Municipals close firmer as supply eases; American Municipal Power brings $546.09 million bonds

By Sheri Kasprzak

New York, June 14 - Municipals were again slightly firmer as new issue supply dwindled and buyers returned to the market, traders reported. Treasuries were weaker, so market insiders pointed to the alleviation of supply pressure.

"Basically, I think we've gotten through the bulk of the supply, and yields are responding in kind," one trader noted.

"Buyers are actually coming back into the market after a few of these bigger deals. Given these factors, munis were able to firm despite lagging Treasuries. Next week, things should return to normal, supply-wise, so I think yields will be subject to a little less volatility."

The coming week will feature about $5 billion of new offerings, led by a $750 million deal from the Massachusetts School Building Authority, said Alan Schankel, managing director with Janney Montgomery Scott LLC. The authority plans to sell dedicated sales tax refunding bonds through senior managers Citigroup Global Markets Inc., Jefferies & Co. and J.P. Morgan Securities LLC.

Proceeds from the offering will be used to refund the authority's series 2005A dedicated sales tax bonds.

Detroit bonds back on calendar

Meanwhile, the City of Detroit is slated to price $575 million of series 2012A sewage disposal system revenue and refunding senior lien bonds (/A+/A-) next week after postponing the deal this week.

The offering was postponed, said Schankel, because of a lawsuit filed against the State of Michigan by the city attorney that threatened the release of state funds for a debt service payment. The city is now on track, Schankel said, to make the $34 million pension debt service payment after a judge dismissed the suit.

Goldman Sachs & Co. is the senior manager for the offering, the proceeds of which will be used to make improvements, additions and extensions to the city's sewage system and to refund its 2003A revenue bonds.

Stockton closer to bankruptcy

In other news Thursday, the City of Stockton, Calif., is getting closer to its June 26 deadline to reach an agreement with its creditors. If an agreement can't be reached, the city could file for bankruptcy. Representatives from the city have said the city government will run out of cash on July 1.

According to Moody's Investors Service, the city's pension and lease obligations have the greatest likelihood of default, while water and sewer bonds and special tax bonds are more insulated from default risk.

American Municipal bonds price

In primary action Thursday, American Municipal Power of Ohio priced $546,085,000 of series 2012 multistate gas project bonds, said a pricing sheet.

The offering included $20.54 million of series 2012A taxable bonds and $525,545,000 of series 2012B tax-exempt bonds.

The 2012A bonds are due 2014 to 2016 with 1.1% to 1.74% coupons, all priced at par.

The 2012B bonds are due 2016 to 2032 with term bonds due in 2037, 2042 and 2044. The serial coupons range from 4% to 5.25%. The 2037 bonds have a 5% coupon and priced at 107.672, and the 2042 bonds have a 5% coupon and priced at 107.013. The 2044 bonds have a 4.375% coupon and priced at 98.228.

J.P. Morgan Securities LLC was the senior manager for the bonds (A1//A).

Proceeds will be used to repay an interim term loan facility used to acquire and complete the Fremont Energy Center in Fremont, Ohio.

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