The infrastructure arm of New York City's Hudson Yards development project will issue nearly $2.2 billion in revenue bonds on Tuesday, the largest deal in a week featuring $7.25 billion in debt issuance, according to Thomson Reuters data.
The Hudson Yards Infrastructure Corp will use the new debt, two series of second indenture revenue bonds underwritten by Goldman Sachs, to refund $2.4 billion of bonds issued in 2007.
Those bonds financed the extension of a subway line, and the three-block Hudson Park Boulevard, according to an investor presentation.
Hudson Yards, a massive mixed-use development on Manhattan's west side, is envisioned as an extension of the city's midtown business hub. Tenants include cosmetics company L'Oreal SA and private equity giant KKR. Other major firms, including the National Hockey League and law firm Skadden Arps Slate Meagher & Flom, are set to move in by 2020.
The San Francisco Municipal Transportation Agency will supply the largest competitive issue next week, a $173 million revenue bond to finance capital projects, including the replacement of light rail vehicles and improvements to the Golden State Warriors Event Center.
Ratings on municipal debt have trended up lately, Janney analyst Alan Schankel said in a Friday note, with upgrades by Moody's Investors Service exceeding downgrades for a third consecutive quarter.
Schankel added, though, that downgrades remained dominant by dollar amount, "primarily due to Moody's late-March rating cut of New Jersey to A3 from A2."
As states across the country continue to face budget pressure, the Pew Charitable Trusts on Thursday unveiled a study on the correlation between bond ratings and states' use of reserve, or rainy day, funds.
Pew found that state lawmakers are often unsure how to manage such funds, and are so sensitive to downgrades that some "are reluctant to tap reserves even during recessions."
But rating agencies expect states to use their rainy day funds when needed, Pew found, and states "are unlikely to see their creditworthiness decline as a result."
(Reporting by Nick Brown; Editing by Daniel Bases and Bernadette Baum)