Long muni bonds take hit; Ambac calls Detroit's restructuring plan 'harmful'; Milwaukee prices

By Sheri Kasprzak

New York, July 9 - Municipal yields were up again Tuesday with new issues pricing at concessions to recent secondary transactions, market insiders reported.

New deals, according to market sources, priced to move but did OK.

"Last week, we were moving with Treasuries, but this week, we seem to be moving independently," a trader said.

"There's still quite a bit of pressure on the secondary side, and new deals are pricing to go, but they're not that bad. We're not off by that much, but the long end is falling victim to some of that pressure now. Yields out long are probably up about 5 [basis points]."

Ambac responds to Detroit plan

Moving to bankruptcy news, the City of Detroit teeters on filing for bankruptcy in what could be the nation's biggest municipal bankruptcy. The city's state-appointed emergency manager, Kevyn Orr, said recently that the city can only make good on a small fraction of its staggering $19 billion debt and would stop making payments on unsecured debt. The city is expected to make a decision on the filing later this month.

Ambac Assurance Corp., which backs $92.7 million of the city's limited tax G.O. bonds and $77.6 million of the city's unlimited tax G.O. bonds, is not happy with Orr's recent statements.

"Ambac Assurance Corp. believes that the proposal put forth by the City of Detroit's state-appointed emergency manager, as well as the failure on the part of the State of Michigan to protect the status of general obligation bonds, is harmful to Detroit and the interests of taxpayers in Michigan," Ambac said in a statement.

"A successful revitalization of the city will be dependent upon its ability to access cost-effective financing in the future, including general obligation funding. Such access will be needlessly imperiled as a result of the emergency manager's approach and the state's apparent support thereof."

Ambac hired Harrison J. Goldin of Goldin Associates LLC to advise the company on Detroit, according to the statement.

"The State of Michigan is making a grave error in its support for the proposed treatment of the general obligation bonds previously issued by the City of Detroit that are backed by a pledge of the city's full faith and credit," said Goldin in the statement.

"The revitalization of Detroit depends on its ability to re-access the credit markets in order to finance critical improvements to its infrastructure. It is short-sighted to signal to lenders that they cannot trust the city's unconditional pledge to repay its general obligation debts, especially given that the general obligation bonds in question comprise less than 3% of the city's estimate of its liabilities."

Milwaukee brings notes

In the session's competitive action, the City of Milwaukee priced $61.9 million of series 2013-T6 taxable G.O. promissory notes, said a pricing sheet.

The notes (Aa2/AA/) were sold competitively with BofA Merrill Lynch winning the bid. The true interest cost came in at 2.179895%, and the net interest cost came in at 2.18%.

The notes are due Feb. 1, 2018, have a 2.18% coupon and priced at 100.344.

"[The city's] policy is to sell debt of this type on a competitive basis," said Richard Li with the city comptroller's office.

Proceeds will be used to fund the city's pension program.

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