Municipals close unmoved as volume tapers; Community Memorial Health leads week's new deals

By Sheri Kasprzak

New York, July 25 - Municipal yields were mostly unchanged on Monday as new issue volume dropped sharply, said market insiders.

One trader said it felt like a typical Monday as the market awaits a smaller supply of new deals.

"There's not as much coming up this week," he said.

"We're waiting for the new deals. It's been pretty quiet. Not a lot is trading. Could be a lot of things. It's summer season, and things get a little lethargic."

Meanwhile, Alan Schankel, managing director with Janney Montgomery Scott LLC, said on Monday that muni-to-Treasury ratios remain attractive following last week's massive $9 billion pace of new offerings.

The 10-year ratio is above 90% and the 30-year is at 102%, Schankel wrote in a report.

"This week's new issue volume will fall short of last week's $9 billion pace, but the $5 billion calendar will be enough for July to end up as the second-busiest month of the year, barely topping $31.5 billion [in] June," Schankel wrote.

California hospital deal

Although there are no exceptionally large offerings on tap for the week ahead, Schankel said the week's action will be led by a $345.9 million offering of series 2011 revenue bonds from the City of San Buenaventura, Calif., on behalf of the Community Memorial Health System.

The bonds (Ba2/BB/) will be sold through senior manager Bank of America Merrill Lynch.

The bonds are due 2016 to 2021 with term bonds due in 2026, 2031 and 2041.

Proceeds will be used to upgrade, expand and modernize Community Memorial Health facilities, including installing seismic safety measures.

Maine Health preps sale

Another hospital offering for the week ahead comes from the Maine Health and Higher Educational Facilities Authority, which plans to bring $290 million of series 2011 revenue bonds for the MaineGeneral Medical Center.

The bonds (Baa3//BBB-) will be sold through Bank of America Merrill Lynch and Raymond James & Associates Inc.

The proceeds will be used to construct and equip a 580,000 square-foot hospital in Augusta, Maine, and to consolidate the medical center's two inpatient facilities located in Augusta and Waterville.

"Last year's health care legislation injected uncertainty into the financial future of hospitals, particularly lower-rated systems, but the unresolved budget talks heightened uncertainty, with talk of reductions to entitlement programs, such as Medicare and Medicaid," Schankel wrote.

"There will be much focus on the reception these two large, lower-rated issues receive."

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