Munis end day firmer; California State Public Works Board prices $743.31 million revenue bonds

By Sheri Kasprzak

New York, Nov. 19 - Municipal yields were better by a few basis points, said a trader reached during the day on Thursday, as the California State Public Works Board sold $743.31 million in series 2009 lease revenue bonds. That deal was downsized from a planned $1.34 billion.

"We're gaining some ground," said one trader.

"There's less competition from primary, and it will probably be the case for most of the week. I think next week, things are going to be quiet all over."

The California State Public Works Board sale included $591.575 million in series 2009I bonds and $151.735 million in series 2009J bonds, said Tom Dresslar, spokesman for the state treasurer's office.

Of the bonds sold, $447.2 million were sold to retail investors.

"Looks like retail really got in there, which is good," said one sellsider when asked about the deal.

"I think pricing went well. It definitely tells us that retail is eager for California bonds again. They [retail investors] have backed off in the past few deals they've done, so this is encouraging."

The 2009I bonds are due 2010 to 2024 with term bonds due 2029, 2034 and 2034. The serials have coupons from 4% to 6.25% and yields from 2.65% to 5.73%. The 2029 bonds have a 6.125% coupon to yield 6.18%, and the 2034 bonds have a 6.375% coupon, priced at par. The other 2034 bonds have a 6.625%, also priced at par.

The 2009J bonds are due 2013 to 2026 with term bonds due 2029 and 2034. The serial coupons range from 4% to 5.5%, and yields range from 3.19% to 5.73%. The 2029 bonds have a 6% coupon, priced at par, and the 2034 bonds have a 6% coupon, priced at 6.05%.

The bonds (Baa2/A-/BBB-) were sold on a negotiated basis with Wachovia Bank, NA as the senior manager for the 2009I bonds and Jefferies & Co. as the lead manager for the 2009J bonds.

Proceeds will be used to construct, acquire, equip and operate public buildings.

"The deal originally was sized at $1.34 billion," Dresslar said in a statement. "But the state decided not to finance construction of the new condemned inmate complex at San Quentin with proceeds from the sale. Legal questions arose Wednesday about whether the San Quentin facility could be funded with the bonds. The state did not have enough time to address those issues and decided to drop the project from the sale. The action reduced the deal's size by $596.7 million."

William Beaumont Hospital to sell

Looking to the coming week, primary action is expected to be very quiet, with action led by a $272.625 million sale of series 2009W hospital revenue and refunding bonds from the Royal Oak Hospital Authority of Michigan. The bonds will be sold for William Beaumont Hospital on Tuesday, said a sales calendar. A retail order period will be conducted Monday.

The bonds (A1//A-) will be sold through senior manager Morgan Stanley & Co. Inc.

Proceeds will be used to refund the hospital's series 2001 and 2003 auction-rate securities as well as to provide capital for improvements.

Also coming up on Tuesday, University Health Services Inc. of August, Ga., plans to price $151.1 million in series 2009 revenue certificates, said a sales calendar.

The bonds (A1/A+/) will be sold through lead manager J.P. Morgan Securities Inc.

Proceeds will be used to refund the health services' series 1999, 2003 and 2008 certificates.

Alabama Public School sale ahead

Also coming up, the Alabama Public School and College Authority plans to sell $145.88 million in series 2009D capital improvement pool qualified school construction bonds, said a preliminary official statement.

The bonds (Aa2/AA/AA) will be sold on a negotiated basis with Morgan Stanley as the lead manager.

The bonds are due Dec. 15, 2026.

The proceeds will be loaned to qualified schools and colleges for school construction.

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