Port Authority $300 million competitive note sale fails to draw bids; Dallas ISD sells $403 million

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, Dec. 3 - In a stunning turn of events, one of the largest competitive sales of municipal notes in many months received absolutely no bids, a bit of news that may impact an even larger sale planned for next week.

The Port Authority of New York and New Jersey received no bids for its $300 million sale of series ZZ consolidated term notes Wednesday, said authority spokesman Steve Coleman. The offering would have been the largest competitive sale since July, when the authority sold $500 million in consolidated bonds.

The authority has taken the sale off the market and is holding off on pricing the deal until 2009. This may be the first time the PANYNJ has experienced such a dilemma.

A sellside source not affiliated with the offering said Wednesday that, although it is surprising that the offering received no bids, market conditions are not ideal right now. Underwriters realize this, he added, and would rather focus on getting investors in on "sure-thing negotiated sales."

"I'm surprised, but there's such a glut of offerings right now that I guess it was bound to happen," he said. "For that particular issuer, it's surprising. I think it really says a lot about how bad the market has gotten."

The sellsider noted that there are so many issuers trying to move offerings that were delayed due to the market meltdown earlier this year that there simply aren't enough investors to buy them.

The Port Authority notes had been due Dec. 1, 2011, and proceeds would have been used for various port authority projects.

"The Port Authority today tested the financial markets by offering a competitive sale of $300 million in short-term notes, and received no bids," said a statement released by the authority.

"The transaction was held well in advance of the need for capital funds, as is the Port Authority's standard practice, and the lack of bids will have no impact on any current Port Authority capital projects. Our credit ratings and our financial health remains strong, with Standard & Poor's and Fitch Ratings Inc. just in the last week reaffirming AA- ratings, and Moody's [Investors Service] just reaffirming Aa3 ratings, and we are confident that the markets will recover in the upcoming year when we plan to return with another sale."

News could impact Pennsylvania

The Port Authority news could affect the Commonwealth of Pennsylvania's planned $600 million competitive sale of series 2008 general obligation bonds expected to price early next week.

The commonwealth is still scheduled to sell the bonds on Dec. 9 with Public Financial Management as its financial adviser.

Calls to the Pennsylvania Treasurer's office Wednesday for comment on the failed Port Authority sale were not immediately returned. So far, there has been no word on whether the sale - the largest competitive offering since September - will move ahead as planned.

The bonds are due 2010 to 2029, and proceeds will be used for capital facilities projects and green facilities projects.

Dallas ISD sells bonds

Even though the market may not have been ideal for the Port Authority, the Dallas Independent School District of Texas got a negotiated offering done Wednesday.

The district sold $403,127,119 in series 2008 unlimited tax school building bonds, said a sellside source connected to the offering.

The bonds were sold through lead manager RBC Capital Markets.

The bonds are due from 2010 to 2031 with a term bond due 2034. The serials have coupons from 5% to 6.25% and yields from 2.35% to 5.7%. The 2034 bonds have a 6.375% coupon to yield 5.75%.

The true interest cost for the bonds came to 5.6812071%, and the net interest cost came to 5.7979457%.

Proceeds from the sale will be used to construct, equip and renovate schools in the district.

Louisiana authority sells $100 million

Elsewhere Wednesday, the Louisiana Public Facilities Authority priced $100 million in series 2008 revenue bonds for Cleco Power LLC, said Pam Hutchinson, spokeswoman for the authority.

The bonds, which are due Dec. 1, 2038, have an initial coupon of 7%, priced at par. The bonds bear interest at the term rate.

KeyBanc Capital Markets was the lead manager for the negotiated offering.

Proceeds will be used for the acquisition, construction, improvement or renovation of nonresidential real property in the Gulf Opportunity Zone of Louisiana.

Wisconsin Health to price bonds

Moving to Thursday's pricing activity, the Wisconsin Health and Educational Facilities Authority is preparing to price $136.15 million in series 2008 revenue bonds (/AA-/AA-) for Froedtert & Community Health, according to the office of Jeff van de Kreeke, the authority's senior vice president of finance.

The authority is hoping to get par amount of between $135 million and $140 million and is angling for yields from 6.75% to 7%, said van de Kreeke's office.

The bonds will be sold through lead manager Morgan Stanley & Co.

Proceeds will be used to refund prior bonds and terminate a qualified hedge related to a previous bond sale.

Seattle to sell $257 million Dec. 10

Moving to next week's offerings, the city of Seattle is scheduled to price $257.745 million in series 2008 municipal light and power improvement and refunding revenue bonds Dec. 10, according to a preliminary official statement.

The bonds (Aa2/AA-/) will be sold on a competitive basis with Seattle-Northwest Securities Corp. as the financial adviser.

The bonds are due 2009 to 2034.

Proceeds will be used for improvements to and conservation projects for the city's light system, as well as for the refunding of existing bonds.

Also ahead, the San Antonio Electric & Gas Systems is gearing up to sell $218.635 million in series 2008A revenue refunding bonds the week of Dec. 8, said Lonny Ahr of CPS Energy.

Ahr said the sale is tentatively scheduled for next week, "if the market holds up."

"The market took a turn to the bad today," Ahr added.

The bonds will be sold on a negotiated basis with Morgan Stanley, Merrill Lynch & Co. and Banc of America Securities LLC as the underwriters.

The bonds (Aa1/AA+/AA) are due from 2010 to 2018.

Proceeds will be used to refund the system's outstanding series 1998A bonds.

Chicago to sell G.O.s

Looking a bit further out, the city of Chicago plans to sell $590.94 million in series 2008 general obligation bonds, according to a preliminary official statement.

The sale includes $327.17 million in series 2008C project and refunding G.O.s, $59.885 million in series 2008D library G.O.s and $203.885 million in series 2008E taxable project and refunding G.O.s.

The bonds will be sold on a negotiated basis with William Blair & Co. as the lead manager.

The maturities for the bonds have not yet been determined.

Proceeds will be used for infrastructure improvements, including the construction of alleys, curbs and gutters, as well as for lighting improvements, sidewalk improvements, street improvements and curb and gutter repairs. The remainder will be used for the demolition of hazardous, vacant or dilapidated buildings in the city.

NYC G.O. sale ahead

Also coming up, New York City is planning a $308 million sale of series 2009G general obligation bonds, according to a preliminary official statement.

The sale includes $300 million in series 2009G-1 tax-exempt bonds and $8 million in series 2009G-2 taxable bonds, which are due 2010 to 2035.

J.P. Morgan Securities Inc. is the lead manager for the negotiated sale.

Proceeds will be used for capital purposes.

Secondary action lighter

Moving to the secondary market, traders said action was fairly light and the tone of the market was, once again, a bit off.

"We're still getting pinched a few basis points here and there," said one trader in New York. "We're a little weaker this afternoon, but it's not off by much."

Among specific trades Wednesday, the New Mexico Hospital Equipment Loan Council's series 2008A bonds for Presbyterian Hospital were seen in play. The 6.125% 2028s were seen trading at 6.226%.

Also trading on Wednesday were the state of Ohio's series 2008-1 major new state infrastructure project revenue bonds. The 5.75% 2019s were seen trading at 4.254%.

Elsewhere, Christus Health's series 2008A revenue refunding bonds sold through the Tarrant County Cultural Education Facilities Finance Corp. in Texas were trading. The 6.5% 2037s were trading at 6.627%. Those bonds have been in demand quite a bit this week, noted one trader, who has seen the bonds trading throughout the week with yields moving steadily up.

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