Municipals close a touch firmer; California Public Works Board brings $309.68 million bonds

By Sheri Kasprzak

New York, April 19 - Municipals rounded out Thursday slightly firmer, said traders reached during the session.

"We're seeing decent bids, and new issues are coming at good levels. New deals are being absorbed quickly, which is good considering we've had a pretty good amount of supply this week," one trader said.

The firmer tone in the market could be contributed in part to the fact that larger issues priced early in the week, said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"Flows to municipal mutual funds continue positive, with the modest $267 million of inflows for the week ending April 11 likely reflecting the liquidations typically seen in the weeks before tax day," Schankel said.

"Next week's supply is building, with about $4 billion listed for pricing, including $120 million Rhode Island G.O.s with Janney as senior bookrunning manager."

In ratings news, Moody's Investors Service placed the ratings of the Puerto Rico Sales Tax Financing Corp. on review for possible downgrade.

"Cofina has $16 billion in outstanding debt with the senior lien bonds rated Aa2 and the subordinate bonds A1," Schankel said.

"The bonds are secured by a dedicated slice of sales tax collected on the island. Despite the long-lasting recession experience by Puerto Rico, sales tax collections have been stable in recent years."

California Public Works prices

Heading up the day's primary action, the California State Public Works Board came to market with $309,675,000 of series 2012 lease revenue bonds.

The offering included $42.05 million of series 2012B University of California Business Unit II lease revenue bonds (Aa2/AA-/AA) and $267,625,000 of series 2012C Department of Correction and Rehabilitation lease revenue refunding bonds (A2/BBB+/BBB+).

"The refunded bonds produce the borrowing-cost savings for taxpayers because the new interest rates on those bonds are lower," said Joe DeAnda, spokesman for California treasurer Bill Lockyer's office.

"Retail investors ordered about $124.3 million of the bonds. The retail orders represent 40.1% of the $309.7 million offering."

The bonds were sold through senior managers Stone & Youngberg and De La Rosa & Co. Inc. with Wedbush Securities Inc. as the co-lead manager.

The 2012B bonds are due 2015 to 2032 with a term bond due in 2037. The serial coupons range from 4% to 5%. The 2037 bonds have a 4.125% coupon and priced at 98.23. The 2012C bonds are due 2015 to 2028 with 4% to 5% coupons.

The final yields ranged from 0.83% in three years to 3.74% in 20 years, said DeAnda.

Proceeds will be used to construct, acquire and equip buildings for the University of California's Paul Merage School of Business and to renovate Kern Valley State Prison to comply with seismic regulations.

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