Yields close flat; competitive sale made sense for Louisiana, director of bond commission says

By Sheri Kasprzak

New York, March 2 - Municipal yields rounded out the quiet session largely unchanged, market insiders said, while the director of the State of Louisiana's bond commission reflected on the state's $300 million competitive sale.

One trader said a lack of activity led to a stalled muni market on Wednesday, with yields little moved in any direction.

"Kind of a repeat of yesterday," he noted.

"We're hanging here waiting for something to move us, but we're flat. It's looking like that's going to be the story for the week. Nothing's coming up."

Meanwhile, a day after Louisiana came to market with $300 million of competitively sold general obligation bonds, Whitman Kling Jr., the director of the state's bond commission, told Prospect News that the competitive offering made sense for the state given current market conditions.

The state, he noted, is required under statutes to conduct competitive bond offerings unless the commission and its financial adviser believe a negotiated sale will provide a better cost for the state. If such a condition occurs, the bond commission must vote and have two-thirds of members approve.

"In the current market environment, we just haven't seen where a negotiated deal, once you factor in the cost, is yielding a price advantage," Kling said.

He noted that the state has elected to conduct competitive sales for the past three bond offerings.

"We do negotiated deals all the time," he added.

"On this particular issue and the two before it, working with our [financial adviser], we just couldn't see any reason to do a negotiated deal."

The state received seven bidders for the deal. There were 9 basis points between the highest and lowest bidders.

"It was a tight pricing," he added.

Added to the mix was the fact that the state was nearly alone in the primary market Tuesday.

"We hit a good time period," Kling said.

"There was practically no activity that went on yesterday. We're a good credit to begin with, and that really helped us, but we were pretty much by ourselves."

Barclays Capital Inc. won the bid for the bonds (Aa2//AA), which are due 2011 to 2030 with 2% to 5% coupons.

Proceeds will be used to fund general government, veterans' affairs, elected officials, economic development, culture, recreation, tourism, corrections, public safety, hospitals, education, legislative and non-state entities expenses.

Oyster Bay brings G.O.s, BANs

During Wednesday's pricing action, the Town of Oyster Bay priced $171.02 million of series 2011 G.O. bonds and series 2011A bond anticipation notes (/AAA/), said pricing sheets.

The town sold $61.575 million of series 2011 G.O. bonds, $59.445 million of series 2011A public improvement BANs and $50 million of series 2011A bond anticipation notes.

The G.O. bonds are due 2012 to 2020 with 2% to 2.625% coupons. The bonds were sold competitively with Citigroup Global Markets Inc. winning the bid.

The public improvement BANs are due March 9, 2012 and have a 2.5% coupon priced at 102.085. J.P. Morgan Securities LLC won that bid.

The BANs are due March 9, 2012 and have a 2% coupon priced at 101.587. Those notes were sold competitively with Wells Fargo Securities LLC winning the bid.

Proceeds will be used to fund the reconstruction of town buildings, conservation of parks, beaches and recreational areas and construction and maintenance of highways.

Philly hospital bonds price

Elsewhere, the Hospitals and Higher Education Facilities Authority of Philadelphia priced Wednesday $100 million of series 2011 hospital revenue bonds for the Children's Hospital of Philadelphia, said a pricing sheet. The offering was downsized from $200 million.

The deal included $50 million of series 2011A bonds and $50 million of series 2011B bonds.

Both bonds are due July 1, 2041, and both bear interest at the daily rate.

JPMorgan was the senior manager.

Proceeds will be used to construct a five-story ambulatory care center at the hospital and make other repairs, renovations and expansions to the hospital.

Tohopekaliga sells bonds

In other pricing action, the Tohopekaliga Water Authority of Florida priced $94.82 million of series 2011A utility system revenue refunding bonds, said a pricing sheet.

The bonds (Aa3/AA+/) were sold through senior manager FirstSouthwest Co.

The bonds are due 2011 to 2032 with a term bond due 2036. The serial coupons range from 2.25% to 5.75%. The 2036 bonds have a 5.25% coupon priced at 99.303.

Proceeds will be used to refund the authority's series 2007 bonds and terminate a swap agreement connected to those bonds.

The authority is based in Kissimmee.

NYC sets offering

Looking ahead, the City of New York is expected to bring $641.455 million of series 2011I G.O. bonds on Tuesday, said a preliminary official statement.

The sale includes $400 million of series 2011I-1 tax-exempt bonds, $56.4 million of series 2011I-2 taxable bonds and $185.055 million of series 2011I-3 taxable bonds.

The taxable bonds will be sold competitively with Public Resources Advisory Group and A.C. Advisory Inc. as the financial advisers.

The tax-exempt bonds will be sold on a negotiated basis with Bank of America Merrill Lynch as the senior manager.

The 2011I-1 taxable bonds are due 2011 to 2023. The 2011I-2 bonds are due in 2011, and the 2011I-3 bonds are due 2012 to 2016.

Proceeds will be used to redeem the city's series 2008J-13 and series 2008J-14 variable-rate bonds, which are due Aug. 1, 2019.

Energy Northwest deal ahead

Also coming up, Energy Northwest of Washington is expected to bring $368.895 million of series 2011 revenue refunding bonds (Aaa/AA/AA), said a preliminary official statement.

The sale includes $255.98 million of series 2011A Columbia Generating Station electric revenue refunding bonds, $91.805 million of series 2011A Project 3 electric revenue refunding bonds and $21.11 million of series 2011B Columbia Generating Station electric revenue refunding taxable bonds.

Citigroup, Goldman Sachs & Co. and JPMorgan are the senior managers for the deal.

The 2011A Columbia Generating Station bonds are due 2013 to 2017 and 2022 to 2023. The 2011A Project 3 bonds are due 2018, and the 2011B Columbia Generating Station bonds are due 2019 and 2023 to 2024.

Proceeds will be used to refund debt issued to fund improvements to the Columbia Generating Station and Project 3.

Based in Richland, Wash., Energy Northwest produces and transmits electricity.

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