Market continues to weaken as primary loads up with deals; Harris County sells $395 million

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, June 9 - Another day of weakness plagued the municipals market Tuesday as the week continues to pile on massive offerings.

"We're really reaching saturation [in the primary market]," one market insider said.

"I suspect things will quiet down in the next week. It really has gotten crazy. It normally tapers off around this time of year."

Meanwhile, trading volume was spotty, according to one trader.

"Pretty choppy is a good way to put it," the trader said about the day's trading.

Tuesday's active pricing session was led by a $395 million sale of series 2009 tax anticipation notes from Harris County, Texas. The notes were sold at a blended overall true interest cost of 0.38%, according to Edwin Harrison, director of financial services.

The aggregate TIC was in the range of what Harrison had predicted.

"You never know what to expect nowadays," he noted.

The county accepted bids for as little as $5 million.

J.P. Morgan Securities Inc. took the largest piece of the competitive auction at $275 million.

Citigroup Global Markets Inc. purchased $75 million, Jefferies & Co. purchased $25 million, and Piper Jaffray & Co. purchased $20 million. First Southwest Co. acted as financial adviser.

Ten banks offered bids that totaled nearly $2.5 billion and oversubscribed the issue by six-and-a-half times, Harrison said.

A $210 million piece carries a coupon of 1.5%, while the remaining $85 million carries a coupon of 2%.

The bonds have one maturity on Feb. 25, 2010.

Proceeds will be used to pay for general expenses ahead of tax collection.

The county seat is Houston.

Washington brings $391 million

In other primary action, the State of Washington brought to market $391.3 million in series R-2010A various purpose general obligation refunding bonds Tuesday, said a sellside source connected to the deal.

The full terms of the sale were still being finalized, but Goldman, Sachs & Co. won the competitive bid with a 3.68% TIC.

Seattle-Northwest Securities Corp. was the financial adviser.

The bonds are due 2010 to 2024.

Proceeds will be used to refund existing debt.

PICA sells bonds

Also on Tuesday, the Pennsylvania Intergovernmental Cooperation Authority priced Tuesday $354.93 million in series 2009 special tax revenue refunding bonds, said a sellside source connected to the deal.

The bonds (Aa3/AA/A+) were sold for the City of Philadelphia Funding Program.

The bonds are due June 15, 2010 to June 15, 2023 with yields from 37 basis points over Treasuries to 4.36%.

Goldman Sachs was the lead manager.

Proceeds will be used to refund the authority's series 1999 bonds to convert the debt to fixed rate from variable rate as well as to pay a $56 million swap termination fee to JPMorgan Chase Bank.

Hawaii hangs $624.11 million

Elsewhere Tuesday, the State of Hawaii priced $624.11 million in series 2009 G.O. and G.O. refunding bonds, according to Ted Jones of Citigroup in Hawaii.

Further details of the sale were not immediately available.

Citigroup and Merrill Lynch & Co. Inc. acted as underwriters for the negotiated deal.

The 2009DQ bonds scheduled to price carried maturities from 2013 to 2029, while the 2009DR bonds carried maturities from 2014 to 2019.

Proceeds were expected to be used to reimburse the state for costs related to capital improvements and refund several series of the state's outstanding bonds.

Puerto Rico upsizes sale

Looking to Wednesday's busy primary calendar, the Puerto Rico Sales Tax Financing Corp. upsized its planned offering of series 2009 sales tax revenue bonds to $4.5 billion from $3.5 billion, said a sellside source close to the deal.

The offering is set to come to market Wednesday.

The bonds (A2/A+/A) will be sold through Citigroup.

The deal includes current interest bonds, which are due 2014 to 2020 with term bonds due 2024, and capital appreciation bonds, which are due 2021 to 2036.

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

L.A. County to return

Another large offering for the week comes from Los Angeles County, which plans to offer its postponed $1.1 billion tax and revenue anticipation notes (/SP-1/F-1+) on Wednesday or Thursday, according to Glenn Byers, county assistant treasurer and tax collector.

Merrill Lynch & Co. will act as underwriter for the negotiated issue.

It is too difficult to predict what yields the county may see when it prices, likely on Thursday, Byers said.

Even within the past few days "things are changing," he said.

"Taxable rates have really jumped up, and munis haven't seen the same levels," he added.

The original issue was pulled June 3 as the county filed a memo with the state government expressing its concern about a nearly $22 billion budget gap.

"The legislature has a very difficult process to go through," and although the governor and lawmakers have been working constantly to fix the budget, there has been "nothing earthshaking," he said.

Controller John Chiang has pressed the government to find $12 billion under the budget, to be supplemented by $10 billion in borrowing to close the gap by June 15.

However, "it takes a two-third majority to adopt a budget," Byers said as "the Republicans have the leverage and the Democrats can't adopt a budget without some Republican support."

Florida Housing waits

The Florida Housing Finance Corp. postponed its $50 million in 2009 series I homeowner mortgage revenue non-alternative minimum tax bonds (/AA+/AA+), according to a spokeswoman.

"We're waiting for an opportune time to do it," the spokeswoman said.

The corporation will resume the offer when market conditions are more favorable.

The bonds were scheduled to be placed via negotiated sale and underwritten by RBC Capital Markets Corp., Citigroup and JPMorgan.

The bonds would have carried maturities from 2011 to 2019 with term bonds due 2024, 2029, 2034 and 2040.

Proceeds would have been used to finance home loans.

The corporation is located in Tallahassee, Fla.

PANYNJ to price

Moving to upcoming sales, the Port Authority of New York and New Jersey is expected to come to market with $750 million in consolidated bonds in three tranches, said a preliminary official statement.

The sale includes $150 million in 157th series bonds, $250 million in 158th series bonds and $350 million in 159th series bonds.

The bonds will be sold through lead managers Citigroup and Loop Capital Markets LLC.

The 157th series bonds are due 2019, the 158th series bonds are due 2024, and the 159th series bonds are due 2029.

Proceeds will be used to fund capital expenses related to the construction of One World Trade Center and the retail components at the site.

Houston, we have a muni

Also coming up, the City of Houston is expected to price $150 million in series 2009 tax and revenue anticipation notes June 17, said a preliminary official statement.

The notes will be sold competitively with First Southwest Co. as the financial adviser.

The notes are due June 30, 2010.

Proceeds will be used to fund general expenses ahead of the collection of ad valorem taxes.

In other upcoming sales, Fulton County in Georgia is scheduled on June 17 to price $120 million in general fund tax anticipation notes, said a preliminary official statement.

The notes (MIG 1/SP-1+/F1+) will be sold on a competitive basis with Public Financial Management Inc. as the financial adviser.

The notes are due June 25, 2009.

Proceeds will be used to pay for general capital expenses ahead of the collection of certain taxes.

The county seat is Atlanta.

Lower Colorado sale ahead

Also coming up on June 17, the Lower Colorado River Authority of Texas is expected to sell $290.175 million in series 2009 refunding revenue bonds, said a preliminary official statement.

The sale includes $175.75 million in series 2009 refunding revenue bonds (A1//A+) and $114.425 million in series 2009 transmission contract refunding revenue bonds (A2//A+).

The bonds will be sold on a negotiated basis with Goldman Sachs as the senior manager.

The refunding revenue bonds are due 2010 to 2024 with term bonds due 2029, 2034 and 2039. The transmission contract refunding revenue bonds are due 2016 to 2024 with term bonds due 2029 and 2036.

Proceeds from the refunding revenue bonds will be used to refund existing commercial paper notes. Proceeds from the transmission contract bonds will be used to refund the authority's outstanding transmission contract revenue notes.

The authority has its headquarters in Austin, Texas.

Atlanta sale

Also in June, the City of Atlanta is set to sell $600 million in series 2009A water and wastewater revenue bonds, according to a preliminary official statement. Pricing is expected to take place in June.

The bonds (Baa1/A/BBB+) will be sold through senior managers JPMorgan and Merrill Lynch.

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

Proceeds will be used to pay for capital improvements to the city's water and wastewater system as well as refund the city's series 2006 commercial paper notes.

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