Maryland prices $235 million, more to follow; Washington Metro expected; secondary action light

By Aaron Hochman-Zimmerman

New York, Aug. 3 - Municipal bonds traded well but lightly on Monday as the desks kept their focus on the new issues.

Maryland brought $235 million of its series 2009 bonds with yields from 0.94% to 3.56%, but series 2009B-C are still expected on Wednesday.

In California, the largest state employee's union, the Service Employees International Union Local 1000, is considering a strike over the state's decision to lock out the employees for three days per month, the Sacramento Bee reported.

Members voted by a 74% majority for the right to strike, although no walk-out is immediately scheduled.

The state asked the workers to remain on the job during the economic turmoil despite the cut in hours.

California's various purpose 5.25% bonds due 2038 were seen trading at 5.449% late in the session.

For most of the day, trading was light because "it's a big vacation time," a market source said, "so it's a little slower in the secondary."

Furthermore, the investors must "pay attention to the new issues," the source said.

Many had their eyes toward the nearly $1.2 billion expected from Metropolitan Washington Airports Authority on Tuesday and Wednesday.

Proceeds will be used to make improvements to the Dulles Toll Road.

Maryland retails $235 million

Elsewhere in the capital region, Maryland priced its $235 million series 2009A state and local facilities loan of 2009 general obligation bonds (Aaa/AAA/AAA) at yields from 0.94% to 3.56%, according to Patti Konrad, state director of debt management.

The serial bonds carry serial maturities from 2012 to 2023.

"We were pleased with the yields," Konrad said.

"It's a great opportunity for the state," a syndicate desk official said.

Under the current rate environment, they were smart to "lock it in now," the official said.

The bonds came at an opportune time in the market, but the timing was coincidental, Konrad said.

"For a number of years," the state has regularly issued in the "late winter" - February or March - and then again in July or early August, she said.

The bonds were sold to retail investors beginning on Friday and ending on Monday.

On Wednesday, the state will sell $200 million of series 2009B negotiated tax-exempt bonds due 2012 to 2023. The state will also accept two bids for a $50 million competitive bond due 2024.

One bid will treat the bond as a Build America Bond; the other bid will treat it as a standard tax-exempt bond. The state will then choose between the two formats.

Citigroup Global Markets Inc. acted as lead underwriter for the negotiated deal. M&T Securities Inc., Bank of America Merrill Lynch, RBC Capital Markets Corp., Siebert, Brandford & Shank & Co. LLC, Barclays Capital Inc., Goldman, Sachs & Co., J.P. Morgan Securities Inc., Loop Capital Markets LLC and Morgan Keegan & Co. Inc. were co-managers.

Proceeds will be used to fund the acquisition and construction of state facilities and for grants.

The bonds were a hit, a syndicate official said.

"Everybody and their brother was involved in this deal," the official said about the participation in Maryland's series 2009A bonds.

However, the competitive offers may not reap the full benefits.

The competitive issue of $50 million will probably not convert the momentum into very "friendly couponing," the official said, although if you were Maryland, "you would hope so."

Generally, "the yields will be comparable," the syndicate official said, but "it depends on MMD."

Houston one step closer

The week's heavy-for-August schedule may not include Houston's $490.81 million series 2009 public improvement refunding bonds (Aa3/AA/), a market source said.

The city is currently deciding when they will price, he said, but it will not likely be during the week of Aug. 3.

The source did not believe the city would consider pulling the issue.

Loop Capital Markets is slated to act as lead underwriter for the deal. Morgan Stanley & Co. Inc., RBC Capital Markets, Southwest Securities Inc., Barclays Capital, Fidelity Capital Markets, Jefferies & Co., Samuel A. Ramirez & Co., Siebert Brandford Shank and Goldman Sachs are co-managers.

The city plans to use the proceeds to refund commercial paper notes and existing public improvement bonds.

Meanwhile, some had expected a $225 million issue of series 2009 sales tax revenue bonds (Aa3/AAA/) from the Metropolitan Atlanta Rapid Transit Authority, said treasurer Richard March.

The issue may price in approximately 30 days, he said. "We're still examining the structure we want to go with," he said.

Merrill Lynch & Co. Inc. was expected to act as lead underwriter for the deal. Proceeds are to be used for improvements to the transit system.

Great Lakes add to calendar

The State Building Authority of Michigan plans to price $221.3 million of series 2009-I revenue refunding bonds, according to a preliminary offering statement.

The bonds (A1/A+/A) will be sold via a syndicate of underwriters led by JPMorgan and including Cabrera Capital Markets, LLC, Citigroup Global Markets Inc., Goldman Sachs, Loop Capital Markets, Mesirow Financial, Inc., Morgan Stanley and Siebert Brandford Shank.

The deal will be structured with serial bonds maturing from October 2009 to October 2025.

Proceeds will be used to refund outstanding debt.

Heading south, the Ohio Higher Educational Facility Commission plans to issue $805 million of bonds (Aa2/AA-) for the Cleveland Clinic, according to a preliminary offering statement.

The offering will include $305 million of series 2009A hospital revenue refunding bonds and $500 million of series 2009B hospital revenue bonds.

The 2009A bonds will mature Jan. 1, 2039. The 2009B bonds will include serial maturities from Jan. 1, 2011 through Jan. 1, 2029 and term bonds maturing Jan. 1, 2034 and Jan. 1, 2039.

JPMorgan will be the lead manager, with Merrill Lynch, Morgan Stanley, PNC Capital Markets LLC and Wells Fargo Securities LLC as co-managers.

The proceeds will be used to refund $300 million of Cleveland Clinic's $670 million series 2008B hospital revenue bonds and to acquire, construct and renovate hospital facilities.

The deal is expected to settle sometime in August.

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