Illinois comes to market with $3.7 billion of taxable G.O. bonds; muni yields close out firmer

By Sheri Kasprzak

New York, Feb. 23 - Municipal yields were buoyed Wednesday by improved Treasuries and solid interest in the State of Illinois' $3.7 billion sale of taxable general obligation bonds, market insiders said.

One trader reached Wednesday said yields were down by 1 to 4 basis points, with the biggest improvement seen on the long end.

"The Illinois bonds probably did help us out a bit because it brought taxables back to the forefront and stirred up some activity on the taxable side," he said.

Meanwhile, the Illinois offering attracted plenty of interest and spreads were attractive, market insiders pointed out, compared with the state's last Build America Bond offering.

The bonds are due 2014 to 2019 with 4.026% to 5.877% coupons, all priced at par. The five-year bonds were priced at 280 bps over comparable Treasuries. Price talk on that maturity was 285 bps over Treasuries, said Alan Schankel, managing director with Janney Montgomery Scott LLC. The spread on the 2019 bonds was 240 bps over Treasuries. Price talk for the 2019s was 245 bps over Treasuries, Schankel said. Spreads on the state's July 2010 BABs were about 300 bps over Treasuries, Schankel noted.

The bonds were sold through joint bookrunners Morgan Stanley & Co. Inc., Goldman Sachs & Co. and Loop Capital Markets LLC with Mesirow Financial Inc. and William Blair & Co. as the senior managers.

Proceeds will be used to finance the state's pension obligations and finance school capital needs.

Houston utility bonds price

Elsewhere in the active primary market Wednesday, the City of Houston priced $280.64 million of series 2011A combined utility system revenue refunding bonds, said a pricing sheet.

The bonds (/AA/AA-/) were sold through Rice Financial Products Co.

The bonds are due 2027 to 2031 with a term bond due in 2033. The serial coupons range from 4.375% to 5.25%. The 2033 bonds have a 5% coupon.

The city intends to use the proceeds to refund its series 2004C-1, 2004C-2A and 2004C-2B bonds.

Louisville prices deal

Also during the session, the Louisville and Jefferson County Metropolitan Sewer District of Kentucky came to market Wednesday with $226.34 million of series 2011A sewer and drainage subordinated bond anticipation notes, said a pricing sheet.

The notes (MIG 1/SP-1+/F1+) were sold competitively with Wells Fargo Bank, NA winning the bid, said Marion Gee, the district's financial director. The true interest cost came in at 0.896189%.

"My philosophy has always been to conduct competitive sales when feasible," Gee said in an interview.

The notes are due March 1, 2012 and have a 2% coupon priced at 101.089.

Proceeds will be used to pay and retire the district's series 2010A sewer and drainage system subordinated BANs, which were used to refund its series 1999A sewer and drainage system revenue bonds.

Grossmont wraps sale

In other pricing news, the Grossmont Healthcare District of California brought to market $136.86 million of election of 2006 series 2011B G.O. bonds, said a term sheet.

The bonds (Aa2) were sold through Goldman Sachs.

The bonds are due 2016 to 2031 with term bonds due in 2034 and 2040. The serial coupons range from 3% to 5.5%. The 2034 bonds have a split maturity with a 5.75% coupon and a 6% coupon. The 2040 bonds have a 6.125% coupon.

Proceeds will be used to continue capital projects including the completion of hospital tower renovations, a central energy plant, a diagnostic and treatment center and a health occupations training center.

The district is based in La Mesa.

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