Municipals close out another busy session mixed; Hawaii prices $1.26 billion of G.O. bonds

By Sheri Kasprzak

New York, Nov. 17 - The municipals market ended another supply-heavy day on a mixed note, said market insiders.

Twenty-year yields were seen firmer by about 5 basis points, said one trader reached during the session, and 30-year yields were softer by more than 3 bps. Five-year yields were seen softer by more than 3 bps.

Although the market was still feeling pressure from the week's heavy primary supply, secondary activity helped push yields back down somewhat, explained one trader. Alan Schankel, managing director with Janney Montgomery Scott LLC, said Thursday that he feels the market has been able to gracefully absorb the week's supply.

"The muni market showed a decent ability to absorb the week's significant new issue flow," Schankel wrote in a report.

Leading Thursday's primary action, the State of Hawaii brought to market $1.264 billion of series 2011 general obligation bonds, said a pricing sheet.

The sale included $800 million of series 2011DZ G.O. bonds, $382.41 million of series 2011EA G.O. refunding bonds, $2.8 million of series 2011EB G.O. refunding bonds, $56 million of series 2011EC G.O. refunding bonds and $23 million of series 2011ED G.O. refunding bonds.

The 2011DZ bonds are due 2016 to 2031 with 3.5% to 5% coupons. The 2011EA bonds are due 2016 to 2023 with 2% to 5% coupons. The 2011EB bonds are due in 2012 and have a 2% coupon. The 2011EC bonds are due 2013 and have a split maturity with 2%, 3% and 5% coupons. The 2011ED bonds are due in 2015 and also have a split maturity with 2%, 3% and 5% coupons.

Hawaii, Schankel reported Thursday, was forced to increase yields by as much as 13 bps compared to Tuesday's retail sale.

"Part of the state's problem may be the late issuance of audited financials, with numbers for FY2010 released only three weeks ago, following a similar delay with FY2009 numbers," Schankel wrote.

"In a time when investors seek more timely, regular and meaningful financial information and disclosure, this tardiness is unacceptable, leading to higher interest expense for the state."

Bank of America Merrill Lynch and Goldman Sachs & Co. were the senior managers for the deal.

Proceeds will be used to finance capital expenditures and refund the state's series 2001CV, 2001CW, 2002CX, 2002CZ, 2003DA, 2003DB, 2004DD, 2004DE, 2005DF and 2006DI G.O. bonds.

Tobacco bonds price

Another major offering hit the market Thursday. The Tobacco Securitization Authority of Minnesota sold $756.955 million of series 2011 Minnesota tobacco settlement revenue bonds, according to a pricing sheet.

The deal included $74.685 million of series 2011A taxable bonds and $682.27 million of series 2011B tax-exempt bonds.

The 2011A bonds have a 2014 maturity with a 2.643% coupon and a 2015 maturity with a 3.093% coupon. The bonds priced at par.

The 2011B bonds are due 2016 to 2026 with a term bond due in 2031. The serial coupons range from 3% to 5.25%. The 2031 bonds have a 5.25% coupon and priced at 99.5.

Barclays Capital Inc. was the senior manager for the bonds (/A/BBB+).

Proceeds will be used to refund existing Minnesota tobacco settlement bonds.

Westchester sells $180 million

Elsewhere, Westchester County, N.Y., priced $180.55 million of series 2011 G.O. bonds (Aaa/AAA/AAA), said a pricing sheet.

The offering included $126.9 million of series 2011B tax-exempt G.O. bonds, $29.39 million of series 2011C tax-exempt G.O. bonds and $24.26 million of series 2011D taxable G.O. bonds.

The bonds were sold competitively. J.P. Morgan Securities LLC won the bid for the 2011B tax-exempt G.O. bonds, and Citigroup Global Markets Inc. took the series 2011C and 2011D bonds.

The 2011B bonds are due 2012 to 2023 with 2% to 5% coupons. The 2011C bonds are due 2012 to 2031 with 2% to 4% coupons. The 2012 to 2013, 2020 to 2023 and 2025 bonds were not reoffered. The 2011D bonds are due in 2016 and bear interest at 1.3% to yield 1.15%.

Proceeds will be used to make improvements, upgrades and repairs to infrastructure projects, including roads, the county jail, park and recreational facilities, community colleges and other county building, as well as to redeem outstanding bond anticipation notes.

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