Yields jump as billions in new bonds hit market; NYC Transitional Finance sells $830 million

By Sheri Kasprzak

New York, Oct. 26 - Municipal yields took a hit on Tuesday as the market processed another deluge of new offerings, something that didn't surprise at least one trader.

"It's not really that surprising," he said. "We're choking on new stuff. We really expected it. Short and intermediate bonds are probably taking the worst of it. Yields inside of 10 years are up maybe 8 basis points or so. Long bonds are up but not quite so much, maybe 3 or 4 [bps]."

Heading up that glut of new issues was an $830 million offering of future tax secured bonds (Aa1/AAA/AAA) from the New York City Transitional Finance Authority.

The sale included $700 million in series 2011B-1 Build America Bonds, $100 million in series 2011B-2 taxable subordinated bonds and $30 million in series 2011B-3 tax-exempt subordinated bonds, said a pricing sheet.

Morgan Stanley & Co. Inc. was the senior manager for the 2011B-1 bonds. Wells Fargo Securities LLC was the winner of the series 2011B-2 and 2011B-3 bonds after a competitive bid.

The 2011B-1 bonds are due 2020 to 2025 with term bonds due 2031, 2036 and 2038. Coupons ranged from 4.075% to 5.572%, all priced at par.

The 2011B-2 bonds are due 2015 to 2019 with coupons from 2.43% to 3.75%.

The 2011B-3 bonds are due 2012 to 2014 with 2% to 5% coupons.

Proceeds will be used to finance capital improvements.

Philly deal prices

The City of Philadelphia priced $619.32 million of series 2010 airport revenue bonds, said a sellsider familiar with the offering. The sale came just a day after Assured Guaranty Insurance Municipal Corp. was downgraded by Standard & Poor's to AA+ from AAA.

The bonds were partially insured by Assured Guaranty, though the insured portion was "substantially cut," according to the sellsider, who spoke with Prospect News Tuesday.

"It doesn't seem to have impacted it very much, if at all," said the sellsider of Assured Guaranty's downgrade.

"The one thing that they did to avoid a problem was just substantially cut the insured portion. Truth be told, I don't know if it would have made that much of a difference in pricing even if they hadn't, but I think it went OK, all things considered."

The deal included $267.67 million in series 2010A non-AMT bonds, $25.13 million in series 2010B non-AMT refunding bonds, $56.215 million in series 2010C AMT refunding bonds and $270.305 million in series 2010D AMT refunding bonds.

The 2010A bonds are due 2011 to 2030 with term bonds due 2035 and 2040. Coupons range from 2% to 5.25% with yields from 1% to 4.7%. The 2010B bonds are due 2011 to 2015 with 2% to 5% coupons and 1.3% to 2.19% yields. The 2010C bonds are due 2011 to 2018 with 2% to 5% coupons and 1.78% to 3.74% yields. The 2010D bonds are due 2011 to 2025 with a term bond due 2028 and coupons from 2% to 5.25%. Yields ranged from 1.78% to 4.96%.

Bank of America Merrill Lynch was the lead manager for the bonds (A2/A+/A). The co-lead managers included J.P. Morgan Securities LLC, Siebert Brandford Shank & Co. LLC and Morgan Stanley & Co. Inc.

Proceeds will be used to upgrade and modernize airport facilities as well as refund the city's series 1997A airport revenue refunding bonds and series 1998A airport revenue refunding bonds.

Baltimore sells G.O. bonds

In other news, Baltimore County, Md., sold $391 million in series 2010 general obligation bonds, said a pricing sheet.

The deal included $124 million in 73rd issue Baltimore County Metropolitan District bonds, $247.05 million in series 2010A Baltimore County consolidated public improvement bonds and $19.95 million in series 2010B Baltimore County public improvement qualified school construction bonds.

The 73rd issue bonds are due 2012 to 2026 with term bonds due 2032 and 2040. Coupons range from 2% to 5.05%.

The series 2010A bonds are due 2018 to 2030 with 3.11% to 4.9% coupons, all priced at par.

The 2010B bonds are due 2029 and have a 4.97% coupon priced at par.

Calls to the issuer for the winning bidder of the competitive sale were not returned by press time Tuesday.

Proceeds will be used to refund bond anticipation notes; construct, design and acquire water supply, drainage and sewerage systems in the county; upgrade and construct parks and recreation facilities, agricultural projects, community college projects, community improvements and waterway improvements; and construct new schools and upgrade existing school facilities.

Orlando-Orange prices bonds

Elsewhere, the Orlando-Orange County Expressway Authority of Florida sold $280 million in series 2010C revenue bonds, said a pricing sheet.

The bonds were sold through Citigroup Global Markets Inc.

The bonds are due 2025 to 2027 with term bonds due 2029, 2030, 2035 and 2040. The coupons range from 4% to 5%, but the full terms were not immediately available.

Proceeds will be used to finance costs associated with acquiring, constructing, improving and expanding highway projects under the authority's five-year plan.

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