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Even as the municipal bond market broke a record for issuance in 2020, gas prepay deals were notably absent from the mix after a good run in the previous two years. Market analysts said turmoil driven by the COVID-19 pandemic was the main culprit in the drop-off in issuance last year. But the question remains as to whether 2021 will be a comeback year for preapid natural gas transactions, or if issuers will remain on the sidelines until market conditions become more favorable. Bloomberg News The Harvest Midstream Company natural gas plant in Cow Island, Louisiana. Prepaid gas transactions are usually structured as tax-exempt bond sales where a municipal gas or electric utility can lock in a long-term supply of natural gas at discount prices. The bonds are sold by a conduit issuer such as a special-purpose entity. “As part of the structure of prepay gas revenue bonds, a financial institution may assume the credit risk of the transaction. It may ultimately guaranty delivery of the commodity and/or provide a guaranty of payments under a purchase and sale agreement,” said Steve Levine, senior market analyst at Interactive Brokers. Levine noted that an institution — a bank such as Morgan […]
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