with New York City to still be an overall strength to the authority's credit, given the city's size and economic resilience.
The authority plans to issue $1.8 billion of new money bonds in the current fiscal year, according to the presentation. That will grow in the coming years, with $2.3 billion of new bonds scheduled for fiscal 2026, $2.4 billion in fiscal 2027, $2.6 billion in fiscal 2028 and $2.7 billion in fiscal 2029.
