Municipal yields end flat to slightly firmer; DART brings $825.09 million in revenue bonds

By Sheri Kasprzak

New York, Sept. 28 - Municipal yields were unchanged to firmer Tuesday as a flood of new deals hit the primary market, said traders reached during the afternoon.

"If it's better at all, long bonds are seeing the most improvement," said one trader.

"Short bonds are flat, but if you go out 40 years, you'll probably see yields down by 1 or 2 basis points. It's been quiet on the secondary side."

Another trader said many investors are focused on the primary side of the market.

"There's a lot going on in primary," he said.

"We're not seeing a lot of trades today. It's looking mostly unchanged."

Heading up the large influx of new issues Tuesday was the Dallas Area Rapid Transit's $825.09 million sale of series 2010B senior-lien sales tax revenue bonds (Aa2/AA+/).

David Leininger, DART's chief financial officer, said Tuesday afternoon that the institutional response to the Build America Bonds was so strong, the sale was cut short.

"The original pricing sequence was to have retail yesterday [Monday] and institutional today [Tuesday]," he noted.

"Institutional did so well for the preorder, we decided to go ahead and take advantage of where Treasuries were."

DART sold $729.39 million in Build America Bonds, which are due 2041 and 2048 and have 4.922% and 5.022% coupons, respectively, both priced at par. The spreads came in at 120 bps and 130 bps, respectively, over comparable Treasuries, Leininger reported.

"We were pretty aggressive, so we were adequately oversubscribed," Leininger noted.

"If it's three or four times oversubscribed, then your pricing is wrong."

DART also sold $95.7 million in series 2010A refunding bonds, which are due 2013 to 2023 with 2% to 5% coupons. The refunding provided a 7.5% net present value savings for DART, Leininger reported.

Bank of America Merrill Lynch led the pricing syndicate.

Following Tuesday's pricing, DART adopted its annual budget Tuesday night.

Proceeds will be used to finance the completion of DART's light rail project as well as improvements to other ongoing projects.

N.Y. Urban Development prices

Elsewhere, the New York State Urban Development Corp. priced $469.435 million in series 2010B service contract revenue refunding bonds, said a pricing sheet.

The bonds priced competitively with Citigroup Global Markets Inc. winning the bid with a 1.424% true interest cost, said Warner Johnston, spokesman for the corporation.

"Given the size of the transaction, we were pleased with the reception and the final pricing of the transaction," said Johnston.

The bonds are due 2012 to 2017 with coupons from 4% to 5%. The 2012 bonds were not reoffered.

Proceeds will be used to refund existing debt.

North Carolina G.O. bonds price

Down South, the State of North Carolina came to market Tuesday with $302.585 million in series 2010C general obligation refunding bonds, said a pricing sheet.

The bonds (Aaa/AAA/AAA) were priced competitively with Citigroup winning the bid with a 2.376% TIC. There were eight bidders for the bonds.

The bonds are due 2018 to 2022 and have 5% coupons across the board. The bonds were not reoffered.

According to state treasurer Janet Cowell's office, the refunding will save the state $21 million in debt service costs.

"We were able to take advantage of low financing costs in the current market," Cowell said in a statement released to Prospect News.

"One of our responsibilities in the state treasurer's office is to monitor these types of opportunities for refinancing to ensure the lowest possible cost to taxpayers."

Proceeds will be used to refund all or a portion of the state's series 2003 G.O. highway bonds, series 2004 G.O. highway bonds and series 2005A public improvement bonds.

Septa prices refunding bonds

In other news, the Southeastern Pennsylvania Transportation Authority sold $220.74 million in series 2010 revenue refunding bonds, said a term sheet.

The bonds (A1/AA-/AA) were sold through Citigroup.

The bonds are due 2011 to 2028 with 2% to 5% coupons. The full pricing details were not available Tuesday afternoon, but a sellsider familiar with the offering said the yields ranged from 0.8% to 3.77%.

Proceeds will be used to refund the authority's series 1999 bonds and fund the termination of a swap agreement associated with the 1999 bonds.

Based in Philadelphia, the authority provides public transit for Philadelphia, Delaware County, Bucks County, Montgomery County and Chester County in Pennsylvania, as well as New Castle County in Delaware and Mercer County in New Jersey.

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