N.J. Turnpike plans $1.75 billion Build America Bonds; California to sell $3 billion-$4 billion

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, April 20 - The municipals market firmed on Monday ahead of a week filled with Build America Bonds. Billions in sales are expected in the coming week, including billion-dollar deals from New Jersey and California.

"There's a lot of hype behind the BABs [Build America Bonds]," one sellside source said Monday.

"Obviously, there's some uncertainty behind anything that's new to the market, but it's amazing that investors seem to be so eager for these already."

Wall Street activity seemed to dominate the market on what was otherwise a lazy Monday.

Still, where work was being done, there was "a lot of follow through" after a wash of supply that flowed into the market during the previous six weeks of rally, a trader said.

The rally began to ease, which may give way to "a pullback a little with retail," the trader said.

"People will have to learn to deal with 4.5% again after fives last week," the trader said.

In the capital region, the general obligation bonds from Richmond, Va., priced at a 4.775% true interest cost but were quickly tucked away and traded likely.

Also, there was some conjecture that a scale was seen for Thursday's Virginia Public School Authority $217.575 million series 2009B school financing bonds (Aa1/AA+/AA+).

There is likely more issuance to follow in the coming weeks, the trader said.

Even as some of the bears felt vindicated by Monday's market drop, "there's a lot of stuff pending," some on 24-hour notice, the trader said.

Maryland's City of Baltimore has been shelved for some time, the trader said.

Additionally, the University of Virginia may be in discussion to formulate a Build America Bond offering, the trader added.

N.J. Turnpike sale

One of the major Build America Bond sales this week comes Tuesday from the New Jersey Turnpike Authority. The authority plans to bring $1.75 billion in series 2009 revenue bonds (//A) through lead manager Morgan Stanley & Co. Inc.

The proceeds from the deal will be used to make capital improvements, including widening of the New Jersey Turnpike and the Garden State Parkway.

Another major deal comes from the State of California, which will sell between $3 billion and $4 billion in series 2009 taxable G.O. bonds, a portion of which will be Build America Bonds.

Tom Dresslar, spokesman for the state treasurer's office, said there would be no retail order period for the offering on Monday.

Goldman, Sachs & Co. is the senior manager for the sale, the proceeds of which will be used to pay down outstanding AB 55 loan expenditures and pay for projects eligible for tax-exempt financing.

MEAG powers up

The Municipal Energy Authority of Georgia increased the size of its previously announced $156.04 million series 2009A bond anticipation notes to $200 million Monday, according to a preliminary offering statement.

Goldman Sachs will act as underwriter for the negotiated bonds due May 25, 2010.

Proceeds will be used to construct the authority's non-power purchase agreement projects.

Northern California Transmission

Looking ahead, the Transmission Agency of Northern California plans to price $131.83 million in series 2009 California-Oregon Transmission Project revenue refunding bonds, said a preliminary official statement.

According to a sellside source, the bonds are expected to price April 29.

The deal includes $69.73 million in series 2009A bonds and $62.10 million in series 2009B taxable bonds.

The bonds (Aa3/A+/A+) will be sold on a negotiated basis with J.P. Morgan Securities Inc. and Citigroup Global Markets Inc. as the lead managers.

The series A bonds are due 2017 to 2024, and the series B bonds are due 2011 to 2016.

Proceeds will be used to refund the agency's series 2003 bonds.

Secondary firms

Moving to the secondary market, one trader reached late in the day said the secondary market firmed as municipals prepare for the launch of some major Build America Bonds.

"Certainly, we're seeing some movement ahead of the Build America Bonds," the trader said.

"Strangely enough, though, it's pretty quiet out there today. There's not a lot trading."

In particular trades, the State of New Jersey's series 2009A lease purchase certificates of participation were seen moving Monday. The 4.375% 2019s were seen at 4.374%.

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