Municipals flat as new issues price at expectations; Educational Enhancement, S.D., prices

By Sheri Kasprzak

New York, Feb. 28 - Municipal yields were mostly unmoved on Thursday as new bonds came to market, with most getting good reception and pricing levels meeting expectations, market sources said.

"Pretty flat," said one trader of the market tone in the afternoon.

"We're seeing a lot of activity in primary today, so the focus is mostly on that side. We are seeing some bumps for some of the bigger deals coming this afternoon. Overall, new issues are hitting expectations," the trader said.

New York City's general obligation bonds led the day's primary activity.

New York City sells G.O.s

New York City hit the market with the four-tranche deal after a two-day retail order period.

The offering included $500 million of series 2013F-1 tax-exempt bonds, $100 million of series 2013F-2 taxable bonds, $20 million of series 2013G tax-exempt bonds and $230 million of series 2013H tax-exempt bonds.

The bonds were sold through Morgan Stanley & Co. LLC.

The 2013F-1 bonds are due 2015 to 2033 with term bonds due in 2037 and 2038. The serial coupons range from 3% to 5%. The 2037 bonds have a 5% coupon priced at 117.093. The 2038 bonds have a split maturity with a 3.5% coupon priced at 99 and a 4% coupon priced at 104.597.

The 2013F-2 bonds are due 2018 to 2023 with coupons from 1.05% to 2.46%.

The 2013G bonds are due 2013 to 2022 with 2% to 5% coupons.

The 2013H bonds are due 2014 to 2034 with coupons from 2% to 5%.

Proceeds will be used to finance capital projects for the city.

Educational Enhancement prices

In other primary action, the Educational Enhancement Funding Corp. of South Dakota sold $169.37 million of series 2013 tobacco settlement revenue bonds, according to a pricing sheet.

The deal included $122,535,000 of series 2013A taxable bonds (/A/) and $46,835,000 of series 2013B tax-exempt bonds (/A-/).

The 2013A bonds are due 2013 to 2018 with a term bond due in 2022. The serial coupons range from 0.80% to 2.156%, all priced at par. The 2022 bonds have a 3.539% coupon priced at par.

The 2013B bonds are due 2023 to 2027 with 5% coupons.

The bonds were sold through Barclays and Dougherty & Co. LLC.

"South Dakota is marketing a $171 million tobacco settlement-backed issue to refinance a 2002 deal," said Alan Schankel, managing director with Janney Montgomery Scott LLC.

"The issue is S&P A rated on maturities through 10 years and A- 2024 to 2028. The structure is similar to more conservative approaches of recent issues from Illinois (Railsplitter) and Minnesota with breakeven if cigarette consumption declines by 9.9%. Although cigarette shipments fell by more than 9% in 2009, after the federal excise tax was nearly tripled, declines in the past two years have been in the 3% to 4% range."

Proceeds will be used to refund the corporation's series 2002A-B tobacco settlement asset-backed bonds.

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