Low municipal interest rates spurred refundings that boost-led power volume to $11.5 billion during the first nine months of 1992, a 73.6% jump over the same period in 1991.
During the first three quarters of 1991, 120 power volume issues were sold for a total of $606.7 million, compared to 149 issues totaling $11.5 billion priced during the first nine months of this year, according to Securities Data Co.
Power deals had been scarce before the beginning of 1992, as overcapacity prevented expansion and the sale of debt. But when yields in the municipal market reached recent record lows, refundings were triggered.
Refunding issues accounted for just over $9 billion of volume in the first three quarters of 1992, compared to $3.6 billion during the same period in 1991.
"There was a tremendous amount of issuance in the early 1980s. and only until recently have yields in the market made sense for refundings," said Gary Krellenstein, senior vice president of research at Lehman Brothers. "We saw aggressive refundings during the first three quarters when rates got below 7% and there are still some deals that will come before rates rise again."
New-money financings, meanwhile, totaled a mere $2.4 billion during the first nine months of this year, down 15.8% from last year's $2.9 billion.
But Krellenstein noted that new-money volume should increase slightly as some building is scheduled and existing plants construct transmission lines and peaking units, smaller power sources compared to large plants.
"There was overbuilding in the '80s, and then nobody wanted to do anything," Krellenstein said. "Now the pendulum is beginning to swing back a little.
"Total volume should continue to increase at a slightly slower rate than we've seen this year," he added, "while new money should stay the same or pick up slightly. "
A total of 121 issues, just under $11 billion, have been priced in the negotiated sector so far in 1992, compared to only $586.5 million competitive deals.
Most refunding deals are priced in the negotiated sector because underwriters then have the flexibility to change structure and use alternative securities, including derivatives, according to Krellenstein. This makes it easier to attract a variety of investors to a deal and allows the issuer to ride out volatile markets by broadening the investor base.
Bond insurance was used in 50 deals, totaling $4.7 billion during the first nine months of 1992. For the same period in 1991, 42 issues were priced with bond insurance for a total of $2 billion.
California was the top state issuer of power debt during the first three quarters in 1992. The state priced 22 issues for a total of $2.3 billion of bonds.
Tennessee was second, issuing 12 bond deals for a total of $1.9 billion, while Florida was the third greatest issuer of debt, selling nine issues totaling $1 billion.
Goldman, Sachs & Co. was the top senior manager of power deals, racking up 19 issues for a total of $3.8 billion, a 33.8% market share.
In second position for power management, First Boston Corp. sold nine issues totaling $1.6 billion, for a 14.4% market share.
Lehman Brothers sold 18 issues for third place, totaling $1.42 billion, a 12.4% market share.
Arizona's Salt River Project Agricultural Improvement Power District was the top issuer of debt during the first three quarters of 1992, selling two issues totaling $812 million, a 7.1% market share.
Massachusetts Municipal Wholesale Electric Co. sold three issues, totaling $747 million, for a second-place 6.5% market share, while the Lower Colorado River Authority came in third, selling three issues totaling $701 million, a 6.1% market share.
