Municipal yields end week mostly flat; New Jersey Economic Development brings $851.7 million

By Sheri Kasprzak

New York, Feb. 11 - Munis wrapped up the week largely unchanged, market insiders reported, as Illinois stands poised to hit the market next week with $3.7 billion of taxable bonds.

"There's very little to move the market," said one trader when asked about the tone and trading volume.

"It's been a quiet day, but Treasuries did OK. There's a touch of firmness out there, but we're flat for the most part."

Alan Schankel, managing director with Janney Montgomery Scott LLC, said Friday that the Illinois sale will prove interesting for the market.

"Next week, we'll see an interest test, as Illinois (A1/A+/A), arguably the state with the toughest financial situation, taps the market with a $3.7 billion taxable issue, raising funds for its significantly underfunded pension plans," Schankel said.

"Since the BABs door slammed shut on Dec. 31, we've seen no significant taxable issues, so the issue may benefit from pent-up demand as well as tighter BABs spreads, which are 30 bps below year-end levels.

"Borrowing to fund pensions adds liability to one side (debt) while removing it from the other (pension funding), so strictly speaking, the issue does not add to the state's liability. Last month's income tax increase is certainly a credit positive for the state. The issue has been on the calendar for several weeks, meaning marketing is well under way. We suspect the bonds will receive a decent reception."

Morgan Stanley & Co. Inc., Goldman Sachs & Co. and Loop Capital Markets are the joint bookrunners for the sale with Mesirow Financial Inc. and William Blair & Co. as the co-senior managers.

The bonds are due 2014 to 2019.

New Jersey EDA bonds price

Heading up Friday's light primary action was a major offering from the New Jersey Economic Development Authority, which priced $851.7 million of series 2011 school facilities construction refunding bonds, according to pricing sheets.

The deal included $498.1 million of series 2011GG tax-exempt bonds, $43 million of series 2011HH refunding bonds, $265.6 million of series 2011E Sifma index notes and $45 million of series F Libor index notes.

The 2011GG bonds are due 2013 to 2027 with coupons from 3% to 5.75%. The 2011HH bonds are due 2012 to 2014 with 2.382% to 3.612% coupons, all priced at par. The 2011E bonds are due 2016 and 2018. The 2016 bonds bear interest at 170 basis points over the Sifma index rate, and the 2018 bonds bear interest at 190 bps over the Sifma rate. The 2011F bonds are due Feb. 1, 2018 and bear interest at 70% of Libor plus 190 bps.

Bank of America Merrill Lynch was the senior manager for the bonds (Aa3/A+/AA-).

Proceeds will be used to refund school construction bonds and terminate connected swap agreements.

Bellevue school bonds ahead

Looking to other upcoming sales for the week ahead, the Bellevue School District No. 405 of Bellevue, Wash., is scheduled to bring $200 million of series 2011 unlimited tax general obligation bonds (Aaa/AA+/) competitively on Tuesday.

The bonds are due 2012 and 2015 to 2030, and the proceeds will be used to rebuild three elementary schools, modernize Bellevue High School, modernize the academic portion of Sammamish High School, modernize up to four middle schools and make other capital improvements.

Swedish Health deal set

Coming up on Thursday, the Washington Health Care Facilities Authority plans to bring $175 million of series 2011A revenue bonds (A2//A+) through Citigroup Global Markets Inc. for Swedish Health Services.

The proceeds from the sale will be used to construct, equip, acquire and remodel Swedish Health's inpatient, outpatient and administrative facilities as well as refund debt.

Swedish Health is based in Seattle.

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