Virginia College Building Authority brings $309 million; Indiana Finance sells $271.28 million for Duke

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, Jan. 8 - Pricing action heated up on Thursday with several large offerings priced. The offerings brought to the table experienced a good reception, at least according to the issuers.

Activity was led by the Virginia College Building Authority, which priced $309 million in series 2009A educational facilities revenue bonds (Aa1).

The bonds are due 2009 to 2038 and priced with yields from 0.59% to 5.07%, said Evelyn Whitley, the authority's director.

Citigroup Global Markets was the lead manager for the negotiated sale.

Proceeds will be used for the acquisition of notes issued by nine state higher educational institutions.

The bonds, Whitley said, were oversubscribed on "a good amount of interest."

Even so, going into the sale, Whitley said she was unsure of what yields to expect because "there aren't many deals out there."

Judging by the results, Whitley said, the market has made an improvement this week.

A sellside source reached Thursday afternoon agreed with that assessment.

"It's looking a lot better," he said.

"The end of 2008 was pretty grim, but I think things are settling back down a bit and we're in a good position to sell some bonds. Institutional interest really seems to be back. We're still seeing some retail, but what we lost in retail, we seem to have gained again in institutional."

Indiana Finance sale complete

In other pricing news from Thursday, the Indiana Finance Authority sold $271.275 million in series 2009 refunding revenue bonds for Duke Energy Indiana Inc., said Tom Shiel, spokesman for Duke Energy.

The offering included $44.025 million in series 2009A-1, $23 million in series 2009A-2 and $77.125 million in series 2009A-3 bonds, all of which bear interest at the weekly rate mode. The initial rate for the weekly rate bonds is 0.7%. The deal also included $77.125 million in series 2009A-4 bonds and $50 million in series 2009A-5 bonds, both of which bear interest at the daily rate. The initial rate for those bonds is 0.5%.

The bonds (Aaa/VMIG 1/AAA/A-1+/) priced at par.

KeyBanc Capital Markets was the lead manager for the 2009A-1 and 2009A-3 bonds, Morgan Stanley was the lead manager for the 2009A-2 bonds, Banc of America Securities LLC was the lead manager for the 2009A-4 bonds, and Wells Fargo Brokerage Services was the lead for the 2009A-5 bonds.

Proceeds from the 2009A-1 bonds will be used to refund the Indiana Development Finance Authority's series 2000A environmental refunding revenue bonds, and proceeds from the 2009A-2 bonds will be used to refund the authority's series 2002A refunding revenue bonds. Proceeds from the 2009A-3 bonds will be used to refund the authority's series 2004C revenue refunding bonds, and the 2009A-4 bonds will be used to refund the authority's series 2004B revenue refunding bonds. The proceeds from the 2009A-5 bonds will be used to refund the authority's series 2005C revenue refunding bonds. The bonds being refunded are tax-exempt auction-rate securities.

Elsewhere, the New York State Urban Development Corp. had been slated to price $1.098 billion in series 2009 state personal income tax revenue bonds on Thursday. A spokesman for the corporation said the final pricing terms for the sale would not be available until Friday.

Citigroup Global Markets was the lead manager for the negotiated offering.

Proceeds will be used for community revitalization, technology projects under the New York State Technology and Development Program and grants and loans.

New York mortgage bonds ahead

In other news out of the Empire State, the State of New York Mortgage Agency is expected to price $80 million in homeowner mortgage revenue bonds later this month, said a preliminary official statement.

The sale includes $11.56 million in series 160 fixed-rate non-AMT bonds, $41.94 million in series 161 fixed-rate non-AMT bonds and $26.5 million in series 162 variable-rate non-AMT bonds.

The bonds will be sold on a negotiated basis with Citigroup Global Markets as the lead manager for the fixed-rate bonds and the underwriter for the variable-rate bonds.

The series 160 bonds are due from 2009 to 2018, and the series 161 bonds are due 2018 with term bonds due 2023, 2028, 2033 and 2039. The series 162 bonds are due April 1, 2039 and initially reset at the daily or weekly rate.

Proceeds will be used for making mortgage loans throughout the state.

U of Houston bonds

Also coming up, the Board of Regents of the University of Houston System plans to price $114.07 million in series 2009 consolidated revenue and refunding bonds, said a preliminary official statement released Thursday.

The bonds (Aa3/AA-/) will be sold on a negotiated basis with RBC Capital Markets Corp., Depfa First Albany Securities Inc., Loop Capital Markets LLC and Ramirez & Co. Inc. as the underwriters.

The bonds are due from 2009 to 2033.

Proceeds will be used for the acquisition, purchase, construction, improvement, enlargement and equipment of property, buildings, structures, activities, services, operations and other facilities, roads or infrastructure throughout the university system. The remainder will be used to defease some outstanding notes.

Secondary feels firmer

Moving to secondary market activity, a trader reached Thursday afternoon said the tone of the market was improved by a few basis points even though volume remains fairly light.

"What is trading is actually doing pretty well," he said. "We're up a few basis points, especially on the long end. Today was a pretty good day for a change."

Looking to specific trades, San Diego County's series 2008A taxable pension obligation bonds were seen in play. The 6.029% 2026s were seen trading at 6.258%.

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