Investors drawn to munis by enticing yields; Massachusetts may proceed with $750 million sale Tuesday

By Cristal Cody and Sheri Kasprzak

New York, Oct. 6 - Even though tax-exempt bonds are gaining support from investors, fewer offerings were being announced this week - and even fewer issuers were willing to put out an exact pricing date.

A sellside source said Monday that investors are being drawn to municipals by yields of 5% or higher on high-investment-grade bonds maturing in as little as 12 years.

"The uncertainty in the marketplace has forced many issuers to postpone selling new issues, increasing the focus on the secondary market," the sellside source said.

Those big yields were seen last week, with Marquette University in Wisconsin pricing $50.56 million in adjustable demand revenue bonds with a 6% initial rate. Desert Sands Unified School District of California also came in with a high yield for its $54.505 million in certificates of participation. Those priced with yields up to 5.8%.

Meanwhile, some offerings that were postponed in recent weeks may be pricing this week.

The Commonwealth of Massachusetts had planned to price $750 million in general obligation revenue anticipation notes (MIG 1/SP-1+/F1+) last week, only to delay the sale due to rocky market conditions. The state now plans to price the competitive offering Tuesday.

The $375 million series 2008B notes mature April 30, 2009, and the $375 million series 2008C notes mature May 29, 2009.

Proceeds will be used to finance current operating expenses.

Florida University System revenue bonds

Coming up in new offerings, the Florida University System Board of Governors plans to price $96 million in improvement revenue bonds, according to a sale notice from the state.

The series 2008A bonds will be sold through a competitive sale.

Florida prices bonds through competitive sales with an 18-hour bidders' notice.

Colorado Springs sale ahead

Colorado Springs, Colo., is expected to price $61.2 million in series 2008B utilities system revenue refunding bonds, according to a preliminary official statement. Though the exact pricing date has yet to be determined, the sale is set to price this week.

The bonds (Aa2/AA/AA) will be sold on a negotiated basis with Citigroup Global Markets as the senior manager.

The bonds are due 2009 to 2028 with term bonds due 2029 and 2033.

Proceeds will be used to redeem and refund existing utility system revenue bonds.

New Orleans IDB bonds

Also ahead, the Industrial Development Board of the City of New Orleans expects to price $50 million in revenue bonds for the New Orleans Federal Alliance project later this month, a source said Monday.

The series 2008A bonds (A2/A/A) have serial maturities from 2009 through 2018 and terms due 2023 and 2028.

The bonds are expected to price a few days before the Oct. 30 delivery date, the source said.

Morgan Keegan & Co. is the senior manager of the negotiated sale.

Proceeds will be used to fund a portion of the costs of developing and constructing a mixed-use development project at the Naval Support Activity for federal and private-sector agencies that will include the Marine Force Reserve headquarters and the Marine Corps Reserve Mobilization Command facilities, which are currently based in Kansas City, Mo., transient lodging, a gymnasium and a child development center.

Proceeds also will be used for the removal and demolition or rehabilitation of existing facilities on the property and to pay operational expenses and the costs for developing and designing the project.

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