Puerto Rico Sales Tax Financing readies $3.5 billion sale; market weakens as calendar fills up

By Sheri Kasprzak

New York, June 8 - The tone of Monday's market took a weaker turn as insiders await a week jam-packed with offerings.

The action is led by a $3.5 billion sale from the Puerto Rico Sales Tax Financing Corp. The corporation plans to sell series 2009 sales tax revenue bonds Wednesday, according to a calendar of sales. A two-day retail order period for the deal began Monday.

The bonds (A2/A+/A) will be sold through senior manager Citigroup Global Markets Inc.

The sale includes current interest bonds, which are due 2014 to 2020 with term bonds due 2024, 2039, 2042 and 2044, as well as capital appreciation bonds, which are due 2021 to 2036.

Proceeds from the sale will be used for operating expenses and to fund the government's stimulus plan.

Meanwhile, a trader reached Monday afternoon said he saw yields rising.

"Looks like tax-exempt is taking the biggest hit," he said. "Yields are up 2, maybe 3 basis points there."

Elsewhere, a sellside source said he feels the influx of sales may negatively impact the secondary market.

"There are a lot of huge sales coming up," he noted. "That's generally bad news for secondary."

U of Texas sale ahead

The rest of the week is also filled with big sales, including Tuesday's $616.535 million in general obligation and G.O. refunding bonds from the State of Hawaii.

Also ahead, the Board of Regents of the University of Texas is set to sell $330 million in series 2009B revenue financing system taxable bonds on Thursday, according to a preliminary official statement.

The bonds (Aaa/AAA/AAA) will be sold through lead managers Morgan Stanley & Co. Inc. and J.P. Morgan Securities Inc.

The maturities have not yet been set.

Proceeds will be used to refinance commercial paper notes.

The university is based in Austin, Texas.

Also coming up this week, the Berks County Municipal Authority in Pennsylvania is set to sell $136.635 million in series 2009A-3 fixed-rate revenue bonds for Reading Hospital and Medical Center, said a preliminary official statement.

The bonds (Aa3/AA/AA-) will be sold on a negotiated basis with RBC Capital Markets Inc.

The bonds are due 2009 to 2019 with term bonds due 2024, 2031 and 2039.

Proceeds will be used to renovate the Reading Hospital laboratory as well as to refinance existing debt.

The seat of Berks County is Reading, Pa.

Connecticut deal coming

Out on the horizon, the State of Connecticut is expected to sell $310 million in series 2009 state revolving fund general revenue bonds, said a preliminary official statement.

The sale includes $210 million in series 2009A general revenue bonds and $100 million in series 2009B refunding general revenue bonds.

The bonds will be sold on a negotiated basis with Ramirez & Co. Inc. as the lead manager.

The 2009A bonds are due 2010 to 2027, and the 2009B bonds are due 2010 to 2021.

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

In other upcoming sales, the County of Chesterfield in Virginia is set June 16 to sell $93.17 million in series 2009 G.O. public improvement bonds, said a preliminary official statement.

The bonds will be sold on a competitive basis with Public Resources Advisory Group as the financial adviser. The sale includes series 2009A G.O. bonds and series 2009B G.O. refunding bonds.

The bonds are due 2010 to 2030.

Proceeds will be used to refund the county's outstanding series 1998 and 1999 bonds.

The county seat is Chesterfield, Va.

San Diego Public Facilities sale

In other deals, the Public Facilities Financing Authority of the City of San Diego is set during the week of June 22 to price $325 million in series 2009B water revenue bonds, said a preliminary official statement.

The bonds (A1/AA-/AA-) will be sold on a negotiated basis with JPMorgan as the lead manager.

The bonds are due 2010 to 2029 with term bonds due 2034 and 2039.

Proceeds will be used to refund the authority's series 1998 certificates and 2008A notes.

Secondary weakens

Moving to the secondary market, traders said the tone weakened with yields gaining as much as 3 bps, especially for tax-exempt deals.

In specific trading action Monday, the School Board of Broward County in Florida saw its recently priced certificates of participation moving. The 5.125% 2026 bonds were seen at 5.178%.

Elsewhere, Eastern Michigan University's 7.11% 2034 bonds were trading at 6.85%.

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