Munis unmoved; California brings upsized $908 million sale of Build America Bonds at 7.26%

By Sheri Kasprzak

New York, Nov. 3 - Municipals remained mostly unmoved on Tuesday as the State of California brought to market $908 million in Build America Bonds.

"It's been pretty quiet," said one trader, who noted that the demand for primary is taking away some attention from the secondary market.

Heading up primary action, California sold Tuesday $908 million in series 2009 general obligation Build America Bonds, said Tom Dresslar, spokesman for the state treasurer's office.

The state had intended to price $750 million after receiving an inquiry from an investor, Dresslar said.

The 30-year bonds priced with a 7.263% coupon at par. The 35% federal subsidy reduces the coupon amount paid by the issuer to 4.74%.

"It looks like there still is demand for high-yield bonds," said one market insider asked about the popularity of the bonds Tuesday.

"It's interesting that they upsized. I think it's even more interesting that they managed to get someone to request these bonds. There must be an appetite for risk out there."

A single investor who made the initial inquiry bought the $750 million, and other investors purchased the remainder.

Citigroup Global Markets Inc. was the senior manager.

"The deal gave us the best spread-to-Treasuries of any G.O. BABs sale we have completed so far," Dresslar said.

"These bonds priced at Treasuries plus 300 [basis points]. The spreads in our April and October BABs deals were 365 bps and 325 bps, respectively."

Additionally, Dresslar said, the new-issue premium was virtually nil.

Proceeds will be used to fund infrastructure projects.

Puerto Rico sells $350 million

Elsewhere in the primary market, the Commonwealth of Puerto Rico sold Tuesday $350 million in series 2009B public improvement refunding bonds, said a pricing sheet.

The bonds were sold through senior managers Morgan Stanley & Co. Inc. and J.P. Morgan Securities Inc. The bonds are due 2036 to 2039 with coupons from 5.75% to 6.5%, all priced at par.

Proceeds will be used to refund interest, but not principal, on existing debt.

Honolulu prices $234.65 million

In other news, the City of Honolulu priced $234.645 million in series 2009 G.O. bonds (//AA) on Tuesday, said a term sheet.

The sale included $140.285 million in series 2009D G.O. bonds, $50.46 million in series 2009E Build America Bonds and $43.9 million in series 2009F G.O. bonds.

The 2009D bonds are due 2014 to 2034 with coupons from 2.25% to 5.25%. The 2009E bonds are due 2014 to 2034 with coupons from 3.27% to 6.3%, all priced at par. The 2009F bonds are due 2014 to 2020 with 5% coupons across all maturities.

Merrill Lynch & Co. and Piper Jaffray & Co. were the senior managers.

Proceeds will be used to refund the city's series 1993 and 1997 bonds as well as fund the expansion of the city's waste-to-energy facility.

Novant brings $100 million

Also, Novant Health Inc. of North Carolina sold $100 million of 5.345% seven-year notes on Tuesday at Treasuries plus 230 bps, a market source said.

The notes priced at the wide end of guidance, which was between 225 bps and 230 bps, the source said.

Full terms were not available at press time.

Bank of America Merrill Lynch and JPMorgan ran the books.

The non-profit health-care provider is based in Winston-Salem, N.C.

Georgia sells $700 million

In other primary news Tuesday, the State of Georgia brought $700 million in series 2009 G.O. bonds through Goldman, Sachs & Co.

The deal included $85.48 million in series 2009F bonds, $114.52 million in series 2009G bonds, $400 million in series 2009H Build America Bonds and $100 million in series 2009I G.O. bonds.

The full details of the offering were not immediately available.

Proceeds will be used to retire existing debt and fund capital projects.

- Andrea Heisinger contributed to this report.

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