Munis firm 10 years and out as Treasuries improve, Georgia brings $737.04 million G.O. bonds

By Sheri Kasprzak

New York, June 21 - Municipals were seen firmer on Thursday, especially outside of 10 years, said market insiders, as Treasuries improved and the AAA-rated State of Georgia came to market with a major general obligation bond deal.

After seeing some softness on Wednesday, maturities outside of 10 years firmed by 1 basis point to 3 bps, said one trader. In fact, yields 10 years and out were 1 bp to 3 bps higher on Wednesday.

"We seem to be turning around since yesterday," one trader said.

"Supply pressure is easing a bit. The largest deal of the week [the Georgia issue] priced. Treasuries are improving, so we're experiencing some firmness because of that."

Detroit water bonds price

In primary action Thursday, the City of Detroit sold $659.78 million of series 2012A Detroit Water and Sewerage Department sewage disposal system revenue and refunding senior lien bonds, said a pricing sheet.

The bonds (Baa2/A+/A-) were sold through Goldman Sachs & Co.

The bonds are due 2014 to 2027 with term bonds due in 2032 and 2039. The serial coupons range from 5% to 5.5%. The 2032 bonds have a 5% coupon and priced at 99.373. The 2039 bonds have a split maturity with a 5% coupon priced at par and a 5.25% coupon priced at 99.285.

The issue, which was delayed last week "as the city flirted with and then dodged a Friday default, received a strong reception with yields reduced 5 to 10 bps in afternoon pricing compared to the morning's preliminary estimates," said Alan Schankel, managing director with Janney Montgomery Scott LLC.

Proceeds will be used to make improvements, additions and extensions to the city's sewage system and to refund its 2003A revenue bonds.

Temple sees 18 bps improvement

Elsewhere, the Philadelphia Health and Higher Education Facilities Authority, which sold $311,105,000 of series 2012 hospital revenue bonds for the Temple University Health System Obligated Group on Wednesday, saw yields improve by as much as 18 bps, Schankel said Thursday.

The offering included $219.21 million of series 2012A revenue bonds and $91,895,000 of series 2012B refunding bonds.

The 2012A bonds are due 2036 and 2042. The 2036 bonds have a 5.625% coupon and priced at 97.747, and the 2042 bonds have a 5.625% coupon and priced at 96.493.

The 2012B bonds are due 2015 to 2018 with a term bond due in 2023. The serial bonds have 5% coupons. The 2023 bonds have a 6.25% coupon and priced at 106.832.

The bonds (Ba1/BBB-/BBB-) were sold through Morgan Stanley & Co. LLC and Barclays Capital Inc. The co-manager was PNC Bank, NA.

The 30-year bonds, which priced at a 5.875% yield, saw institutional-sized trades in the afternoon as low as 5.69%, said Schankel.

Proceeds will be used to finance capital projects for the obligated group and to refund existing debt.

Georgia brings $737.04 million

In the largest deal of the week, the State of Georgia brought to market $737.04 million of series 2012 G.O. bonds (Aaa/AAA/AAA), said a pricing sheet.

The offering included $520,055,000 of series 2012A G.O. bonds, $79.9 million of series 2012B G.O. taxable bonds and $137,085,000 of series 2012C G.O. refunding bonds.

The 2012A bonds are due 2013 to 2032 with 3% to 5% coupons. The 2012B bonds are due 2013 to 2032 with 0.35% to 3.3% coupons. The 2012C bonds are due 2014 and 2021 to 2023 with coupons from 4% to 5%.

J.P. Morgan Securities LLC won the competitive bid for all three tranches, said a sellside source familiar with the deal.

Proceeds will be used to finance capital outlay projects for the state and to refund existing G.O. bonds.

Stockton poised to file

In other municipals news, the City of Stockton, Calif., is expected to file for bankruptcy as early as next week, said Schankel.

The city has been in talks with its creditors, but if no agreement is reached by Monday, the city has proposed closing a budget gap by not appropriating $10.2 million for debt service and cutting $11.2 million of labor costs, said Schankel.

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