California prices $2.4 billion of $4 billion sale in first retail order period, prices $500 million RANs

By Sheri Kasprzak

New York, March 23 - The State of California hit the municipal market in a big way Monday, selling $2.4 billion of its planned $4 billion in general obligation bonds as well as $500 million in revenue anticipation notes.

In its first day of a two-day order period, the state issued $2.4 billion in series 2009 G.O. bonds, said a source close to the sale. The state intends to conduct another retail order period for the offering on Tuesday before selling the remainder to institutional investors Wednesday.

The bonds, which are due 2013 to 2036, have yields from 3.25% to 6%.

Merrill Lynch & Co. Inc. and Citigroup Global Markets Inc. are the senior managers for the sale.

Proceeds will be used to restart the state's infrastructure program.

Also Monday, the state brought $500 million in series 2009 short-term revenue anticipation notes on a competitive basis with Golden 1 Credit Union purchasing the notes.

The RANs are due June 23, 2009 and have a 2.2% coupon, priced at par.

Proceeds will be used for the state's cash flow requirements.

"Completion of the Golden 1 transaction reduces to $1.5 billion the amount of RAN borrowing needed to make the state's cash-flow requirements through the end of the 2008-09 fiscal year," said Tom Dresslar, spokesman for the state treasurer's office.

The fate of the state's infrastructure program hinges upon the success of the $4 billion sale, said treasurer Bill Lockyer. The state froze infrastructure financing in June 2008, halting thousands of projects.

NJ educational authority sale

Looking to upcoming sales, the New Jersey Educational Facilities Authority is expected to price $253.075 million in series 2009B revenue refunding bonds for the University of Medicine and Dentistry of New Jersey, said a preliminary official statement.

The bonds will be sold on a negotiated basis with Morgan Stanley & Co. and Citigroup Global Markets Inc. as the senior managers.

The bonds are due 2012 to 2018 with term bonds due 2023, 2028 and 2032.

Proceeds will be used to refund the university's series 1995, 1999, 2001A and 2002B bonds.

Also out of the Northeast, the Trust for Cultural Resources of the City of New York plans to price $193.865 million in series 2009 revenue bonds for the Julliard School Wednesday, said a sellside source close to the deal.

The bonds (Aa2) will be sold through senior manager J.P. Morgan Securities Inc.

The sale includes $47.85 million in series 2009A bonds, which are due 2034 and 2039; $76.015 million in series 2009B bonds, which are due 2036; and $70 million in series 2009C bonds, which are due 2036, said a preliminary official statement.

Proceeds will be used to expand and renovate the Julliard campus at Lincoln Center.

JEA's electric system bonds

In other upcoming deals for the week, JEA of Jacksonville, Fla., plans to price $78.395 million in series 2009 subordinated electric system revenue bonds Tuesday, said a preliminary official statement.

The sale includes $64.71 million in series 2009C bonds and $13.685 million in series 2009D bonds.

The 2009C bonds are due 2014 to 2020, and the 2009D bonds are due 2011 to 2012.

Citigroup is the senior manager for the 2009C bonds, and Merrill Lynch is the lead manager for the 2009D bonds.

Proceeds will be used to make improvements to the authority's electric system.

UConn deal planned

Moving to sales coming up later, the University of Connecticut announced plans to price $150 million in series 2009A G.O. bonds, said a preliminary official statement.

The bonds will be sold on a negotiated basis with JPMorgan as the lead manager.

The bonds are due 2010 to 2029.

Proceeds will be used for capital expenses.

Another university is also planning to sell bonds on the horizon.

The University of Hawaii plans to bring $100 million in series 2009A university revenue bonds, said a preliminary official statement released Monday.

The bonds (Aa3/A+/AA-) will be sold through senior manager Merrill Lynch.

The bonds are due 2009 to 2029 with term bonds due 2034 and 2038.

Proceeds will be used to acquire and develop apartments for faculty housing, renovate student housing, make additions to the university's biomedical science building and refinance some of the university's debt.

Secondary stays quiet

Moving to the secondary market, a trader said volume remained fairly light and relatively unmoved.

"A lot of people have their eyes on the California deal," the trader said.

"We'll see how tomorrow and Wednesday go. I'm sure the tone of the whole market will really depend a good deal on how it goes with institutional. I think that they've gotten so much interest from retail, they'll end up upsizing. It looks good so far."

In specific trades, Frederick, Md.'s recently priced series 2009 G.O. bonds were seen in motion. The 4.75% 2028s were seen trading at 4.165%. The bonds priced last week to yield 4.89%.

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