New York City sells $683 million to retail investors; California will bring $3 billion in G.O.s

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, April 6 - The tone of the municipals market eased a bit ahead of a week filled with new supply, market insiders told Prospect News.

In general, the market has been able to hang on to its strong sentiment, said one dealer reached Monday afternoon.

"Muni bonds are so cheap and there's a lot of resilience," he said, particularly on the retail side.

"People will buy what's cheap," he said, and likely more so in the coming weeks.

Traditionally the municipals market slows down into Tax Day, April 15, he said, but "after April 15 people will be buying more bonds."

Among the big offerings of the week is an upsized sale of general obligation bonds from the City of New York.

The city wrapped up the two-day retail order period on its series 2009I G.O. bonds, said Raymond Orlando, spokesman for the city's Office of Budget Management. An institutional sale period will be held Tuesday.

G.O.s, remarketing bonds sold

The city sold $683 million in G.O.s (Aa3/AA/AA), including a $50 million remarketing of series 2005C-3 bonds, to retail investors. The city had originally planned to sell $433 million

The city issued $600 million in series 2009I-1 bonds and $33 million in series 2009I-2 bonds.

The 2009I-1 bonds are due 2011 to 2027 with term bonds due 2031 and 2035. The 2009I-1 bonds have coupons from 2.25% to 5.3% with yields from 1.9% to 5.36%. The 2031 bonds have a 5.5% coupon, priced at par, and the 2035 bonds have a 5.6% coupon, also priced at par.

The 2009I-2 bonds are due 2016 and 2017. Both are 2.75% bonds. The 2016 bonds are priced at 310 basis points over Treasuries, and the 2017 bonds are priced at 320 bps over Treasuries.

The 2005C-3 bonds are due 2028 and 2029. The 2028 bonds have a 5.125% coupon, priced at par, and the 2029 bonds have a 5.125% coupon, priced at 99.058 to yield 5.2%.

Morgan Stanley & Co. is the lead manager.

Proceeds will be used for capital expenditures.

California to bring $3 billion

Looking to upcoming sales, the State of California announced Monday that it plans to sell $3 billion in series 2009 taxable G.O. bonds during either the week of April 13 or the week of April 20.

Of the proceeds, $1 billion will be used to pay down the state's outstanding AB 55 loan expenditures. The remainder will be used for projects eligible for tax-exempt financing.

The full details of the sale were not immediately available Monday.

The state recently sold more than $6.5 billion in an upsized G.O. offering that effectively lifted the state's infrastructure financing freeze.

Anne Arundel deal grabs interest

As for deals coming this week, a regional dealer noted that the $144.6 million series 2009 G.O. bonds from Anne Arundel County in Maryland will attract a great deal of local attention on the primary side.

"There will be a lot of demand for it," the dealer said.

"There's a scarcity of G.O. paper in Maryland," he said, adding that he predicts that when the deal comes, "it'll be around MMD."

The county plans to sell its G.O.s competitively on Wednesday with Public Resources Advisory Group as its financial adviser.

The sale includes $115.4 million in series 2009 general improvement bonds, which are due 2010 to 2029, and $29.2 million in series 2009 water and sewer bonds, which are due 2010 to 2039.

Proceeds will be used to improve county facilities, including water and sewer systems.

The county seat is Annapolis.

Large slate ahead

Even though the primary market is gearing up for a week filled with new issues, investors are eager to buy, traders said.

"We're still cheap," said one trader reached during Monday afternoon.

"I think there will be really good demand for everything that's coming out."

Among those big offerings is a $550 million in series 2009 health-care revenue bonds from the Industrial Development Authority of Fairfax County in Virginia. The bonds will be sold for Inova Health System Wednesday, said a calendar of upcoming sales.

The deal includes $360 million in series 2009A serial bonds and $190 million in series 2009B term bonds.

Citigroup Global Markets Inc. is the lead manager.

Proceeds will be loaned to Inova Health System, which is based in Falls Church, Va.

Another big offering comes from the Nassau County Interim Finance Authority in New York. The authority will bring $308 million in sales tax secured bonds (Aa2/AAA/AA+) Wednesday, said a sales calendar.

The bonds will be sold through senior manager Goldman, Sachs & Co.

Proceeds will be used for capital expenditures.

The authority is based in Mineola, N.Y.

Elsewhere, the Long Beach Unified School District of California is expected to price $260 million in G.O.s Tuesday, according to a calendar of upcoming deals.

The bonds (Aa3/AA-/AA-) will be sold on a negotiated basis with Piper Jaffray & Co. as the senior manager.

The bonds are due 2010 to 2029.

Proceeds will be used to repair existing facilities and construct new classrooms.

North Carolina deal

Moving to deals out on the horizon, the State of North Carolina plans to issue $400 million in series 2009A capital improvement limited G.O. bonds on April 16, according to a preliminary notice of sale.

Bank of America will act as lead underwriter for the negotiated deal.

The bonds will carry serial maturities from 2010 to 2029.

Proceeds from the sale will be used for hospital facility construction and maintenance.

Oregon DAS bonds trade

Moving to the secondary market, where traders said the tone remained fairly flat, the Oregon Department of Administrative Services' recently priced series 2009A state lottery revenue bonds were seen moving, a trader said.

The 5% 2029s were seen at 4.855%. The bonds were priced March 25 to yield 5.125%.

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