Municipals come off gains, outperform Treasuries; Catholic Health sells $1.5 billion bonds

By Sheri Kasprzak

New York, Oct. 25 - The municipal bond market was somewhat weaker on Thursday as investors backed off and Treasuries hit a slump, market sources reported.

"We're getting toward the end of the month, and that could be pulling us back somewhat," said a trader Thursday, who noted that the market lost the firm tone it had on Wednesday.

"Treasuries are off, but we are outperforming Treasuries. I think it's probably just a question of supply. I think demand could be easing off somewhat. The past several months have been heavy on the supply, and there might be a slight dip in supply again."

Catholic Health prices

Heading up the day's pricing action, Catholic Health Initiatives sold $1.5 billion of taxable bonds (Aa3/AA-/) through J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC.

Catholic Health intends to use the proceeds to finance mergers, acquisitions and joint ventures as the company creates new partnerships. News of the offering comes along with word that subsidiary Catholic Health East will merge with Trinity Health.

"CHI, with $10 billion in annual revenue, operates 74 hospitals in 19 states, placing it among the top five health care systems by revenue in the country," said Alan Schankel, managing director with Janney Montgomery Scott LLC.

A $250 million tranche of five-year notes sold at a spread of 80 basis points over Treasuries.

A $500 million tranche of 10-year notes priced at a spread of Treasuries plus 115 bps.

Finally, a $750 million tranche of 30-year bonds sold at a spread of Treasuries plus 140 bps.

All of the notes were priced about 20 bps tighter than guidance, the source said.

Full terms of the sale were not available at press time.

Proceeds will go toward covering the $500 million to $550 million cost of acquiring the other half of Alegent Creighton Health from Catholic Health's co-owner, along with other general corporate purposes, including ambulatory and physician expansion and technology investments.

The non-profit health organization is based in Englewood, Colo.

Honolulu sells G.O.s

In other activity, the City and County of Honolulu sold $914,175,000 of series 2012 general obligation bonds in seven tranches, according to a pricing sheet.

The bonds (Aa1//AA+) were sold through Bank of America Merrill Lynch and Piper Jaffray & Co.

The offering included $255.51 million of series 2012A tax-exempt bonds, $291.18 million of series 2012B tax-exempt bonds, $32,675,000 of series 2012C tax-exempt bonds, $17.91 million of series 2012D taxable bonds, $74.97 million of series 2012E taxable bonds, $50,625,000 of series 2012F taxable bonds and $191,305,000 of series 2012G taxable bonds.

The 2012A bonds are due 2017 to 2037 with 3% to 5% coupons. The 2012B bonds are due 2016 to 2029 with coupons from 3% to 5%. The 2012C bonds are due 2013 to 2027 with 1% to 3% coupons. The 2012D bonds are due 2017 to 2028 with coupons from 1.259% to 3.362%, all priced at par.

The 2012E bonds are due 2015 to 2017 with coupons from 0.778% to 1.259%, all priced at par. The 2012F bonds are due 2017 to 2021 with coupons from 1.259% to 2.412%, all priced at par. The 2012G bonds are due 2017 to 2023 with coupons from 1.259% to 2.812%, all priced at par.

Proceeds will be used to finance capital improvements for the city and county, as well as to refund existing G.O.s bonds.

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