New York City Transitional Finance sells $600 million in BARBs; municipal market closes flat

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, June 3 - As the market comes down from a very active day for pricings, municipals closed out Wednesday largely unmoved, market insiders said.

"There's really not a lot of movement at all today," said one trader reached during the afternoon.

"Primary has tapered off somewhat, so we're not really moving one way or the other. There's limited activity [in secondary], but some things are moving."

Wednesday's primary action was led by the New York City Transitional Finance Authority's $600 million in series 2009S-5 building aid revenue bonds, said Ray Orlando, spokesman for the city's Office of Budget Management.

The bonds (A1/AA-/A+) were sold through senior managers Citigroup Global Markets Inc. and Goldman, Sachs & Co.

The bonds are due 2011 to 2039 with yields from 1.25% to 5.33%.

"Under legislation enacted last spring by the State of New York, the TFA is authorized to have outstanding up to $9.4 billion of bonds to finance capital costs for the New York City Department of Education," said a statement released Wednesday by the TFA.

"TFA BARBs are payable from and secured by New York State building aid for educational purposes. The New York City personal income tax and the New York City sales tax will not be pledged as additional security for the TFA BARBs."

Proceeds will be used to pay for a portion of costs related to the authority's five-year building plan.

Institutional interest spotty

"I think the institutional interest is very spotty," Anthony Shields, a senior vice president with Grigsby & Associates, said.

Meanwhile, retail business has been worse, he said.

"I talk to people on the Street," he said, "everyone is saying 'What are you doing for business?'"

"For the New York Transitional Finance Authority, we got no orders," he said. The deal brought $200 million in pre-sale business, which he said seems to be "a very tepid response."

"There are spots of interest," he said, particularly for the higher yielding paper, but the market has been fickle and that interest has been available only on "a day-to-day basis."

The overarching theme has been Treasury yields, which have backed off recently and sent municipals slightly higher, but "the government needs to borrow trillions," he said. "That should be good for munis."

As Washington, D.C., scrambles for revenues, "people can put some of their income in tax-free instruments," he said.

"I still don't know what California is going to do," he said.

Washington Metro sales bonds

In other pricing news from the week, the Washington Metropolitan Area Transit Authority priced $307 million in series 2009 gross revenue transit bonds on Tuesday. The sale is the largest offering from Metro in 10 years, according to spokeswoman Candace Smith.

The bonds (A1/A/) are due 2010 to 2032 with yields from 1% to 7.14%. The average rate is 4.69%.

Goldman Sachs was the lead manager for the sale.

"There was very high demand, and the pricing of the bonds was below what we had anticipated," said Carol Kissal, Metro's chief financial officer, in a statement.

"We planned for an average interest rate of 5.5%. The lower rate of 4.69%, and the fact that we did not have to pay for insurance or have a debt service reserve, will save Metro millions of dollars."

The demand for the sale, said general manager John Catoe, is a reflection of the authority's "strong financial management and the financial strength of the state and local governments that help fund Metro."

Proceeds will be used to pay for transit improvements.

Virginia Beach finds $72 million

Virginia Beach priced $72 million in series 2009 general obligation public improvement bonds at a true interest cost of 3.655747% (Aa1/AAA/AA+), according to Richard Dunford, city debt and financial services manager.

"We were happy with that," Dunford said about the TIC. "We were hoping for under 4%."

Robert W. Baird & Co. Inc. won the auction over six other bidders. Government Finance Associates Inc. acted as financial adviser to the deal.

The bonds carry maturities from 2010 to 2029.

Proceeds will be used to fund various public projects.

One for Texas

Texas priced a $71.73 million series 2009 college student loan G.O. bond (Aa1/AA/), according to Morgan Keegan & Co. Inc. senior vice president Buddy Kempf.

"I think the yields we were hoping for were the yields we got," Kempf said.

The bonds carry serial maturities from 2013 to 2030 with one term bond due 2033. Yields ranged from 2.17% to 4.98%.

Wachovia Securities LLC acted as the lead underwriter with Edward Jones & Co., Morgan Keegan and RBC Capital Markets acting as co-managers.

Proceeds will be used to make low-interest student loans for college students in Texas.

Tennessee Local prices

The Tennessee Local Development Authority priced a $52.845 million series 2009A state loan programs bond anticipation note at a TIC of 0.374559% (MIG 1/SP-1+/F1+), according to Lauren Lowe, a Public Financial Management Inc. consultant.

Barclays Capital Inc. won the auction over six other bidders. Public Financial Management acted as financial adviser.

The short-term notes are due June 16, 2010.

Proceeds will be used to make loans to local governments to fund construction projects.

The authority is located in Nashville.

In other pricing news, the Government of Guam sold $283.23 million in series 2009A G.O. bonds (/B+/) Wednesday, but the pricing details were not immediately available, said a sellside source close to the offering. The details should be made public before the end of the week.

Citigroup and Piper Jaffray & Co. were the leads for the bonds, which are due 2014, 2019 and 2039.

Proceeds will be used to fund a government-incurred settlement, tax refunds and capital improvements to Guam Memorial Hospital.

Dartmouth to sell $250 million

In upcoming sales, Dartmouth College in Hanover, N.H., plans to sell $250 million in series 2009A taxable bonds, said a preliminary official statement. The sale, a market insider said, will likely take place in the coming week.

The bonds (Aa1/AA+/) will be sold through senior manager Morgan Stanley & Co. Inc.

The bonds are due June 1, 2019.

Proceeds will be used to fund working capital.

NYC Municipal Water deal

Also coming up, the New York City Municipal Water Finance Authority is expected to price $500 million in series 2009GG water and sewer system second general resolution revenue bonds, said a preliminary official statement.

M.R. Beal & Co. is the senior manager.

Proceeds will be used to repay commercial paper notes and pay for construction projects.

In other new-issue deals, Clark County in Nevada is set to price $169.93 million in series 2009 flood control bonds, said a preliminary official statement.

The sale includes $22.63 million in series 2009A tax-exempt flood control G.O. bonds and $147 million in series 2009B taxable flood control Build America Bonds.

The bonds (Aa1) will be sold through lead manager Merrill Lynch & Co. Inc.

The 2009A and 2009B bonds are due 2009 to 2038.

Proceeds will be used to refund the county's series 1998 bonds.

The county seat is Las Vegas.

Secondary action light

In Wednesday's light trading activity, the Allegheny County Hospital Authority's revenue bonds for the University of Pittsburgh Medical Center were moving. The 5% 2023 bonds were trading near par. The 4% 2014s were seen at 3.3%.

Elsewhere, Wisconsin Health and Educational Authority's ThedaCare Inc. bonds were also moving. The 4.5% 2023s were seen at 6.674%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.