California brings $3.49 billion in economic recovery bonds; Georgia plans $700 million sale

By Sheri Kasprzak

New York, Oct. 29 - Municipals remained mostly flat on Thursday as investors turned to the Golden State for the week's largest sale.

The tone, however, was seen a bit weaker, one trader reported.

"There's a sense of weakness out there," she said.

"We're not really changed by that much, but there's a sense that it's just a little weaker in general."

Meanwhile, the State of California finished pricing $3.49 billion in series 2009 economic recovery refunding bonds (//A) after a two-day retail period that surprised some market insiders.

"You know, I have to say, I'm pretty surprised," said one sellside source who was watching the deal.

"Retail really picked up on this deal. Compared to the last sale they had, retail was very much involved. Pricing looks pretty good. You know, compared to other parts of the country, it might be a little cheap, but it's California. For California, it's good."

Final yields on the bonds - which were upsized from $3 billion - ranged from 2.48% for the 2013 maturity to 4.85% in the 2022 and 2023 maturities, said Tom Dresslar, spokesman for the state treasurer's office.

The strong retail demand caused the state to drop expected yields by 5 basis points on Wednesday, said Dresslar.

"By the time institutional investors finished placing their orders [Thursday], the state today reduced the yields in those maturities even further and also cut yields in other years," Dresslar said in a statement.

"The lower yields will reduce taxpayers' borrowing costs."

By Wednesday, retail investors had ordered $2.494 billion of the bonds, representing 71.5% of the total offering.

"Once again, in assessing California as an investment, retail investors have voted with their cash," Dresslar said in the statement.

"Once again, they have recognized the big upside and saw the downside for what it is - virtually nil. We couldn't be happier with the results."

Barclays Capital Inc. was the senior manager for the sale.

Retail demand drove the sale, despite some early estimates.

Proceeds will be used to refund existing recovery bonds.

Georgia sale planned for Tuesday

Looking to the coming week's sales, the State of Georgia plans to price $700 million in series 2009 general obligation bonds on Tuesday, said a sales calendar.

The sale includes $85.48 million in series 2009F bonds, $114.52 million in series 2009G bonds, $400 million in series 2009H Build America Bonds and $100 million in series 2009I G.O. bonds.

Goldman, Sachs & Co. is the senior manager.

The 2009F bonds are due 2010 to 2014, and the 2009G bonds are due 2010 to 2029. The 2009H bonds are due 2010 to 2029, and the 2009I bonds are due 2010 to 2023.

Proceeds will be used to retire existing debt and fund capital projects.

Also on Tuesday, the Commonwealth of Puerto Rico is scheduled to price $350 million in series 2009B public improvement refunding bonds, said a sales calendar.

The bonds will be sold on a negotiated basis with Morgan Stanley & Co. Inc. and J.P. Morgan Securities Inc. as the lead managers.

Proceeds will be used to refund the interest, but not principal, on existing debt.

Columbus to price G.O.s

The City of Columbus, Ohio, is set to sell $279.01 million in various purpose G.O. bonds, said a preliminary official statement. The sale is scheduled for Thursday, according to a sales calendar.

The sale includes $56.485 million in series 2009A unlimited tax bonds, $9.6 million in series 2009B unlimited tax bonds, $183.96 million in series 2009C Build America Bonds, $12.635 million in series 2009D Build America Bonds and $16.33 million in series 2009E economic recovery bonds.

The bonds (Aaa/AAA/) will be sold on a negotiated basis with Stifel, Nicolaus & Co. Inc. and JPMorgan as the senior managers.

The 2009A bonds are due 2010 to 2015, and the 2009B bonds are due 2010 to 2019. The 2009C bonds are due 2013 to 2021 with term bonds due 2025 and 2029. The 2009D bonds are due 2013 to 2017 with a term bond due 2030. The 2009E bonds are due 2030.

Proceeds will be used to fund capital projects from the Department of Health and the Department of Public Safety, as well as parks and recreation, transportation, refuse collection, electricity and other projects.

Connecticut deal ahead

Moving to New England, the State of Connecticut is expected to sell $600 million in series 2009A G.O. economic recovery notes, said a preliminary official statement.

The notes will be sold through senior manager Citigroup Global Markets Inc.

The bonds are due 2012 to 2016.

Proceeds will be used to fund the state's deficit for the fiscal year ended June 30.

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