Municipal yields flatten; Turnpike Authority of Kentucky, Illinois price large offerings

By Sheri Kasprzak

New York, June 17 - After a volatile week, municipal yields approached the end of the week largely unmoved as new issues continued to pour in to the primary market, market insiders reported.

"We're pretty flat today," said one trader. "I'd call it unchanged, but there's a firmer feeling out there."

Meanwhile, the primary market continued to dominate the market, but the flood of deals has been met with lackluster results, said one sellside source.

"The issuers who are coming to market right now are either getting crap pricing or they're just having to take less," said the sellsider.

"Munis are not a draw right now. Yields are through the roof, and investors are backing away, so we'll ride it out."

Thursday's primary action was led by a $340.9 million sale of series 2010 economic development road revenue and revenue refunding bonds from the Turnpike Authority of Kentucky.

The deal included $153.26 million in series 2010A revenue and refunding bonds and $187.64 million in series 2010B Build America Bonds.

The 2010A bonds are due 2013 to 2020 with coupons from 2.5% to 5%. The 2010B bonds are due 2025 and 2030. The 2025 bonds have a 5.244% coupon priced at par, and the 2030 bonds have a 5.722% coupon, also priced at par.

Goldman, Sachs & Co. was the senior manager.

Proceeds will be used to fund the authority's six-year highway revitalization plan, as well as to refund existing debt.

The authority is based in Louisville.

Kentucky student bonds price

Also out of the Bluegrass State, the Kentucky Higher Education Student Loan Corp. sold $224.865 million in series 2010-1 three-month Libor floating-rate student loan revenue bonds (/AAA/AAA), according to a pricing sheet.

The sale included $75 million in class A-1 bonds, which are due May 1, 2020, and $149.865 million in class A-2 bonds, which are due Nov. 1, 2039. Both bonds priced at three-month Libor.

Bank of America Merrill Lynch was the senior manager.

Proceeds will be used to finance student loans to qualified individuals.

Illinois sells BABs

In other pricing news, the State of Illinois priced $300 million in series 2010-4 taxable general obligation Build America Bonds, according to a pricing sheet.

The bonds (A1/A+/A+) were sold competitively with Citigroup Global Markets Inc. winning the bid. The financial adviser was Acacia Financial Group Inc.

The bonds are due 2011 to 2019 with coupons from 1.75% to 6.125%, all priced at par. The 2021 term bond has a 6.125% coupon, priced at par. The 2025 term bond has a 6.875% coupon, priced at par, and the 2035 term bond has a 7.1% coupon, also priced at par.

Proceeds will be used to fund transportation projects and other capital projects.

Illinois prices OSF bonds

Another sale from Illinois came from the Illinois Finance Authority, which priced $162.905 million in series 2010A revenue refunding bonds for OSF Healthcare System, according to a pricing sheet.

The bonds were sold through Bank of America Merrill Lynch.

The bonds are due May 15, 2039 with a 6% coupon priced at 97.318.

Proceeds will be used to reimburse OSF for costs associated with the construction of system-owned hospitals, as well as to refinance and redeem the system's series 1985B variable-rate demand bonds, its series 2001 variable-rate demand bonds and its series 2007D revenue bonds.

Based in Chicago, the authority makes loans and investments in businesses, nonprofit organizations, agricultural concerns and local governments. Based in Peoria, Ill., OSF operates hospitals and health care facilities in Illinois, Michigan and Iowa.

California to price G.O.s

Looking to upcoming sales, the State of California is scheduled to bring $157.705 million in series 2010C veterans G.O. bonds on Wednesday, according to a notice of sale.

The bonds (A1) will be sold competitively with Gardner, Underwood & Bacon LLC as the financial adviser.

The offering is comprised of $83.975 million in series 2010CF non-AMT bonds, $25 million in series 2010CG non-AMT bonds and $48.73 million in series 2010CH AMT bonds.

The 2010CF bonds are due 2011 to 2017 and the 2010CG bonds are due 2011 to 2018. The 2010CH bonds are due 2011 to 2018.

Proceeds will be used to purchase residential property for veterans, as well as to refund existing debt.

Texas university deal ahead

Also coming up, the Board of Regents of the University of Texas System plans to price $520 million in series 2010D revenue financing system taxable bonds, according to a preliminary official statement.

The bonds (Aaa/AAA/AAA) will be sold through senior managers Morgan Stanley & Co. Inc. and Barclays Capital Inc.

Proceeds will be used to refund a portion of the university's tax-exempt commercial paper notes, as well as to finance campus improvements.

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