California's $4 billion G.O. bond sale thaws state's financing freeze; Oregon lottery sale ahead

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, March 20 - The week in municipals ended the day firmer, but virtually unmoved, said a trader reached Friday morning. This follows a major rally for municipals spurred by improvements in the Treasuries market.

"We're feeling pretty firm today," said the trader, "definitely better than earlier in the week. I suspect we'll probably stay right around where we're at for the day."

The upcoming week's action will be led by a $4 billion sale of general obligation bonds from the state of California. The sale will mark the end of a financing freeze that held up thousands of state infrastructure projects, said state Treasurer Bill Lockyer.

The state has been locked out of financing infrastructure projects since June 2008 when it price $1.5 billion in G.O. bonds.

"California will be back in the bond market after a nine-month absence, and we're confident investors will greet us warmly," Lockyer said in a statement released earlier in the week.

"I believe a successful $4 billion deal should allow us to start providing relief from the freeze that has harmed our workers, businesses, communities and economy. But it will take time to return our infrastructure financing system to full health."

Lockyer said he will recommend the Pooled Money Investment Board conditionally approve up to $500 million in financing from the State Pooled Money Investment Account. The move would be contingent upon completion of the G.O. bond sale, which is set for Wednesday. A retail order period will be conducted Monday and Tuesday.

Merrill Lynch & Co. Inc. and Citigroup Global Markets Inc. will bring the bonds to market.

Other issuers eye California deal

Wednesday's California bond sale may impact more than just that state. At least one issuer said Friday that its offering will depend largely upon the $4 billion deal.

Mary-Margaret Collier of the Tennessee State School Bond Authority said Friday that its $133.02 million sale of higher educational facilities second program bonds (Aa2/AA/AA) will price based upon the results of the California sale, with a tentative retail order period set for Wednesday and an institutional period set for Thursday.

"The market has changed so much this week," she said.

The bonds will be split into a $113.56 million 2009 series A tranche and a $19.46 million 2009 refunding series B offering.

The series A bonds will carry serial maturities from 2010 to 2039, while the series B bonds will carry maturities from 2010 to 2021.

J.P. Morgan Securities Inc. will act as underwriter for the negotiated deal.

Proceeds will be used to retire outstanding debt and to construct new university facilities within the state.

The authority is located in Nashville.

Oregon lottery deal

In other upcoming sales, the Oregon Department of Administrative Services will bring $466.965 million in series 2009 lottery revenue bonds on Tuesday, according to a preliminary official statement.

The bonds (Aa3/AAA/) will be sold on a negotiated basis with Citigroup as the senior manager.

The sale includes $444.08 million in series 2009A tax-exempt bonds and $22.885 million in series 2009B taxable bonds.

The 2009A bonds are due 2010 to 2029, and the 2009B bonds are due 2010 to 2013.

Proceeds will be used for a light rail projects, transportation infrastructure costs and the purchase of transportation equipment.

Also coming up on Tuesday, the city of Houston plans price $481.13 million in series 2009A first-lien combined utility system revenue and refunding bonds on Tuesday, according to a calendar of sales.

The bonds will be sold through lead manager Piper Jaffray & Co.

The bonds are due Nov. 15, 2009 though Nov. 15, 2029 with term bonds due 2033 and 2038.

Proceeds will be used to refund and defease $300 million in series A commercial paper notes and series 2008D2 first-lien revenue refunding bonds. The rest will be used to reimburse the system for project costs.

Northwestern Hospital bonds ahead

Wednesday brings an offering from the Illinois Finance Authority, which plans to price its previously announced $455.975 million series 2009 revenue bonds (Aa2/AA+/) for Northwestern Memorial Hospital, according to a calendar of upcoming deals.

The bonds will be sold on a negotiated basis with JPMorgan.

The sale includes $352.525 million in series 2009A bonds and $103.45 million in series 2009B bonds.

Proceeds will be used to reimburse the hospital for costs related to constructing and renovating health care facilities, as well as refund the hospital's series 1995, 2004B, 2007B and 2008B bonds.

The New York State Environmental Facilities Corp. also has a sale planned for Wednesday. The corporation is expected to price $361.55 million in series 2009A state clean water and drinking water revolving funds revenue bonds, according to a preliminary official statement.

The bonds will be sold through senior managers Goldman, Sachs & Co. and M.R. Beal & Co.

The bonds are due 2010 to 2038. The offering also includes term bonds, but the maturities have not been set.

Proceeds will be used to provide financial assistance to the New York City Municipal Water Finance Authority to fund water pollution control and drinking water projects.

Ohio Water sale planned

In other news, the Ohio Water Development Authority plans to sell $119.495 million in series 2009A fresh water revenue bonds (Aaa/AAA/) Tuesday, according to an offering calendar.

The bonds will be sold through senior manager Morgan Stanley & Co.

The bonds are due 2009 to 2016.

Proceeds will be used to refund the authority's series 1998 fresh water bonds.

On Thursday, the Hospital Authority of Richmond in Indiana plans to sell its previously announced $90.515 million in series 2009A revenue bonds, according to a calendar of upcoming sales.

The bonds will be sold on a negotiated basis with Citigroup as the senior manager.

The proceeds will be used to refund the authority's series 2005B and 2005C bonds issued for Reid Hospital.

Energy Northwest sale ahead

Moving to upcoming sales for April, Energy Northwest in Washington State plans to sell $376.1 million in series 2009 revenue refunding bonds, according to a preliminary official statement.

The sale includes $47.985 million in series 2009A project 1 electric revenue refunding bonds, $116.685 million in series 2009A Columbia Generating Station electric revenue refunding bonds and $119.48 million in series 2009A project 3 electric revenue refunding bonds.

The deal also includes $1.45 million in series 2009B taxable project 1 electric revenue refunding bonds, $20.515 million in series 2009B Columbia Generating Station electric revenue refunding bonds and $1.305 million in series 2009B project 3 electric revenue refunding bonds. The sale also includes $68.68 million in series 2009C Columbia Generating Station electric revenue refunding bonds.

The 2009A project 1 bonds are due 2014 to 2015, the 2009A Columbia bonds are due 2014 to 2018 and the 2009A project 3 bonds are due 2014 to 2018. The 2009B project 1 bonds are due 2014, the 2009B Columbia bonds are due 2014, 2023 and 2024, and the 2009B project 3 bonds are due 2014. The 2009C bonds are due 2020 to 2024.

The bonds (Aaa/AA/AA) will be sold on a negotiated basis with Citigroup and Goldman Sachs as the senior managers.

Proceeds will be used to refund electric revenue bonds issued for the Columbia Generating Station, project 1 and project 3 operating costs.

Virginia colleges to price $392.02 million

Also on the horizon, the Virginia College Building Authority plans to issue $392.02 million in educational facilities revenue bonds in three tranches, according to Evelyn Whitley, director of debt management.

The authority plans a $287.965 million series 2009A bond with serial maturities from 2016 to 2029.

The authority will also sell an $84.385 million series 2009B term bond and $19.670 million series 2009C bonds with serial maturities from 2010 to 2015.

The deal will open up to retail accounts on March 30. The bonds will be open to institutional investors and will price on March 31.

Barclays Capital Inc. and Citigroup will act as underwriters for the negotiated deal.

Proceeds will be used to refund existing debt.

The Virginia College Building Authority is located in Richmond.

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