California unable to sell G.O.s in market crisis; Illinois toll highway authority brings $350 million

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, Nov. 6 - Pricing action tapered off on Thursday as the week winds down, but the big news of the day came out of the State of California, which announced that it will be unable to enter the market to sell general obligation bonds until the beginning of 2009.

State treasurer Bill Lockyer said in a statement released Thursday that the current economic meltdown has impacted the state in such a way that financial market conditions are unfavorable for such a sale.

"Under the present circumstances, it appears to our office unlikely that California will be able to enter the market to sell general obligation bonds until after the first of the year," Lockyer said in the statement.

"Current financial market conditions are not favorable, and with our state budget assumptions in flux during the legislature's special session, securities disclosure requirements would make it difficult or impossible to access the credit market."

Once the budget details are hammered down, Lockyer noted in the statement, it might be possible for the state to return to the debt market.

The treasurer's office is currently in talks with the state department of finance and state controller's office regarding California's need to borrow capital to meet short-term cash-flow needs, Lockyer's statement said.

Illinois State Toll Highway sale

Moving to Thursday's pricing activity, the day's action was led by the Illinois State Toll Highway Authority's $350 million sale of series 2008B toll highway senior priority revenue bonds.

The bonds (Aa3//AA-) were sold on a negotiated basis with J.P. Morgan Securities Inc. as the senior manager.

The bonds are due Jan. 1, 2033 and priced with a 5.5% coupon to yield 5.75%, authority spokeswoman Joelle McGinnis said Thursday.

Proceeds will be used for improvements to the state's toll highways.

Michigan State Building offering

In other pricing news, the Michigan State Building Authority priced $192 million in series 2008I revenue and revenue refunding bonds (A1//A+), according to Deborah Roberts, executive director of the authority.

The bonds are due from 2010 to 2020 with term bonds due 2038.

Yields came in at 4% for five-year maturities, 5.13% for 10-year bonds and 6.23% for 30-year bonds.

Coupons were not immediately available.

All bonds are callable in 2018.

"Considering the way the market is, I'd say it did well," Roberts said, although the issue was planned ahead of the December expiration of a line of credit from Depfa First Albany Securities, she said.

If not for the expiration, the authority would not likely have launched an issue, she said.

Legacy Health sale ahead

Moving to upcoming offerings, the Legacy Health System of Oregon is tentatively slated to price $150 million in series 2008 revenue bonds on Wednesday, said a preliminary official statement. The bonds will be sold through the Hospital Facility Authority of Clackamas County, Ore.

The bonds (A2) will be sold on a negotiated basis with Citigroup Global Markets as the senior manager.

The sale includes $50 million in series 2008A bonds, $50 million in series 2008B bonds and $50 million in series 2008C bonds. All of the variable-rate bonds are due June 1, 2037, and the interest rate resets weekly.

Proceeds will be used for construction, renovation, remodeling and installing equipment at some Legacy Health hospitals in Oregon.

Delaware Transportation bonds

In other upcoming deals, the Delaware Transportation Authority plans to sell $117.875 million in series 2008B transportation system senior revenue bonds on Nov. 20, said a preliminary official statement released Thursday.

The bonds (Aa3/AA+/) will be sold on a competitive basis with Public Financial Management Inc. as the financial adviser.

The bonds are due from 2010 to 2029.

Proceeds will be used for capital improvements and a deposit to a senior bond debt service reserve fund.

Florida Housing to sell $100 million

Looking a bit further ahead, the Florida Housing Finance Corp. is gearing up to price $100 million in series 2008-4 homeowner mortgage revenue bonds, according to a preliminary official statement released Thursday.

The bonds will be sold on a negotiated basis with J.P. Morgan Securities as the senior manager.

The sale is expected to occur in November.

The bonds are due 2010 to 2023 with term bonds due 2028, 2033 and 2038.

Proceeds will be used for a portion of the corporation's housing loans.

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