Municipal trading thins; California on shaky ground; New York City brings two new deals

By Aaron Hochman-Zimmerman and Cristal Cody

New York, Feb. 17 - Municipal trading desks were nearly silent on Tuesday as traders returned from holidays and equities were out to lunch.

Investors across the board made a dash for Treasuries and lost much of what risk appetite there was left.

Meanwhile, in the Mid-Atlantic states, investors continued to be scared off high-grade paper by high dollar prices, a trader said.

"We're not seeing the supply" to support prices from 107 to 110, the trader said. "Retail tends to shy away from that."

There is still an attraction to the yield of a single-A hospital, but as some run for safety, they run up against the high-price issue, the trader said.

The Maryland State Health and Higher Educational Facilities Authority for Medlantic/Helix has seen "good follow-through," the trader said about the A3-rated credit.

Financial tremors in California

California has been a mainstay of municipal issuance, but rumors swirled through the market about the effects of a round-the-clock session in the Legislature and the possibility of as many as 20,000 state employees being laid off.

"It's one of a bunch of factors that makes us nervous," a market source said. "With the budget in flux it's a difficult time."

"People are concerned," he said, and the government has moved to take action, but "the solution is not good."

Many bond issues, such as the paper from the Los Angeles Unified School District, remained relatively liquid, but new issuance may start to hit an even more treacherous road.

"I expect there to be a rough issuance landscape going forward," the source said.

"The state is not going to solve its [budget] problems until there is an economic recovery," he added about the nationwide and global problems.

Oceanside to sell $70 million by seashore

On the primary side, Oceanside Unified School District in California announced plans to issue $70 million series 2009 general obligation refunding bonds.

The district will issue $50 million in new bonds and $20 million in refunding bonds on Wednesday, subject to market conditions.

Serial bonds will carry maturities from 2009 to 2024. Term bonds will also be part of the issue.

The bonds due after 2018 are callable.

Morgan Stanley & Co. and De La Rosa & Co. will act as underwriters for the negotiated issue. KNN Financial will act as financial adviser to the district.

Proceeds will be used to refund series A, B and C 2000 election bonds, which have $8.37 million, $17.75 million and $18.15 million outstanding.

Oceanside Unified School District is based in Oceanside, Calif.

Also in the Golden State, the City of Anaheim Electric System Distribution Facilities in California plans to sell $70 million in revenue bonds through the Anaheim Public Financing Authority on Feb. 24, a source with the issuer told Prospect News.

The series 2009A bonds (Aa3/AA-/AA-) also will be sold through retail orders on Monday, the source said Tuesday.

The bonds have serial maturities from 2010 through 2029 and terms due 2034 and 2039, according to a preliminary official statement.

The bonds will be sold through a negotiated sale led by senior manager Citigroup Global Markets Inc. De La Rosa, J.P. Morgan Securities Inc., Morgan Stanley and Stone & Youngberg are the co-managers.

Proceeds will be used over the next two years to finance the acquisition and construction of distribution transformers, substations and circuit upgrades for the city's electric distribution system.

Trojans pony up $200 million

In Los Angeles, the University of Southern California intends to price $200 million in revenue bonds through the California Educational Facilities Authority.

The series 2009B bonds (Aa1/AA+/) will be sold through a negotiated sale handled by senior manager Morgan Stanley and co-manager Prager, Sealy & Co.

The proceeds will fund improvements to university facilities, including the renovation of the Norris Cancer Center and University Hospital.

Back in the New York Groove

Back east, the City of New York plans to offer $520 million in fiscal 2009 series H G.O. bonds.

The bonds will be made up of subseries H-1 and H-2.

The city will sell $400 million of the tax-exempt H-1 bonds and $120 million of the taxable H-2 bonds.

Both tranches will carry maturities from 2011 to 2024.

Citigroup, J.P. Morgan Securities, Merrill Lynch & Co. and Morgan Stanley will act as underwriters for the deal.

Proceeds from the series H-1 bonds will be used for general purposes and to finance the cost of issuance. The proceeds from the series H-2 bonds will be used for discrete capital purposes.

Also, the City of New York Municipal Water and Finance Authority will offer water and sewer system second general revenue bonds, fiscal 2009 series FF.

The issue will consist of serial and term bonds.

Depfa First Albany Securities LLC, Merrill Lynch, M.R. Beal & Co. and Siebert Brandford Shank & Co., LLC will act as underwriters for the deal.

Proceeds will be used to repay existing debt and to make improvements to the water and sewer system.

Texas Transportation to price $150 million

Other anticipated issues include the Texas Transportation Commission, which expects to price $150 million in first tier revenue refunding put bonds during the last week of February, a source said Tuesday.

The series 2009 bonds (Baa1/BBB+/BBB+) are due in 2042 with a mandatory tender date on Feb. 15, 2011, according to the preliminary official statement.

The bonds will be sold between Feb. 24 and Feb. 26, the source told Prospect News.

"We're just waiting for the documentation to be finalized," the source said.

Citigroup is the senior manager of the negotiated sale.

The proceeds will be used to refund the commission's series 2002B bonds.

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