State Public Works Board of California preps for institutional sale of Build America Bonds

By Sheri Kasprzak

New York, Oct. 21 - The municipals market rounded out Wednesday mostly unchanged but with a firmer tone, market sources reported, as the State Public Works Board of California prepares to offer its $820 million in lease revenue bonds to institutional investors.

"If I had to give the tone, I'd say very slightly firmer," said one trader reached in the afternoon.

"There's not a lot trading, but there's a firmer feeling. We're largely unchanged."

Amid the light trading action, the North Slope Borough of Alaska's recently priced series 2009B Build America Bonds were moving. The 5.426% 2023 bonds were seen at 5.218%.

Elsewhere, the City of Atlanta's water and wastewater revenue bonds were seen in action. The 5.25% 2027s were seen trading at 4.8% Wednesday afternoon.

Looking to Thursday's calendar, California's State Public Works Board is gearing up for the institutional order period for its series 2009 lease revenue bonds.

The retail order period for the bonds, according to state treasury spokesman Tom Dresslar, has been lackluster.

"It doesn't surprise me that they haven't gotten much retail interest," said one sellside source when asked about the board's retail order period.

"There's a great deal of risk associated with the bonds, and maybe retail is backing off a bit from that risk."

Dresslar reported that during the first day of the retail order period on Tuesday, individual investors bought $67.5 million of the $820 million in bonds. The retail investors were not offered $500 million in Build America Bonds, which will be offered to institutional investors Thursday.

A total of $263.2 million of the tax-exempt bonds were offered to individual investors Tuesday, and the $67.5 million represents 25.6% of the total offered. Institutional investors were offered the tax-exempt bonds Wednesday, but the results of the sale were not available by press time.

Preliminary yields, Dresslar said, ranged from 1.47% for the 2010 bonds to 5.5% for the 2029 bonds.

Morgan Stanley & Co. Inc. and RBC Capital Markets Inc. are the senior managers for the negotiated sale.

Alabama school bonds price

Looking to Wednesday's pricing action, the Alabama Public School and College Authority priced Wednesday $680.1 million in series 2009 capital improvement bonds, said a sellside source connected to the sale.

The sale included $467.3 million in series 2009A bonds, $175 million in series 2009B bonds and $37.8 million in series 2009C bonds.

The 2009A bonds are due 2012 to 2029 with yields from 2.02% to 4.7%, and the 2009B bonds are due 2010 to 2019 with yields from 2.02% to 4%. The 2009C bonds are due 2010 to 2029 with yields from 2.02% to 4.7%.

Morgan Stanley was the lead manager.

Proceeds will be used to refund the authority's series 2001A and 2002A bonds as well as fund capital improvements to the authority's colleges and public schools.

Maryland brings $200 million

Elsewhere, the State of Maryland sold $200 million in series 2009 state and local facilities loan general obligation bonds, said a pricing sheet. The offering was substantially downsized from the planned $803.37 million. The sale had previously included $603.37 million in series 2009C refunding bonds, but that portion was canceled.

The bonds (Aaa/AAA/AAA) were sold on a competitive basis with J.P. Morgan Securities Inc. winning the $141.8 million series 2009A G.O. bonds and Barclays Capital Inc. winning the $58.2 million series 2009B Build America Bonds portion.

The true interest cost for the 2009A bonds came in at 2.85%, and the TIC for the 2009B bonds came in at 4.68%.

The 2009A bonds are due 2012 to 2021 with 5% coupons across the board, and the 2009B bonds are due 2022 to 2024 with 4.45% to 4.8% coupons.

Proceeds will be used to fund state and local facilities capital grants for local governments for public schools, community colleges and jails as well as to refund existing debt.

Duke University Health bonds price

In other news, the North Carolina Medical Commission priced Wednesday $150.715 million in series 2009 health-care facilities revenue bonds for Duke University Health System, said a term sheet.

The sale included $65.355 million in series 2009A bonds, $65.36 million in series 2009B bonds and $20 million in series 2009C bonds.

The senior manager for the bonds (Aa2/AA/AA) was Citigroup Global Markets Inc.

All three series have a 0.56% coupon, priced at par, and all three series are due June 1, 2039.

Proceeds will be used to construct, acquire, equip, expand and renovate health-care facilities operated by Duke University Health, which is based in Durham, N.C..

Ohio sells $75 million

Also on Wednesday, the State of Ohio sold $75 million in series 2009B Third Frontier research and development G.O. bonds (/AA+/AA), said a pricing sheet.

The bonds were sold through senior managers RBC Capital Markets and PNC Capital Markets LLC.

The bonds are due 2012 to 2019. The coupons range from 2% to 5%.

Proceeds will be used to fund research and development costs associated with the Third Frontier program, which expands the state's high-tech research capabilities and fosters the creation of new high-tech jobs in the state.

Baltimore County to price $262.17 million

Looking out on the horizon, Baltimore County in Maryland is expected to sell $262.17 million in series 2009 G.O. bonds, said a preliminary official statement. The sale is scheduled for Tuesday.

The bonds will be sold on a competitive basis with Public Resources Advisory Group as the financial adviser.

The sale includes $36 million in series 2009A 72nd issue metropolitan district bonds, $70.6 million in series 2009B 72nd issue metropolitan district bonds, $60 million in series 2009A consolidated public improvement bonds, $63 million in series 2009B consolidated public improvement bonds and $32.57 million in series 2009C consolidated public improvement economic development bonds.

The 2009A 72nd issue bonds are due 2010 to 2019, and the 2009B 72nd issue bonds are due 2020 to 2039. The 2009A consolidated bonds are due 2010 to 2019, and the 2009B consolidated bonds are due 2020 to 2029. The 2009C bonds are due 2010 to 2029.

Proceeds will be used to design and construct water, sewer and drainage systems; finance or refinance public works projects; and construct public school buildings.

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