Muni sweeps: Strike two for Larry Silverstein
The $1.275 billion offering to fund Larry Silverstein’s New York City’s World Trade Center Liberty Tower 4 was withdrawn yesterday for the second time.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 â€śdue to market considerationsâ€ť.
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 andÂ James Ramage of the Bond Buyer have an excellent discussion of yesterday’sÂ 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 shouldnâ€™t be difficult, provided they are appropriately priced.
â€śIf itâ€™s the right level, it going to get digested. If not, it will get hung up,â€ť 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.
Photo source:Â gallagher.michaelsean
$1 billion of Â MCDX rolls:
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 maturitiesÂ and like other creditÂ defaultÂ swap indexes “rolls” on a established schedule.
During the roll the referenceÂ securitiesÂ which underlie the index are edited and ones which don’t meet the indexÂ criteriaÂ 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 onÂ naturalÂ gas drilling in his state. This is kind of surprising given the funding challenges the state faces, the fact thatÂ naturalÂ resources are Â ”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.
Pennsylvaniaâ€™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%), Â New Mexico (8.4%) and Wyoming (10.2%). Â Pennsylvaniaâ€™s effective tax rate of 7.3% would be higher than West Virginiaâ€™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 sourceÂ Pennsylvania could develop asÂ naturalÂ 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 Democratsâ€™ Holy Grail: a tax on natural gas extraction in the stateâ€™s Marcellus Shale regions.
â€śItâ€™s absolutely indefensible, as a matter of public policy, that the governor just tenaciously â€“ and Iâ€™ll say it, pig-headedly â€“ refuses to consider a Marcellus drilling tax.â€ť
But Budget Secretary Charles Zogby says Governor Corbett and his opponents will just have to agree to disagree, â€śI think we could talk about this until the cows come home: the governorâ€™s just not interested in increasingÂ 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 nationalÂ 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?
Ipreo: New deal municipal issuance calendar (PDF)
Wall Street Journal:Â Population Leaves Heartland Behind
The Florida Legisture: Â State Agency Travel Costs Are Down