DART brings $1 billion in revenue bonds, Build America Bonds; Atlanta upsizes to $750 million

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, June 16 - Tuesday proved not only to be a busy day for the new-issue market but a firmer day for the market as a whole, insiders reported.

"We're feeling better," noted one trader reached during the day. "Yields are down 1 to 2 basis points."

Trading action has been concentrated at the five-year range, leaving the longer end open, according to a D.C.-based market source.

There is still demand on the retail side for longer-term paper, the source said.

Meanwhile, action on the primary front was led by a $1 billion sale of revenue bonds and Build America Bonds from the Dallas Area Rapid Transit, said a market source familiar with the deal. The offering was the largest sale in DART history.

The deal included $750 million in Build America Bonds and $250 million in revenue bonds.

The Build America Bonds priced at 175 bps plus Treasuries for the 2034 maturity and 150 bps over Treasuries for the 2039 maturity.

The tax-exempt revenue bonds were priced at 51 bps over Treasuries for the 2010 to 2014 maturities, 43 bps over Treasuries for the 2015 to 2019 maturities and 10 bps over Treasuries for the 2020 to 2022 maturities.

The bonds (Aa3/AAA/) were sold through senior manager Siebert Brandford Shank & Co. LLC.

Proceeds will be used to make a deposit to an acquisition and expansion fund.

Atlanta sells $750 million

Another large offering came out of the City of Atlanta. The city came to market with an upsized $750 million in series 2009A water and wastewater revenue bonds, said a sellside source familiar with the sale. The offering had been set for $600 million.

The bonds (Baa1/A/BBB+) were sold on a negotiated basis with J.P. Morgan Securities Inc. and Merrill Lynch & Co. Inc. as the lead managers.

The bonds are due 2011 to 2029 with a term bond due 2039.

The 2011 to 2018 bonds priced at a spread of 176 bps plus Treasuries to yield 3.2%; the 2019 to 2029 bonds priced at a spread of 227 bps plus Treasuries to yield 5.75%; and the 2039 term bond priced at a spread of 113 bps over Treasuries to yield 6.38%.

Some market sources had predicted earlier that the city's decision to go sans insurance might hurt it, given the less-than-stellar credit rating. Even so, Guy LeBas, chief fixed income strategist at Janney Montgomery Scott LLC, said he feels it doesn't make that much of a difference anymore.

"Now that the market for less-than-perfect credits is starting to revive, Atlanta's decision to issue uninsured isn't all that surprising," LeBas said in an interview.

"There's only one major insurer - Assured Guaranty - in the primary markets these days, and their cost for AA1 credit is likely very high. The fact that the market digested this deal at reasonable spreads suggests that a great deal of healing has occurred in just the last eight weeks or so. Investors are once again concerned with yield, not solely safety."

Proceeds will be used to fund capital improvements to the city's water and wastewater system as well as refund the city's series 2006 commercial paper notes.

Connecticut brings $244.1 million

Also Tuesday, the State of Connecticut priced $244.1 million in series 2009 state revolving fund general revenue bonds, said a sellside source connected to the deal.

The bonds (Aaa/AAA/AAA) were sold through lead manager Ramirez & Co. Inc.

The sale included $199.7 million in series 2009A general revenue bonds and $44.4 million in series 2009B refunding general revenue bonds.

The 2009A bonds are due 2010 to 2027 with coupons from 2% to 4.375% and yields from 1.1% to 4.375%. The 2009B bonds are due 2010 to 2015 with coupons from 3% to 4.25% and yields from 1.1% to 2.66%.

Proceeds will be used to pay for water and wastewater projects as well as refund the state's series 1999 bonds.

Elsewhere on the East Coast, the Andrew W. Mellon Foundation in New York sold $230 million in series 2009 taxable bonds Tuesday, said John Hull with the foundation.

The bonds (Aaa/AAA/) were sold through lead manager Morgan Stanley & Co. Inc.

The bonds are due Aug. 1, 2014 and have a 3.95% coupon to yield 3.954%.

Proceeds will be used to fund a variety of charities.

Wichita harvests $132.62 million

Wichita, Kan., priced $132.62 million in water and sewer utility bonds (/A-/) over two tranches on Monday, according to Kelly Carpenter, financial director.

The $119.775 million non-taxable series 2009A bonds carry serial maturities from 2009 to 2029 with term bonds due 2034 and 2039 and priced at a true interest cost of 4.86%.

The $12.845 million taxable series 2009B bonds carry serial maturities from 2009 to 2019 and priced at a TIC of 5.165%.

The taxable bonds were not placed as Build America Bonds, but "we are going to look at some Build America Bonds for our next straight G.O. issue," Carpenter said.

As the issue was ready to price, Carpenter had only scant concerns that a saturation of new issues during the week may draw attention away from the city's bonds.

"We were the first ones," she said about pricing on Monday of a busy week.

The interest was strong, she said, and the TICs were "only 10 bps higher than expectations" put together by financial adviser Springsted Inc.

"Kansas doesn't have a whole lot out there," she added.

Citigroup Global Markets Inc. acted as the lead underwriter for the negotiated deal, while George K. Baum & Co. acted as co-manager.

Proceeds will be used for an aquifer storage and recovery project.

Washington Airports prices

Metropolitan Washington Airports Authority sold $314.435 million series 2009C airport system revenue bonds (Aa3/AA-/AA), according to a market source.

The bonds carry maturities from 2010 to 2039 and yields that range from 1.13% to 5.37%.

Deals from the authority are "always well received," and "fairly priced," the market source said.

Piper Jaffray & Co. acted as lead underwriter for the negotiated deal.

Barclays Capital Inc., Morgan Keegan & Co. Inc., Wachovia Bank, Citigroup, JPMorgan, Loop Capital Markets LLC, Morgan Stanley and Siebert Brandford Shank were co-managers.

Proceeds are scheduled to refund the authority's flexible-term passenger facility charge revenue notes and to make deposits into a debt service reserve fund.

The Metropolitan Washington Airports Authority is located in Washington, D.C.

Huskies pull $75.84 million

University of Washington priced $75.835 million in general revenue taxable bullet bonds (Aa1/AA+/) at a TIC of 3.974%, according to Chris Malins, senior associate treasurer.

The Build America Bonds mature on July 1, 2039 and carry a coupon of 6.06% with a net interest cost of 6.08%.

The sale went "very well," Malins said. "Treasuries rallied yesterday."

"It was a good simple sale," he said.

Barclays Capital acted as lead underwriter for the negotiated deal. Merrill Lynch/Banc of America Securities LLC acted as co-manager.

Proceeds are intended for various campus projects.

The university is located in Seattle.

Regional Transportation sale

Looking to Wednesday's pricing action, the Regional Transportation Authority of Illinois is set to sell $260 million in series 2009B taxable general obligation working cash notes, said a preliminary official statement.

The notes (/SP-1+/F1+) will be sold on a negotiated basis with Wachovia Bank as the senior manager.

The notes will be sold in two tranches. The first tranche is due April 1, 2011 and the second is due June 1, 2011.

Proceeds will be used to meet cash flow deficits and refund the authority's series 2008 notes.

Nassau to sell G.O.s

In other upcoming deals, the County of Nassau in New York is expected on Monday to sell $150 million in series 2009 G.O. bonds, said a preliminary official statement.

The bonds (A2/A+/A+) will be sold on a competitive basis with Public Financial Management, Inc. as the financial adviser.

The deal includes $135.3 million in series 2009C general improvement bonds and $14.7 million in series 2009D sewer and storm water resources district bonds.

Both bonds are due Oct. 1, 2039.

Proceeds will be used to fund general public improvements and water and storm water improvements.

The county seat is Mineola, N.Y.

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