Tuesday's pricing action exceptionally busy; New Jersey Economic Development Authority to sell $450 million

By Cristal Cody and Sheri Kasprzak

New York, May 19 - Pricing activity is gearing up to be rather busy for Tuesday, even as upcoming offering announcements were fairly light Monday.

Heading up the action for Tuesday is a $405.03 million offering of series 2008 general obligation bonds from the Commonwealth of Pennsylvania.

The bonds will be sold on a competitive basis. The sale includes $325 million in first series bonds and $80.03 million in first series refunding bonds. The first series bonds are due 2009 to 2028, and the first series refunding bonds are due 2008 to 2013.

Proceeds will be used for the construction, acquisition and rehabilitation of capital facilities; the maintenance and protection of open space and other environmental initiatives; compensation for service in the Persian Gulf conflict; and refunding of outstanding general obligation bonds.

Also coming up for Tuesday is a $274.43 million offering of G.O. refunding bonds (Aa3/AA/AA-) from San Francisco City and County in California.

Backstrom McCarley Berry & Co. and Montague DeRose and Associates are the financial advisers for the competitive sale.

Proceeds will be used to refund a portion of the city and county's outstanding G.O. bonds.

U.S. Supreme Court reverses Kentucky case

In other muni news Monday, the U.S. Supreme Court reversed a decision by the Kentucky Court of Appeals on Monday in a case over taxes levied on bonds issued outside the state.

Kentucky exempts from state income taxes interest on bonds that are issued by the state or its political subdivisions but not on bonds sold by other states and their subdivisions.

The case, Kentucky Department of Revenue v. George W. Davis, was argued Nov. 5, 2007.

Davis claimed the differential tax discriminated against interstate commerce.

The trial court ruled for Kentucky. The State Court of Appeals reversed the decision and found that the state's policy was against the Commerce Clause.

The U.S. Supreme Court reversed the Court of Appeals decision and remanded the case.

Justice David Souter said in the court opinion the policy does not offend the Commerce Clause and that "respondents would have this court invalidate a century-old taxing practice presently employed by 41 states and supported by all."

Justices Anthony Kennedy and Samuel Alito filed dissenting opinions.

The Securities Industry and Financial Markets Association is pleased with the decision to uphold longstanding state-tax exemptions for municipal bonds, according to a statement following the release of the decision.

"We applaud and support the Supreme Court's decision to uphold Kentucky law and allow the interest earned by state residents on municipal bonds issued within the state to remain tax-free, but to tax interest earned by its residents on municipal bonds issued by other states," Sifma said in the statement.

"Changing the status quo in the manner proposed by the Davis' would have been extremely disruptive to the long established market for municipal bonds, with far-reaching negative effects to individual investors and governmental entities."

New Jersey plans bond sales

Looking ahead, the New Jersey Economic Development Authority plans to price $450 million in series 2008X and 2008Y school facilities construction bonds, said a source at the issuer.

The sale includes $250 million in series 2008X bonds and $200 million in series 2008Y bonds (A1//A+). The series 2008X bonds will be sold May 28 and the 2008Y bonds on June 3.

The 2008Y bonds are due from 2010 to 2033. The maturity date for the 2008X bonds could not be determined by press time, but those bonds are variable-rate securities.

The bonds will be sold on a negotiated basis with Merrill Lynch as the senior manager.

Proceeds from the 2008X bonds will be used for school facilities construction projects, and the 2008Y bonds will be used for refunding existing construction bonds.

Gwinnett hospital to sell bonds

In other upcoming sales, the Gwinnett Hospital System of Georgia plans to price $154.95 million in series 2008 Georgia revenue anticipation certificates on Thursday, said a preliminary official statement.

The sale includes $34.75 million in series 2008A certificates, $60.275 million in series 2008B certificates and $59.925 million in series 2008C certificates.

The certificates (Aa2/VMIG1//) will be sold through the Gwinnett County Hospital Authority.

The 2008A certificates are due July 1, 2034; the 2008B certificates are due July 1, 2042; and the 2008C certificates are due July 1, 2032. The variable-rate certificates initially bear interest at the weekly rate.

SunTrust Bank is the lead manager for the series 2008A and 2008B certificates, and Wachovia Securities is the lead manager for the series 2008C certificates.

Proceeds will be used to refund the system's outstanding series 2007E and 2007F certificates.

New Mexico to price $135.2 million

The New Mexico Finance Authority intends to price $135.2 million refunding revenue bonds, according to a preliminary official statement.

The $84.8 million series 2008C and $50.4 million series 2008D adjustable-rate state transportation refunding revenue bonds will price for the State Transportation Commission.

The bonds (Aa3/AA/) initially will price with a weekly rate.

The series 2008C bonds are due June 15, 2024, and the series 2008D bonds are due Dec. 15, 2026.

JPMorgan will manage the negotiated sale.

Proceeds will be used to refund the outstanding $84.8 million series 2004C refunding revenue bonds and the $50.4 million series 2006D revenue bonds. The refunding of the auction-rate bonds will be completed to limit the state's exposure, according to the statement.

Additional information was not immediately available.

Minneapolis plans bond sale

Minneapolis, Minn., plans to price $50.415 million G.O. bonds on Tuesday, according to a release from Moody's Investor's Service.

The sale will include $11.605 million series 2008 G.O. library bonds and $38.81 million series 2008 G.O. various purpose bonds (Aa1//).

Proceeds will fund improvements to community libraries and multiple capital projects, including improvements to public buildings, streets and the water, sewer and storm water systems.

Calls for additional information were not immediately returned.

Texas to sell $148 million

Texas plans to price $147.745 million G.O. student loan bonds, according to Moody's.

The $73.985 million series 2008A and $28.04 million series 2008B bonds will price on May 27. The $45.72 million series 2008C bonds will price on June 9.

The bonds (Aa1//) will price through the Texas Higher Education Coordinating Board.

Proceeds from the series 2008A bonds will be used to make student loans. Proceeds from the series 2008B bonds will refund certain maturities of the board's series 1997, 1999, 2000 and 2002 bonds.

Proceeds from the series 2008C bonds will refund all outstanding maturities of the series 1994, 1995 and 1996 bonds.

No additional information was available before press time.

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