Muni yields struggle again as major deals price; New Jersey Transportation brings $1.3 billion

By Sheri Kasprzak

New York, Nov. 16 - Yields continued to struggle under the pressure of supply as more new offerings hit the already heavy primary market Wednesday, market insiders reported.

Twenty-year yields were seen up more than 17 bps and 30-year yields were up nearly 16 bps. Fifteen-year yields were seen up 6 bps.

"It was a huge day," said one trader when asked about the continued pressure from new offerings.

"There's still more coming [this week]."

Leading the extremely busy session was the New Jersey Transportation Trust Fund, which brought to market $1.3 billion of series 2011 transportation system bonds.

The bonds (A1/A+/A+) were sold through senior manager Morgan Stanley & Co. LLC.

The bonds are due 2013 to 2026 with term bonds due in 2031, 2036, 2037 and 2042, said a pricing sheet. The serial coupons range from 2.5% to 5.25%. The 2031 bonds have a 5.5% coupon, the 2036 bonds have a 5.25% coupon and the 2037 bonds have a 5% coupon. The 2042 bonds have a 5% coupon.

Proceeds will be used to fund transportation-related capital projects in the state.

Hawaii deal ahead

The second-largest sale of the week is coming to market on Thursday. The State of Hawaii is poised to price $1,264,210,000 of series 2011 general obligation bonds through Bank of America Merrill Lynch and Goldman, Sachs & Co.

The offering includes $800 million of series 2011DZ G.O. bonds, $382.41 million of series 2011EA G.O. bonds, $2.8 million of series 2011EB G.O. refunding bonds, $56 million of series 2011EC G.O. refunding bonds and $23 million of series 2011ED G.O. refunding bonds.

Proceeds from the deal will be used to finance capital expenditures and refund the state's series 2001CV, 2001CW, 2002CX, 2002CZ, 2003DA, 2003DB, 2004DD, 2004DE, 2005DF and 2006DI G.O. bonds.

Massachusetts offers $1.05 billion

Another major offering Wednesday came from the Commonwealth of Massachusetts. The state sold $1.05 billion of series 2011 general obligation revenue anticipation notes, said a pricing sheet. The deal was downsized from $1.2 billion.

The offering included $450 million of series 2011A notes and $600 million of series 2011B notes.

The 2011A notes are due April 26, 2012, and have a 2% coupon priced at 100.814. The 2011B notes are due May 31, 2012, and have a 2% coupon priced at 100.997.

The notes (MIG 1/SP-1+/F1+) were sold competitively. The issuer did not return calls by press time for the winning bidder.

Proceeds will be used to fund certain capital requirements for the commonwealth of the collection of revenues.

Tobacco Securitization prices for retail

Retail investors took on the Tobacco Securitization Authority of Minnesota's $787.57 million offering of series 2011 Minnesota tobacco settlement revenue bonds Wednesday. The offering is slated to price for institutional investors Thursday.

The deal includes $81.075 million of series 2011A taxable bonds, which are due 2014 to 2015, and $706.495 million of series 2011B tax-exempt bonds, which are due 2016 to 2026 with a term bond due in 2031.

The 2014 maturity of the 2011A taxable portion priced for retail at Treasuries plus 237 bps and the 2015 maturity at Treasuries plus 287 bps, said a source familiar with the deal.

The 2011B tax-exempt bonds priced with yields ranging from 2.26% to 5.375%, said the market insider.

The bonds (/A/BBB+) will be used to refund existing Minnesota tobacco settlement bonds.

Alan Schankel, managing director with Janney Montgomery Scott LLC, said Wednesday that the offering is an interesting one.

"Unlike tobacco bond issues of the past, the Minnesota deal, like last year's Illinois issue, has a more conservative structure, including breakeven consumption declines of nearly 10%, compared to, for example, the 2007 Ohio issue which was structured around breakeven declines of 4%," Schankel wrote in a report.

"A further plus for the Minnesota issue is a separate agreement which has none of the problem of deals backed by the 46-state master settlement agreement."

Puerto Rico bonds price

Elsewhere during the heavy pricing session, the Puerto Rico Sales Tax Financing Corp. priced $443,378,386 of series 2011 sales tax revenue bonds, said a pricing sheet.

The deal included $355.03 million of series 2011A-1 bonds, $42,728,386 of series 2011A-2 capital appreciation bonds and $45.62 million of series 2011B bonds.

The 2011A-1 bonds are due 2043 with a split maturity. The bonds have a 5% coupon priced at 98.429 and a 5.25% coupon priced at par.

The 2011A-2 bonds are due 2023 to 2024, 2032 to 2033 and 2041. The bonds are zero-coupon capital appreciation bonds.

The 2011B bonds are due 2031 and 2036. The 2031 bonds have a 5% coupon priced at par and the 2036 bonds have a 5.15% coupon, also priced at par.

The bonds (A1/A+/A+) were sold on a negotiated basis. The senior manager for the 2011A bonds was Citigroup Global Markets Inc. The senior manager for the 2011B bonds was Santander Securities Inc.

Proceeds will be used to refund first subordinate and junior subordinate bonds

Omaha powers offering

Also priced was a $278.395 million offering of series 2011 electric system revenue bonds from the Omaha Public Power District.

The deal included $140.465 million of series 2011B bonds and $137.93 million of series 2011C bonds, said a pricing sheet.

The 2011B bonds are due 2013 to 2030 with 2% to 5% coupons. The 2011C bonds are due 2023 to 2029 with term bonds due in 2031, 2036, 2039 and 2042. The serial coupons range from 3.25% to 5%. The 2031 bonds have a 4% coupons priced at par. The 2036 bonds have a split maturity with a 4% coupon priced at 97.425 and a 5% coupon priced at 106.241. The 2039 bonds have a 5% coupon priced at 105.929 and the 2042 bonds have a 5% coupon priced at 105.774.

The bonds (Aa1/AA/) were sold through senior managers Bank of America Merrill Lynch and J.P. Morgan Securities LLC.

Proceeds will be used to fund capital expenditures and refund existing debt.

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