Sacramento Municipal Utility District brings $200 million revenue bonds; market still unchanged

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, May 5 - The Sacramento Municipal Utility District led a heavy primary session for municipals Tuesday as the secondary market remained relatively unmoved.

The Sacramento MUD Build America Bonds were very popular in reoffering action, said a trader watching the deal.

"They're moving quite a bit," said the trader. "That's not surprising, since they're BABs."

The 6.322% bonds, which are due 2036, were seen lower by as much as 23 basis points late in the day. The bonds were seen reoffered at 6.094% after pricing at par.

Goldman, Sachs & Co. and Merrill Lynch & Co. Inc. were the lead managers.

Proceeds will be used to construct improvements to the district's electrical system.

One market source said he'd seen a lot of interest in Build America Bonds but has also seen some changes in the new offerings as issuers learn how investors are receiving the bonds.

Steve Shogren, senior vice president of underwriter George K. Baum & Co. in Wichita, Kan., has seen strong interest in Build America Bonds on the part of issuers in the area, he said.

"I think they've been well received," he said.

Shogren has not seen the new program inspire new issuance, but many issuers are retooling their approved debt issues to take advantage of the bonds.

"Our issuer has received a great benefit," he said about Unified School District No. 259 of Sedgwick County.

For the market, "it has been a very positive development."

Sedgwick schools' BABs

Shogren's George K. Baum brought to market Build America Bonds from the school district on Tuesday. The $132.5 million in bonds (Aa3/AA/) priced at an average coupon of 6.22%.

The bonds are subject to a sinking maturity beginning in 2026 and maturing in 2028.

Shogren expected the bonds to price near 250 bps over 30-year Treasuries, which has been the average yield for Build America Bonds, he said.

However, the bonds came at 215 bps over 30-year Treasuries, he said.

Proceeds will be used for capital improvements to school facilities.

Unified School District No. 259 of Sedgwick County is located in Wichita, Kan.

Texas prices $157.24 million

In other primary market news Tuesday, Texas priced $157.24 million in series 2009B water financial assistance general obligation bonds (Aa1/AA/AA+) at a true interest cost of 4.01%, according to Richard Weiss, public finance executive director.

The TIC is historically low for this issuer, Weiss said.

"They were very happy with it," he said.

Morgan Stanley & Co. Inc. acted as the lead underwriter for the negotiated deal.

The bonds, which priced Monday, are due from 2010 to 2029.

Proceeds will be used to construct dams, water storage facilities and other projects.

Utah's $111.1 million G.O.s

Elsewhere, Utah priced $111.1 million series 2009B G.O. bonds (Aaa/AAA/AAA) at a TIC of 1.75%, according to David Damschen, chief deputy treasurer.

"It went extremely well," Damschen said, besting expectations that were "in the sub 2% range."

"We had very positive, high expectations and even they were exceeded in the level of interest and participation," he said.

Zions Bank Public Finance acted as financial adviser for the competitive deal.

The bonds carry maturities from 2010 to 2015.

Proceeds will be used for various capital projects.

Johnson County sells

Elsewhere in the crowded primary market, Johnston County in North Carolina priced $81.133 million in series 2009 G.O. bonds Tuesday, said Martha Lasater, the county's debt and grant management analyst.

The bonds were sold competitively with Merrill Lynch as the winning bidder. Davenport & Co. LLC was the financial adviser.

The sale included $49.8 million in series 2009A G.O. public improvement bonds, $15.402 million in series 2009B G.O. refunding bonds and $15.931 million in series 2009C G.O. refunding bonds.

The 2009A bonds are due 2012 to 2028 with coupons from 3% to 4.25% and yields from 1.43% to 4.37%. The 2009B bonds are due 2012 to 2021 with 3% to 5% coupons and yields from 1.33% to 3.51%. The 2009C bonds are due 2010 to 2019 with coupons from 3% to 5% and yields from 0.45% to 3.22%.

Proceeds will be used to refund the county's series 2001 bonds and improve local schools and community colleges.

The county seat is Smithfield, N.C.

Georgia bonds

In other news, the State of Georgia had been set to price $314.53 million in series 2009 G.O. bonds, said Lee McElhannon, the state's director of finance.

The terms of the bonds were still being determined Tuesday afternoon.

Morgan Stanley was the senior manager.

The sale includes $9.5 million series 2009C bonds and $305.03 million series 2009D bonds.

Proceeds will be used to acquire and improve lands, highways, structures, equipment or facilities as well as repay existing debt.

Clackamas bonds ahead

Moving to upcoming sales, the Hospital Authority of Clackamas County in Oregon plans to price $167.125 million in series 2009 revenue bonds for Legacy Health System, said a preliminary official statement.

The pricing, an issuer calendar said, is scheduled for May 13.

The bonds (A2/A+/) will be sold on a negotiated basis with Citigroup Global Markets Inc. as the lead manager.

The sale includes $117.125 million in series 2009A bonds and $50 million in series 2009B and 2009C bonds.

Proceeds will be used to make loans to Legacy Health, which is based in Portland, Ore.

Also coming up, the Commonwealth of Pennsylvania plans to issue its first refunding issue of 2009 on May 19, according to a press release.

The bonds will tentatively refund a portion of the state's $164.2 million in outstanding debt.

Secondary stays quiet

In the secondary market, traders noted that municipals remained mostly unmoved despite weakness in Treasuries. Trading volume remained light for a second session.

"Not a lot to report, really," a trader said in the late afternoon. "Treasuries are off, but we're looking pretty much unchanged. We're not really seeing a lot of activity today."

Looking at specific trades, the Citizens Property Insurance Corp. of Florida's series 2009A-1 senior secured bonds were moving. The 4.5% 2014s were seen at 4.277% in late trading. The bonds priced late last week at 4.625%. The 5.5% 2017s were seen at 5.212% after pricing at 5.7%. The 5.375% 2016s were seen reoffered Tuesday at 5.395%. Those bonds priced at 5.5%.

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