Municipal yields hold steady; Illinois prices $900 million, sees some reluctance from buyers

By Sheri Kasprzak

New York, July 14 - Municipal yields were largely unchanged to very slightly improved on Wednesday as the market watched the troubled State of Illinois bring $900 million in series 2010-5 general obligation Build America Bonds to market.

"If there's any movement at all, it's probably out long, and only by a basis point, maybe two," said one trader.

"It's very quiet. There's probably a little more [activity] than yesterday, but not a great deal more."

Amid the trading activity, the Virgin Islands Public Finance Authority's matching fund subordinated bonds were seen moving. The 5.25% 2029 bonds were seen at 5.122%.

In the primary market, Illinois' offering was met with some reluctance by buyers, according to one sellsider watching the deal.

"It really wasn't that cheap for Illinois," said the sellsider.

"I do think investors were leery, but investors are leery in general. Illinois has a ton of problems, but they're certainly not alone there. Loads of states are going through similar issues. For Illinois, it wasn't too bad, if you ask me, all things being relative."

The bonds (A1/A+/A-) were sold through Citigroup Global Markets Inc. with Morgan Keegan & Co. Inc. and PNC Capital Markets LLC as the co-senior managers, said a term sheet.

The bonds are due 2011 to 2016 with term bonds due 2021 and 2035. The serial coupons range from 2.28% to 5.23%. The 2021 bonds have a 6.2% coupon priced at 99.971, and the 2035 bonds have a 7.35% coupon priced at par.

Proceeds will be used to fund transportation projects and other capital projects throughout the state.

RTA bonds to come

Meanwhile in Illinois, the Regional Transportation Authority is expected to bring its previously announced $140 million in series 2010C G.O. working cash notes on Thursday, said the sellsider.

Bank of America Merrill Lynch is the lead manager for the bonds (Aa3/AA/AA-), which are due July 1, 2012.

The Chicago-based authority plans to put the proceeds to use to meet cash flow needs. The state is currently behind on subsidy payments to the RTA, and the offering is being conducted to meet that deficit.

Maryland transportation bonds ahead

In other transportation news, the Maryland Transportation Authority priced $326.435 million in series 2010 transportation facilities revenue bonds (Aa3/AA-/AA-) Wednesday, said a term sheet.

The offering included $29.795 million in series 2010A tax-exempt bonds and $296.64 million in series 2010B Build America Bonds.

The 2010A bonds are due 2015 to 2020 with 3% to 5% coupons. The 2010B bonds are due 2025, 2030 and 2041 and all priced at par. The coupon is 5.164% for the 2025 bonds, 5.604% for the 2030 bonds and 5.754% for the 2041 bonds.

Citigroup and Goldman, Sachs & Co. were the senior managers.

Proceeds will be used to construct, acquire, repair and expand a variety of projects, including the Potomac River Bridge, the Chesapeake Bay Bridge, the Baltimore Harbor Tunnel, the John F. Kennedy Memorial Highway, the Baltimore Harbor Outer Bridge, the Fort McHenry Tunnel and the Intercounty Connector.

New Mexico brings TRANs

In the Southwest, the State of New Mexico priced $127.5 million in series 2010-2011 tax and revenue anticipation notes, said a pricing sheet.

The notes (MIG 1/SP-1+/) were sold competitively. Piper Jaffray & Co., Citigroup, J.P. Morgan Securities Inc. and Morgan Stanley & Co. Inc. all took portions of the notes. The weighted true interest cost came in at 0.30524%.

The notes are due June 30, 2011. The notes were sold in split maturities with a 1.5% coupon priced at 101.127, a 2% coupon priced at 101.597 and a 2.5% coupon priced at 100.463.

Proceeds will be used to finance general capital needs ahead of the collection of taxes and other revenues.

McLeod plans sale

Out on the horizon, Florence County in South Carolina is set to sell $122.415 million in series 2010A hospital revenue bonds for McLeod Regional Medical Center of the Pee Dee Inc., said a preliminary official statement.

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

Proceeds will be used to construct, acquire and equip hospital facilities as well as refund the hospital's outstanding series 2004B bond and a portion of its series 1998A bonds, if market conditions are favorable.

The medical center is based in Florence, S.C., which is the county seat.

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