Munis cheapen as secondary remains very light; Ohio Turnpike announces $1.45 billion offering

By Sheri Kasprzak

New York, Jan. 4 - Municipals were cheaper again on Friday as the new-issue calendar continued to offer up little for investors and secondary action remained light, traders reported.

"We're off, but it's not by much, maybe a basis point or two in spots," said a trader reached in the early afternoon.

"We continue to outperform Treasuries. There's just a lot going on right now that is putting pressure on yields. Treasuries are getting hit; trading is extremely light; there's nothing pricing. It's taking a toll on munis."

In fact, the new issue supply, which barely totaled $2 billion for the past week, will remain very light in the coming weeks. The 30-day visible supply was reportedly at just about $4 billion.

Ohio plans $1.45 billion deal

Although the upcoming supply is light, it includes some larger deals. The State of Ohio plans to conduct a massive $1.45 billion offering on behalf of the Ohio Turnpike Commission.

The offering comes after a 10-month study from Gov. John Kasich's office evaluating different options, including privatization. The state decided against leasing its turnpike, as Indiana did in 2006, in a move that demonstrates that privatization concerns continue to influence policymakers, said a statement from Fitch Ratings.

Although the 50-year lease of the turnpike could generate $3.3 billion to $4 billion, the state chose not to go with privatization as the analysis included toll increases above the rate of inflation for EZ pass users, said the Fitch statement.

"While the proposed bonds' credit quality will likely differ from the AA rating on the outstanding debt, Fitch views the plan as conservative, providing the turnpike with a fair amount of flexibility in the future," said Reed Singer, director of Fitch's global infrastructure group.

Proceeds from the deal will be used to finance transportation projects in northern Ohio. The offering, according to Fitch, is not expected to negatively impact the quality of existing turnpike commission debt.

Hillsborough deal postponed

Meanwhile, the Hillsborough Industrial Development Authority's $162.03 million bond offering for Tampa General Hospital, Fla., was put off yet again due to lackluster market conditions, said a sellside source close to the deal.

The offering had been set to price before the end of 2012 but was rescheduled for the first week of January. Pricing conditions have not been ideal, said the sellsider, so the deal is being pushed back.

The bonds (A3) will be sold through J.P. Morgan Securities LLC, and proceeds from the deal will be used to refund the authority's series 2003A revenue bonds.

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