Muni yields end at record lows; Phoenix Civic Improvement prices $714.28 million revenue bonds

By Sheri Kasprzak

New York, Aug. 10 - Municipal yields closed at record lows on Tuesday with 10-year munis reportedly ending at about 2.5%, one trader said. Just a week ago, 10-year yields were around 2.8%.

"It's insane," said the trader.

"It's absolutely going through the floor right now. It's a good time to be an issuer, for sure."

In fact, the biggest deals of the week came to market on Tuesday, led by a $714.28 million offering of revenue bonds (A1/A+/) from the Phoenix Civic Improvement Corp. of Arizona.

The offering included $660.855 million in series 2010A bonds, $21.345 million in series 2010B taxable bonds and $32.08 million in series 2010C junior-lien refunding bonds.

The 2010A bonds are due 2013 to 2034 with a term bond due 2040. Coupons range from 2% to 5.25%. The 2040 bonds have a 5% coupon priced at par.

The 2010B bonds are due 2040 and have a 6.6% coupon priced at par.

The 2010C bonds are due 2023 to 2025 with 5% coupons.

Barclays Capital Inc. was the senior manager.

Proceeds from the sale will be used to construct a rail link at Sky Harbor International Airport.

The authority manages the state's debt issuance.

Portland brings bonds

In other offerings, the City of Portland, Ore., priced $407.85 million in a downsized offering of series 2010A second-lien sewer system revenue bonds, said Eric Johansen, the city's debt manager. The city intended to sell $412.06 million.

The bonds (Aa3/AAA/) were sold competitively with Bank of America Merrill Lynch winning the bid with a 3.862945% true interest cost. The city received eight bids for the bonds.

"The TIC on the bonds was better than I was expecting by about 15 to 20 bps," said Johansen.

Johansen said the city sells about 95% of its bonds competitively because he feels competition results in lower borrowing costs.

"That certainly puts us in the minority of issues in an 80% positive negotiated market," he added.

"Nonetheless, we maintain that competitive bidding simply results in lower costs for our taxpayers and ratepayers and most of our bonds are sold that way."

The bonds are due 2011 to 2035 with coupons from 2% to 5%.

Proceeds will be used to finance capital facilities and improvements to the sanitary sewer and storm water drainage system as well as to repay a line of credit. Those capital improvements include a combined sewer overflow project on either side of the Willamette River, Johansen said.

The timing of the offering was chosen simply because the city needed the money at this time.

"Today's sale date was selected a couple of months ago," he noted.

"As it turned out, this was a great week to be in the market, given the low supply of tax-exempt bonds."

Tacoma prices deal

Also on the West Coast, the City of Tacoma, Wash., sold $103.225 million in series 2010 water system revenue bonds on Tuesday, said a pricing sheet.

The bonds (Aa2/AA/) were sold through Citigroup Global Markets Inc.

The offering included $29.575 million in series 2010A revenue and refunding bonds and $73.65 million in series 2010B Build America Bonds.

The 2010A bonds are due 2013 to 2024 with coupons from 2% to 4%. The 2010B bonds are due 2030 and 2040. The 2030 bonds have a 5.371% coupon priced at par. The 2040 bonds have a 5.621% coupon also priced at par.

Proceeds will be used to finance capital improvements to the water system. They may also be used to refund outstanding bonds.

Louisiana sale ahead

Looking to upcoming offerings, the State of Louisiana plans to bring to market $405.3 million in series 2010B second-lien gasoline and fuel tax revenue bonds, said a preliminary official statement.

The bonds (Aa2/AA/) will be sold on a negotiated basis with Goldman, Sachs & Co. and Citigroup as the senior managers.

The bonds are due 2013 to 2030 with term bonds due 2035, 2040 and 2045.

The state intends to use the proceeds to construct and maintain the New Florida Avenue Bridge and the Interstate 12 to Bush Highway project, also known as Louisiana Highway 3241.

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