Municipals improve after successful sale of $3.5 billion Puerto Rico G.O.s; Ohio brings debt

By Sheri Kasprzak

New York, March 11 - Municipals ended the session better after Puerto Rico successfully completed and upsized a general obligation bond offering, market sources said. Improved Treasuries as investors move toward less-risky securities also helped municipals, traders reported.

Municipal yields were reportedly down by 1 basis point to 2 bps during the session as the market chattered about the Puerto Rico deal, which was upsized to $3.5 billion from $3 billion.

Debt due 2035

The Puerto Rico bonds are due July 1, 2035 and have an 8% coupon priced at 93.

The bonds (Ba2/BB/BB) were sold through Barclays, Morgan Stanley & Co. LLC and RBC Capital Markets LLC.

Proceeds will be used to repay certain Government Development Bank lines of credit, to repay bond anticipation notes issued by the Puerto Rico Sales Tax Financing Corp. and to refinance outstanding G.O. bonds.

The junk offering reportedly gained interest from beyond the muni arena with the high-yield sector taking an interest in the debt as well. The bonds were quoted in the afternoon at 95¼ to 95¾ after pricing at 93. Late in the day, the bonds were quoted up at 95¾ to 96.

Ohio prices debt

Also during the session, the State of Ohio hit the market with $300 million of series 2014A higher education G.O. bonds.

The bonds (Aa1/AA+/AA+) were sold competitively. Morgan Stanley won the bid at a 3.57% true interest cost, said Kurt Kauffman, the state's debt manager.

The bonds are due 2015 to 2034 with 3% to 5% coupons with 0.18% to 3.71% yields, according to a pricing sheet.

Proceeds will be used to finance capital improvements for state-supported and state-assisted higher education facilities.

The state last issued G.O. new money bonds in January for state infrastructure projects, said Kauffman in an interview. Citigroup Global Markets Inc. won that offering at a 3.76% TIC.

"The Ohio Public Facilities Commission tends to sell its standard G.O. new money bond issuances on a competitive basis," Kauffman pointed out.

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