California upsizes G.O.s to $6.54 billion amid brisk demand; Emory University brings $250 million

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, March 25 - After selling more than $4 billion in general obligation bonds earlier in the week, the State of California upsized the sale to $6.543 billion. The bonds were purchased largely by retail investors and may have had that appeal due to their cheapness, one market source indicated.

"There's no doubt these bonds were going cheap," said one trader reached Wednesday afternoon.

"Retail is clearly going for these because they're cheap for California."

Demand for the offering was so great, the state opened the deal to institutional investors a day early - and had upsized the bonds by late Tuesday.

The successful offering will jumpstart the state's stalled infrastructure financing program. A freeze on the program put the brakes on thousands of infrastructure projects throughout the Golden State.

"This is a great result for California's workers, businesses and economy," state treasurer Bill Lockyer said in a statement released late Tuesday.

"Investors stepped up and showed their confidence in California, and now we're $2.6 billion closer to getting our economically vital infrastructure program back up to full speed."

The $2.6 billion is in addition to the $500 million the state freed up last week by the Pooled Monday Investment Account. The $2.6 billion will go directly to projects, as opposed to being loaned to projects through the PMIA, noted Tom Dresslar, spokesman for the treasurer's office.

The bonds (A2/A/A) are due 2013 to 2029 with term bonds due 2031, 2035 and 2038. The serials have coupons from 3.2% to 5.75% with yields from 3.2% to 5.85%. The 2031 bonds have a 5.75% coupon to yield 5.95%, and the 2033 bonds have a 6.5% coupon to yield 5.9%. The 2035 bonds have a 6% coupon, priced at par, and the 2038 bonds have a 6% coupon to yield 6.1%.

Merrill Lynch & Co. Inc. and Citigroup Global Markets Inc. were the senior managers.

Emory sells $250 million

Elsewhere in Wednesday's pricing action, Emory University in Atlanta priced $250 million in series 2009A taxable bonds, said a trader.

The bonds (Aa2/AA/), which are due Sept. 1, 2019, priced at 5.625% with a spread of Treasuries plus 280 basis points.

J.P. Morgan Securities Inc. was the senior manager.

Proceeds will be used to pay for capital expenses and reimburse the university for construction-related costs.

Metro Washington Airport's bonds

In other pricing news, the Metropolitan Washington Airport Authority of the District of Columbia priced $236.825 million in series 2009B airport system revenue bonds, said a sellside source connected to the sale.

The offering closed a day early, the sellsider said, because the deal received solid demand during the two-day retail order period Monday and Tuesday. The final pricing terms were set Tuesday.

The bonds (Aa3/AA-/AA) were sold through senior manager Siebert Brandford Shank & Co. LLC.

The bonds are due 2010 to 2029 with coupons from 3% to 5.25%.

Proceeds will be used to fund capital airport projects, refinance a portion of the authority's outstanding series one revenue commercial paper notes and terminate interest rate swap agreements with Wachovia Bank and Bank of Montreal.

JEA prices series C only

The Jacksonville Electric Authority in Florida priced $65.5 million series 2009C subordinated electric system revenue bonds at a 4.59% true interest cost, according to Helen Kehrt, director of treasury services.

The authority was also scheduled to price nearly $80 million in series 2009D bonds via JPMorgan. However, "we didn't hit our target levels," Kehrt said.

The authority was approximately 3 bps short, Kehrt said, so the $80 million will have to come sometime in the future.

Still, the sale of the series C bonds was "a good deal," Kehrt said.

The authority had expected a TIC close to 4.4%, compared with the 4.59% it achieved.

Citigroup acted as lead underwriter for the negotiated offer of the series 2009C bonds.

The bonds carry maturities from 2014 to 2020.

Proceeds will be used for improvements to the authority's electric system.

The authority is located in Jacksonville, Fla.

Michigan plans $468.14 million

Moving to upcoming sales, the State of Michigan plans to place $468.139 million in G.O. bonds over four tranches, according to public information officer Terry Stanton.

The bonds are expected to price early in the week of March 30.

A taxable $182.565 million tranche of series 2009A G.O. school loan and refunding current interest bonds will be offered with maturities from 2015 to 2020.

A taxable $186.979 million tranche of series 2009B G.O. school loan and refunding capital appreciation bonds will be offered with maturities from 2010 to 2030.

A tax-exempt $65.02 million tranche of series 2009A G.O. current interest bonds will be offered with maturities from 2021 to 2025.

Finally, a federally taxable $33.575 million tranche of series 2009B G.O. current interest bonds will be offered with one serial maturity in 2011.

Merrill Lynch and Goldman, Sachs & Co. will act as underwriters for the negotiated deal.

Proceeds will be used to make loans to school districts and to refund existing debt.

Secondary weakens slightly

Moving to the secondary market, a trader said the tone turned a bit weaker as the market recovers from a large number of primary market issues.

"We were kind of deluged there over the past week or so with new sales," the trader said.

"We're off just a touch today, but volume looks OK."

Among the bonds traded Wednesday was the recently priced clean water and drinking water revolving funds revenue bonds from the New York State Environmental Facilities Corp. The 5% 2016s were in particularly high demand, a trader noted, with the bonds trading around 3.09%.

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