Colorado sells $255 million in TRANs; California IOUs provide investment opportunity

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, July 16 - Another active day for municipals saw the market a touch weaker, according to a market source reached in the afternoon.

"We're probably up [yields] about 1 or 2 basis points," said the trader.

"Things have tapered off. I haven't seen a lot going on this afternoon. We had a little more interest this morning, but it's gotten quiet."

Meanwhile, the Golden State is looking like a lucrative investment for some enterprising people. California's IOUs, which are now being rejected by some major banks, have found a market.

One intrepid investor even posted an ad on online classified web site Craigslist. The investor in question wants to purchase IOUs "near face value."

SecondMarket Inc. is also ready to start accepting the IOUs. The New York firm trades hard-to-sell financial instruments and is expected to start trading the registered warrants in the next few days.

"I suspect there's going to be a good market for these [warrants]," a sellside source said during the afternoon. "The holders [of the IOUs] are really trying to get something back. Even 80 cents on the dollar is going to be better than nothing."

Colorado comes again

Moving to the primary market Thursday, Colorado priced $255 million series 2009A education loan program tax and revenue anticipation notes (MIG 1/SP-1+/) at a 0.568% combined true interest cost, according to Charles Scheibe, chief financial officer.

Citigroup Global Markets Inc. purchased $80 million of the notes, while Merrill Lynch Banc of America Securities LLC purchased $175 million. Seven bidders competed in the auction.

RBC Capital Markets Corp. acted as financial adviser for the deal.

The notes are due Aug. 12, 2010.

Proceeds will be used for the cash flow needs of the state's school system until property taxes are collected in the spring.

The notes follow Tuesday's issue of $650 million in series 2009A general fund tax and revenue anticipation notes at a TIC of 0.445473%.

The state was hoping for a similar TIC, but it found insufficient interest at those levels, Scheibe said.

"[The TIC] was a little higher than we had hoped," he said.

Scheibe attributed some of the widening to the 13-month maturity of Thursday's bonds. The bonds priced Tuesday carry an 11-month maturity.

Cal Health bonds

The California Health Facilities Financing Authority priced a $150 million series 2009B revenue bond (Aa2/AA/AA) for Providence Health & Services at a TIC of 5.807505%, according to Joe DeAnda, a spokesman for the state treasurer.

The single term bond priced at 96.707 with a coupon of 5.5% to yield 5.73% and is due Oct. 1, 2039.

Merrill Lynch Banc of America Securities acted as lead underwriter for the negotiated deal.

Proceeds will be used to construct, acquire and equip health facilities for Providence Health in Mission Hills, Calif.

The California Health Facilities Financing Authority is located in Sacramento.

N.C. Turnpike drives bonds

Elsewhere, the North Carolina Turnpike Authority sold $270.083 million in series 2009 Triangle Expressway System senior-lien revenue bonds (Aa2/AAA/AA) Wednesday, said a sellside source connected to the deal.

The sale included $234.91 million in series 2009A state annual appropriation revenue bonds and $35.173 million in series 2009B state annual appropriation revenue Build America Bonds. The authority had intended to sell $312.5 million of the Build America Bonds and just $29.475 million of the tax-exempt bonds.

The 2009A bonds are due 2019 to 2026 with term bonds due 2029 and 2039. The serials have coupons from 4.5% to 5.75% and yields from 4.6% to 5.47%. The 2029 bonds have a 5.5% coupon to yield 5.52%, and the 2039 bonds have a 5.75% coupon to yield 5.8%.

The 2009B bonds are due 2030 to 2038 with coupons from 6.74% to 7.1%, all priced at par.

Merrill Lynch & Co. Inc. and Banc of America Securities LLC were the lead managers.

Proceeds will be used to fund engineering costs, develop rights-of-way and roadways in the Triangle Expressway System and pay for maintenance costs.

Sacramento Airport bonds fly

In other primary news Thursday, the Sacramento County Airport System in California priced $477.755 million in series 2009 airport system revenue bonds, but the full terms were not available by press time.

J.P. Morgan Securities Inc. sold the bonds.

The deal included $29.71 million in series 2009A airport system senior revenue bonds (A2/A+/); $174.305 million in series 2009B airport system senior revenue bonds (A2/A+/); $110.12 million in series 2009C airport system subordinate and passenger facility charge/grant revenue bonds (A3/A/); and $163.62 million in series 2009D airport system subordinate and passenger facility charge/grant revenue bonds (A3/A/).

Proceeds will fund airport improvements.

Secondary weakens

Looking to the secondary market, traders said Thursday that yields were up a touch as volume tapered off.

Among the light trading action were the State of Iowa's I-Jobs Program special obligation bonds, which priced this week. The 6.75% 2034 bonds were seen at 6.748%.

In other trades, the Pennsylvania Turnpike Authority bonds priced Wednesday were also moving. The 6.7% 2039 bonds were trading at 6.406%.

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