Illinois brings $1 billion in G.O. certificates at 1.86%; market firms yet again

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, May 14 - Thursday proved to be a busy day for the primary municipals market, led by a $1 billion sale of general obligation certificates from the State of Illinois.

Meanwhile, the market was seen firmer yet again, despite a day filled with primary offerings.

One source said he felt the primary offerings were being "well-digested" by the market.

Even so, calendars have thinned, but "volume is still quite robust," said Citigroup's Charlie Plimpton, a director of municipal underwriting assigned to the Newport Beach, Calif., $217.35 million in series 2009A-E revenue bonds to be sold on behalf of Hoag Memorial Hospital Presbyterian. Those bonds are set to go Wednesday.

In recent sessions, "rates have been moving down for a variety of reasons," he said.

However, with its current ratings (Aa3/AA/), "Hoag is the highest-rated health-care credit in the state of California," he said.

Specific predictions are premature.

"It's a little too early to talk yields," he said, but investors will be more influenced by Hoag's status rather than the surrounding market conditions.

Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. will act as underwriters for the deal.

Illinois sells $1 billion

Heading up Thursday's primary calendar was a $1 billion sale of series 2009 G.O. certificates from Illinois.

The sale included $500 million in certificates due April 26, 2010 and $500 million in certificates due May 20, 2010.

Both certificates have a 1.86% coupon, priced at par, said Marcelyn Love with the state governor's Office of Budget and Management.

Morgan Stanley & Co. Inc. was the winning bidder out of six bidders.

Proceeds will be used for the general fund to relieve cash flow pressure.

"We have an obligation to the community organizations and vendors who provide services for the state to get them paid as quickly as possible," Illinois Gov. Pat Quinn said in a statement.

"These are difficult economic times for all of us, so it's absolutely critical that our citizens aren't unduly impacted as we work to get the state back on long-term, sound financial footing."

The state also announced plans Thursday to sell another $1.25 billion in bonds in June. The full details of that sale were not available by press time.

Philly sells $140 million

In other primary market activity, the City of Philadelphia sold $140 million in series 2009 water and wastewater revenue bonds, said Rebecca Rhynhart, the city's treasurer.

The bonds (A3/A/A-) were sold through Banc of America Securities LLC.

The bonds are due 2017 to 2029 with term bonds due 2032, 2033 and 2036. The serial coupons range from 4% to 5.75% and yields range from 3.85% to 5.3%. The 2032 bonds have a 5.25% coupon to yield 5.29%, and the 2033 bonds have a 5.25% coupon to yield 5.30%. The 2036 bonds have a 5.25% coupon to yield 5.33%.

Proceeds will be used to fund improvements to the city's water and wastewater systems.

Clackamas hospital sale

Also on Thursday, the Hospital Authority of Clackamas County of Oregon priced $117.125 million in series 2009A revenue bonds Thursday, said a sellside source connected to the deal. The bonds were sold for the Legacy Health System.

The bonds (A2/A+/) were sold on a negotiated basis with Citigroup as the senior manager.

The bonds are due 2010 to 2024 with term bonds due 2029 and 2035. The serial coupons range from 3% to 5.50%, and serial yields range from 2.23% to 5.30%. The 2029 bonds have a 5.50% coupon to yield 5.55%, and the 2039 bonds have a 5.50% coupon to yield 5.75%.

Proceeds will be used to make loans to Legacy Health System, which is based in Portland, Ore.

In reoffering news, a trader said he saw the bonds moving close to pricing levels during the day Thursday. The 5.125% 2023 bonds were seen reoffered at 5.045%.

Clearwater clears $66 million

Clearwater, Fla., announced the sale of $66 million in water and sewer revenue bonds (Aa2/AAA/AA, insured; A2/AA-/A, underlying), according to a market source.

Yields ranged from 4.01% at the earliest 2019 maturity to 5.50% at the final 2039 maturity.

Wachovia Bank NA acted as lead underwriter for the negotiated issue. RBC Capital Markets Corp., Fifth Third Securities Inc. and Merrill Lynch & Co. were co-managers. Raymond James & Associates Inc. acted as financial adviser.

Proceeds will be used for capital improvement and the retiring of outstanding debt.

Tucson prints $61.8 million

Tucson priced $61.8 million series 2009 revenue bonds for the University Medical Center Corp. at a true interest cost of 6.6% (Baa1/BBB+/), according to Kevin Burns, medical center chief financial officer.

The offering netted the medical center "better yields than we expected," Burns said.

When the plan for the bonds was first being organized, "I'd have been excited if we hit 7%," he said.

"Five months ago no one wanted to lend to anybody," he said.

The bonds carry serial maturities from 2019 to 2024 and term bonds maturing in 2024, 2029 and 2039.

Merrill Lynch acted as underwriter for the negotiated deal, which priced on Wednesday.

Proceeds will be used to reimburse the medical center for costs related to constructing, equipping, acquiring and expanding health facilities, including Diamond Children's Hospital.

Illinois Finance to sell bonds

Looking to upcoming offerings, the Illinois Finance Authority is set to sell $250 million in series 2009 revenue bonds for Silver Cross Hospital and Medical Centers, said a preliminary official statement.

The bonds (/BBB/BBB+) will be sold on a negotiated basis with Goldman, Sachs & Co. as the lead manager.

The maturities have not yet been set on the bonds.

Proceeds will be used to reimburse the hospital for costs related to constructing a replacement hospital. The remaining proceeds will be used to make a deposit to a debt service reserve fund.

Silver Cross Hospital is based in Joliet, Ill.

Oglethorpe to sell

Also ahead, Oglethorpe Power Corp. out of Tucker, Ga., plans to sell $200 million tax-exempt bonds in late 2009 to 2010, according to a statement.

The city may also seek additional allocations to fund a scrubber installation project currently under way at Plant Scherer.

In 2006, the city was given $150 million in allocations for equipment to control mercury emissions at Plant Scherer. Also in 2008, another $50 million of allocations were granted to Plant Wansley to mitigate sulfur dioxide emissions.

After allocation, the city has up to three years to issue the bonds.

Secondary firms

Moving to the secondary market, traders said the market was firmer Thursday, despite heavy primary action.

"Certainly, I do think most of the attention is going to primary, but it seems to be being digested pretty well," said a trader.

"We're basically firmer out on the long end for the day."

Looking to Thursday's trading action, the Illinois State Toll Highway Authority saw its series 2009A Build America Bonds moving. The 5.293% 2024s were seen at 5.027% in the afternoon. The 6.184% 2034 bonds were seen at 6.026%.

The Commonwealth Financing Authority of Pennsylvania saw its recently priced series 2009B revenue bonds moving. The 5% 2026 bonds were seen at 4.27% on Thursday afternoon. The 5% 2027s were seen at 4.404%. The 4.7% 2028 bonds were seen at 4.719%.

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