New York State Housing Finance Agency
Affordable Housing Revenue Bonds
2016 Series D
New York State Housing Finance Agency issues Affordable Housing Revenue Bonds
During the week of July 18, 2016, the New York State Housing Finance Agency (“NYSHFA”) priced its $55 million Affordable Housing Revenue Bonds, 2016 Series D, which was senior managed by Siebert Brandford Shank & Co. (“SBS”). The Bonds are rated Aa2 by Moody’s and are secured by Freddie Mac credit enhancements. The Bonds were issued in order to finance a mortgage loan for the acquisition and rehabilitation of a multifamily housing project. The transaction was comprised of tax-exempt fixed-rate par bonds offered with serial bonds maturing semi-annually from 2016 to 2027 and term bonds in 2031, 2036, 2041, and 2046. The bonds were priced with an optional par call in November 1, 2025.
In the weeks leading up to pricing, the fixed-income market (and global markets generally) had experienced significant volatility due to economic factors such as anticipated action by the Bank of England and Bank of Japan, and geopolitical concerns including the UK’s referendum to leave the EU, recent acts of terrorism, and an attempted coup d’état in Turkey. In the week before the transaction, US Treasuries yields increased significantly as traders began to unwind certain Brexit-related trades and after inaction by the BOE. While terrorism in France provided some temporary downward pressure on fixed-income prices, this proved temporary after stronger-than-expected economic releases. The new issue municipal market saw relatively strong responses to transactions and a lighter calendar the week of HFA’s transaction compared to the previous week ($7 billion versus $9.3 billion). Comparable transactions in the market that could have impacted pricing included a $520 million Metropolitan Transportation Authority transaction, a $277 million Trust for Cultural Resources (Museum of Modern Art) transaction, a $61 million Massachusetts Housing Finance Agency transaction, and a $40 million Maine State Housing Authority transaction.
On the morning of retail pricing (Wednesday July 20, 2016), the Municipal and US Treasury markets opened somewhat weaker and remained sluggish throughout the morning as equities opened relatively strong. During the retail order period, SBS recommended keeping the longest term-bond (maturing in 2046) closed to retail orders in order to steer demand toward the shorter-term bonds and serial bonds. The bonds were offered with coupons and yields ranging from 0.55% to 3.125%. Order flow was relatively strong throughout the retail order period, with investors placing $33.7 million orders by noon. As subscription levels continued to increase, SBS, the Agency, and Acacia decided to close all maturities in 2016, 2017, 2018, 2025, 2026, and 2027. After further discussion, the Agency and SBS agreed to terminate the order period early (at 1:45 pm) and accelerate to institutional pricing a day earlier than initially planned. In total, $37.9 million retail orders were placed.
In light of the strong retail performance of the transaction, the Agency and SBS agreed to close off an additional 9 maturities (for a total of 20 of 27 maturities) and lower the yields in the 11/1/2016 to 11/1/2018 maturities and 5/1/2025 to 11/1/2027 maturities by 5 basis points. Ten other maturities (11/1/2019 and 11/1/2020 through 11/1/2023) had a subscription level between 1.14x and 2.33x, however given the order book and in order to maintain a coherent yield curve, SBS and the Agency agreed to keep yields at the retail order period levels. The institutional order period received strong interest, with institutions placing over $40 million in priority orders, leading to a total subscription level of 1.66x. Despite the overall subscription level, there was a small balance of $95,000 in the 5/1/2019 maturity, which SBS underwrote. Final yields ranged from 0.50% in 11/1/2016 to 3.20% in 11/1/2046.