Investors unimpressed by California budget; Georgia Tollway pulled wider; OhioHealth plans $165.8 million

By Cristal Cody and Aaron Hochman-Zimmerman

New York, Feb. 19 - Municipal bonds struggled through another slow and skittish day as equities bowed to new recent lows.

Investors were happy just to keep cash in their pockets and sit back to watch the events unfold.

Meanwhile, the California Legislature finally wrapped up five days of a nearly non-stop legislative session, and after many sacrifices were made, the $42 billion budget gap was patched, reports said.

Still, "I don't think that it makes it cheaper for Californian borrowers to borrow," Dave Olson, vice president of KNN Financial, said about the deal brokered in Sacramento.

"No," a trader said when asked if the deal will have any effect on the market, but "it's hard to know."

The direction of so many states and municipalities is still anyone's guess, he said, because "Obama has basically said he's going to come in and save the world."

"So it's hard to know what that does to the market in the long run," the trader said.

On Thursday, what was most clear was that "spreads have gotten wider in municipal credit," he said, "nothing has really held too much value."

The Georgia State Road and Tollway Authority, which priced its $600 million deal on Wednesday, was pulled wider during its first full session of trading on Thursday.

"The Georgia Tollway deal did get wider," he said, but "that just plays into what I said earlier."

Still, the markets that have been the hardest hit are the ones that had the most to lose in the economic downturn.

"The New York Citys and the Californias seem to be more economically sensitive," he said, but the problem is not contained.

"The curve in the whole municipal market as a whole has been flattening for the last week or two," he said.

Investors have been just as happy to watch and wait as they have been to muster their risk appetite.

"There has been more patient money out there," he said. "There's no rush."

Some have speculated that more Treasuries may be on the way as soon as next week, but the trader was doubtful as announcements are usually made farther in advance, he said.

Eventually the government will be obliged to put Treasuries back on the auction block to support the stimulus spending.

When Treasuries have been offered, "they are being absorbed," but not without mild difficulty, the trader indicated.

Investors have been "more and more patient," he said.

Two deals for Florida

Coming up, the School District of Palm Beach County in Florida plans to price $73 million in revenue anticipation notes through a competitive sale on Feb. 26.

The series 2009 notes mature on March 10, 2010.

Public Financial Management is the district's financial adviser for the sale.

The proceeds will be used to pay or reimburse capital funds of the district to design, construct, acquire and equip educational facilities.

The district is based in West Palm Beach.

Also on the horizon, the School Board of Orange County in Florida plans to price $185 million in certificates of participation.

The series 2009A COPs have serial maturities from 2016 through 2024 and terms due 2029 and 2034.

The notes are insured by Assured Guaranty Corp.

Citigroup Global Markets Inc. is the senior manager of the negotiated sale.

The proceeds will be used to finance the costs to construct, replace and renovate two high schools.

The district is based in Orlando.

Boulder Valley School and Broomfield to sell $176.8 million

Also ahead, the Boulder Valley School District No. RE-2 and the city and county of Broomfield in Colorado expect to price $176.8 million in general obligation bonds through a competitive sale on Tuesday.

The series 2009 bonds have serial maturities from 2010 through 2034.

Public Finance Associates LLC is the financial adviser.

OhioHealth to sell $165.8 million refunding revenue bonds

Two new announcements also came out of Ohio on Thursday.

Franklin County of Ohio intends to sell $165.8 million in refunding revenue bonds for OhioHealth Corp., which is based in Columbus.

The bonds (Aa2//AA) will price with a weekly interest rate.

The $82.9 million series 2009A bonds and $82.9 million series 2009B bonds will be sold through a negotiated sale managed by Citigroup Global Markets.

The proceeds will be used to redeem outstanding debt.

On Tuesday, the State of Ohio intends to price $60 million in Third Frontier Research and Development G.O. bonds, a source with the issuer told Prospect News.

The series 2009A bonds (Aa1/AA+/AA+) also will be sold through retail orders on Monday.

The bonds have serial maturities from 2010 through 2018.

PNC Capital Markets LLC is the senior manager of the negotiated sale.

The proceeds will be used to pay for authorized research and development projects.

Ohio created Third Frontier in 2003 to expand high-tech research capabilities and create high-paying jobs. The state plans to contribute $1.6 billion over 10 years, which includes $500 million through the sale of G.O. bonds.

The series 2009A bonds are the fourth installment and will bring the total sale to date to $180.7 million.

Oceanside prices $66.6 million

Oceanside Unified School District in California priced a $66.6 million two-tranche issue with a true interest cost of 5.560614% on Wednesday, according to a source familiar with the deal.

"I though that it went pretty well," the source said.

"The financing plan was designed to do a refunding issue," he said, in order "to make more of them current interest bonds."

"About half of the issue is current interest bonds. ... I'd consider that a success," the source said.

"There was very good buyer interest," he added.

The tranches were split into $50 million in new bonds and $16.6 million in refunding bonds.

The 2008 authorization new money bonds carry serial maturities from 2014 to 2031 and term bonds that mature in 2031, 2032 and 2033.

The 2009 G.O. refunding bonds carry serial maturities from 2015 to 2022 and will refund series A, B and C 2000 election bonds, which have $8.37 million, $17.75 million and $18.15 million outstanding.

The refunding bonds due 2019 and 2020 are callable at par.

Morgan Stanley and De La Rosa & Co. will act as underwriters for the negotiated issue. KNN Financial is financial adviser to the district, which is based in Oceanside, Calif.

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