Muni sweeps: Strike two for Larry Silverstein

April 12, 2011
WTC in December, 2010

WTC in December, 2010

The $1.275 billion offering to fund Larry Silverstein’s New York City’s World Trade Center Liberty Tower 4 was withdrawn yesterday for the second time.

Goldman Sachs withdrew the offering “due to market considerations”.

The deal was first postponed last December as the municipal market was roiled by talk of mass defaults. The bankruptcy talk caused many investors to exit the market and sent muni yields rising.

When yields spike up issuers tend to withdraw from the market and wait on the sidelines until conditions settle down. Think of a sailor who can wait in the harbor as a storm brews at sea.

Most issuers are planning months and years ahead so they can choose the point at which they bring their bonds to market for the best advantage.

Patrick McGee and James Ramage of the Bond Buyer have an excellent discussion of yesterday’s market conditions:

Traders have been saying that high-grade [investment grade] bonds can be priced without much trouble in this environment, but lower-grade issuance have a difficult time getting priced.

Including the Liberty deal, The Bond Buyer and Ipreo calculated that $4.35 billion was to hit the market this week, versus the $2.6 billion last week.

First-quarter issuance averaged roughly $3 billion per week, well down from the $8 billion average last year.

A trader said digesting deals this week shouldn’t be difficult, provided they are appropriately priced.

“If it’s the right level, it going to get digested. If not, it will get hung up,” he said.

It’s hard to know what the real reasons behind the second postponement of the Silverstein Liberty bonds are because traders were saying that the market could absorb the issuance.

Mr. Silverstein needs these funds to complete Liberty Tower 4. We’ll keep an eye out for when he sails from the harbor.

Reuters Factbox: Rebuilding at New York’s “Ground Zero”

Photo source: gallagher.michaelsean

$1 billion of  MCDX rolls:

International Financing Review reports on the municipal credit default swap index (MCDX) that we wrote about yesterday.

According to Citigroup analysts more than $1bn in index notional traded last week as the MCDX “rolled from Series 15 to Series 16″.

The MCDX has maturities and like other credit default swap indexes “rolls” on a established schedule.

During the roll the reference securities which underlie the index are edited and ones which don’t meet the index criteria are discarded.

What is interesting is that $1 billion of muni CDS index is a proxy for $2.9 trillion municipal market. Yes, that is the way it works.

PA governor: No taxes on extraction of states natural resources;

The governor of Pennsylvania has said no taxes on natural gas drilling in his state. This is kind of surprising given the funding challenges the state faces, the fact that natural resources are  “public wealth” and that their use should benefit the common weal.

The Pennsylvania Budget and Policy Center did an excellent roundup on Oct. 6 of how various states approach taxing natural gas drilling.

Pennsylvania’s proposed tax is comparable to other gas-producing states. The House-passed bill sets a rate of 39 cents per thousand cubic feet (MCF) of gas and exempts wells that produce less than 60 MCF per day.

The effective tax rate, after factoring in tax breaks and local property taxes assessed in other states, is lower than Montana (7.9%),  New Mexico (8.4%) and Wyoming (10.2%).  Pennsylvania’s effective tax rate of 7.3% would be higher than West Virginia’s rate of 5.8%.

The Marcellus Shale Coalition plan has an effective tax rate of 2.3%, well below most gas-producing states.

Imagine the rich revenue source Pennsylvania could develop as natural gas becomes a bigger energy resource for our nation.


Democratic lawmakers continue to go round-and-round with Governor Corbett over a tax on natural gas drilling, but the governor continues to stand his ground.

During state House budget hearings, Delaware County Democrat Greg Vitali continued to press for the Democrats’ Holy Grail: a tax on natural gas extraction in the state’s Marcellus Shale regions.

“It’s absolutely indefensible, as a matter of public policy, that the governor just tenaciously – and I’ll say it, pig-headedly – refuses to consider a Marcellus drilling tax.”

But Budget Secretary Charles Zogby says Governor Corbett and his opponents will just have to agree to disagree, “I think we could talk about this until the cows come home: the governor’s just not interested in increasing taxes.

While he does not favor a tax on gas extraction that would raise revenue for the state general fund, Corbett says he will discuss ways to address the costs being incurred by local governments.

Build those bridges

American City and County is out with a story about American’s views towards our national infrastructure. And unsurprisingly the people would like some improvements.

More than three-quarters (77 percent) of Americans think the federal government should increase spending to repair the nation’s crumbling roads, bridges and transit systems, according to a report from Kansas City, Mo.-based HNTB Corp.

The report, released March 31, found that most respondents do not think the current national gas tax, which traditionally supports federal highway and transit programs, raises enough money to cover the expenses, and they are willing to support large-scale infrastructure projects through increased tolls or taxes as long as they can directly reap or be assured of the benefits.

I haven’t heard anything recently about the National Infrastructure Bank proposed by Senators Kerry and Hutchinson. There certainly seems to be support for the concept of creating additional funding sources away from the national gas tax. Jobs creation anyone?

Little sweeps:

Ipreo: New deal municipal issuance calendar (PDF)

Wall Street Journal: Population Leaves Heartland Behind

Fox News:  Some States Cut Back Financial Incentives for Hollywood Productions

The Florida Legisture:  State Agency Travel Costs Are Down

One comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see

[…] have been one of the biggest muni bond deals (A $1.275 billion “Liberty” bond deal to fund Larry Silverstein’s New York City’s World Trade Center Liberty Tower 4) earlier this week […]

Posted by CreditLime – CDS Market Information » Blog Archive » Are municipals (bonds or swaps) headed up or down? | Report as abusive

let Silver Stein get his money from the lower manhattan development corporation ,that he began with G.W. BUSH , ROLAND BETTS (CHELSEA PIERS ) BLANK FEIN ,GOLDMAN SACHS , RUDY G ., GRASSO , PATAKI , EISENBERG AND MANY OTHERS (SILVERS FROM NY STATE HOUSE , THANK YOU FOR YOUR GREAT COLUMN

Posted by BELLINHAND | Report as abusive