Metropolitan Washington Airports prices; New Jersey readies; yield curve 'historically steep'

By Aaron Hochman-Zimmerman

New York, Aug. 4 - Municipal market investors were ravenous again on Tuesday.

Buyers continued to come out for anything put in their way, and issuers were happy to oblige.

The seemingly insatiable appetite of some began to give others indigestion, but the calendar remained packed with plenty of new paper.

The largest deal of the week, the $1.925 billion in tax and anticipation revenue notes from New Jersey, was highly anticipated for Wednesday.

The question that remained was whether or not the appetite would last and if the buyers were ready to show up in droves.

"It sure seems like it," said senior trader Anthony Shields, a senior vice president at Grigsby & Associates.

For deals from North Texas Tollway Authority and Metropolitan Washington Airports Authority, the buyers were snapping at all that was available, he said.

The frenzy pushed a yield curve, which was "historically steep," he said, to "historically steeper."

"The front end was gobbled up ... like PacMan," he said, and "the long end seems to be getting done pretty good."

North Texas Tollway issues

The North Texas Tollway Authority priced $1.243 billion in series 2009A-B bonds (A2/A-/) on Tuesday, according to Sherita Coffelt, spokeswoman for the authority.

Series 2009A consisted of $418 million system first-tier tax-exempt current interest bonds, which priced at a true interest cost of 6.1878% and an average coupon of 6.1268%. The bonds carry serial maturities from 2010 to 2013 with term bonds due 2024, 2029 and 2039. Morgan Stanley & Co. Inc. acted as lead underwriter.

Series 2009B consisted of $825 million Build America Bonds, which priced at a TIC of 4.4188% and an average coupon of 4.366%. The bonds mature in 2049. Goldman, Sachs & Co. acted as lead underwriter.

Proceeds will be used to make capital improvements to the Sam Rayburn Tollway and the George Bush Turnpike as well as for refunding outstanding debt.

The authority is located in Dallas.

"Our CFO was pretty pleased," Coffelt said about the deal, which was oversubscribed by 200%.

"The BABs exposed us to a whole other group of buyers that traditionally have not had access to NTTA bonds," she said about investors who normally play in taxable bonds.

They are "just not familiar" with North Texas Tollway Authority, she said.

Also, for the Metropolitan Washington Airports Authority, "there was pretty good interest," Shields said.

"The big interest was in the zeros," he said about the zero-coupon bonds, "which is a change from the norm."

"I haven't seen that many zero deals getting sucked up like that," he said.

The airports authority was expected to sell $826.95 million tax-exempt revenue and Build America Bonds on Tuesday through Citigroup Global Markets Inc. as part of its $1.186 billion issue of series 2009 Dulles Toll Road revenue bonds.

The authority will sell a $359.53 million second senior lien issue of revenue and Build America Bonds in a second tranche through Morgan Stanley & Co. Inc. on Wednesday.

Proceeds will be used for capital improvements to the Dulles Toll Road.

New Jersey eyes 'historic lows'

There are still plenty of big deals on the calendar, including the $1.925 billion from New Jersey on Wednesday.

Tom Vincz, a spokesman for the New Jersey state treasurer, said the state is looking forward to taking advantage of "historic lows" for yields.

"There still seems to be an appetite," he said, but "I'm getting a little nervous over here."

There are more Treasury auctions to come and "every new auction seems to be a new record," he said.

"August isn't usually a month where there's a lot of danger in the market," he said, but things are getting "a little bit ominous."

Still, "as a trader, I'm usually kind of overly cautious," he said.

Elsewhere, trading was strong, especially for the insured Indianapolis Local Public Improvement Bond Bank issue that priced at 5.77% on July 29.

"One of my customers was looking for Indy bonds," he said.

The bonds traded at 5.60% on Tuesday.

"That's a pretty significant move in the space of a week," he said.

Tartans print paper

Pennsylvania Higher Educational Facilities Authority priced $170 million series 2009 revenue bonds (/AA-/) on behalf of Carnegie Mellon University, according to a market source.

The bonds priced with eight-, 10- and 12-year bullet maturities in order to suit Carnegie Mellon's refinancing needs.

The maturities priced at yields of 3.44%, 3.89% and 4.23%, respectively

Merrill Lynch & Co. Inc. acted as the lead underwriter for the negotiated deal.

Lately, "a lot of the money is moving to the six-year range from the seven- to 20-[year] range," the source said.

The 10-year range has been "a little bit difficult over the last several months," he said.

Still, "there was very strong demand," he said.

Perhaps, this deal is a "lead example" of investors moving out the yield curve, he said.

The Pennsylvania Higher Educational Facilities Authority is located in Harrisburg, Pa.

For your information

FYI Properties, Wash., priced $305.81 million district project lease revenue bonds (/AA/) at a TIC of 5.4% on Tuesday, according to a source close to the deal.

The issue was very successful, he said, "better than we'd hoped for."

Barclays Capital Inc. acted as lead underwriter for the negotiated bonds. Citigroup Global Markets, Goldman Sachs and Merrill Lynch acted as co-managers.

The bonds carry serial maturities from 2012 to 2029 as well as term bonds due 2034 and 2039.

Proceeds will be used to build a state data center and office.

Mecklenburg prices

Mecklenburg County, N.C., priced $100 million in series 2009B general obligation public improvement bonds (Aaa/AAA/AAA) at a TIC of 3.5372%, according to Gordon Johnson, an analyst in the State Treasurer's office.

Citigroup Global Markets won the auction over nine other bidders for the bonds, which carry serial maturities from 2011 to 2030.

Yields ranged from 0.65% to 4.39%.

Proceeds will be used for school system capital projects.

The county seat is Charlotte, N.C.

New on the board

The New York City Transitional Finance Authority plans to issue $600 million of series fiscal 2010B future tax secured subordinate bonds, according to a preliminary official statement.

The bonds will have serial maturities from 2010 through 2024.

The lead managers for the negotiated sale are Morgan Stanley, Barclays Capital, Goldman Sachs and J.P. Morgan Securities Inc.

The co-managers are Citigroup Global Markets, Jefferies & Co., Loop Capital Markets LLC, M.R. Beal & Co., Merrill Lynch, Ramirez & Co., Inc., Roosevelt & Cross Inc., Siebert Brandford Shank & Co. LLC, Wachovia Bank, NA, Cabrera Capital Markets, Inc., Jackson Securities, Raymond James & Associates, Inc., RBC Capital Markets Corp., Stifel Nicolaus and TD Securities (USA) LLC.

The proceeds will be applied toward the redemption of outstanding bonds.

The bonds will settle in August.

Sarasota County Public Hospital District in Florida plans to issue $104.285 million of series 2009A hospital revenue bonds (A1/AA-) for the Sarasota Memorial Health Care System, according to a preliminary offering statement.

Citigroup Global Markets and JPMorgan are the underwriters for the negotiated sale.

The offering will have serial and terms bonds, but maturities have not yet been set.

Proceeds will be used to acquire, construct and make capital improvements to health-care facilities in the district.

The bonds will settle in August.

Up north, the Maine Municipal Bond Bank plans to issue $59.325 million of bonds and refunding bonds, according to a preliminary official statement.

The sale will include $35.02 million of series 2009D bonds, $4.48 million of series 2009E refunding bonds and $19.825 million of series 2009F refunding bonds.

The bonds (/AAA/AAA) will be issued in a negotiated sale through underwriters Wells Fargo Securities, LLC and Citigroup Global Markets.

Maturities run from 2010 to 2029 for the series 2009D bonds, from 2009 to 2014 for the series 2009E bonds and from 2010 to 2012 for the series 2009F bonds.

The series 2009D bonds will be callable.

Proceeds will be used to fund a loan to a governmental unit, to acquire a municipal bond, to make a deposit to a reserve fund and to refund the series 2009E and 2009F bonds.

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