Municipals close flat as supply drops and retail grows wary; Massachusetts sells $490 million

By Sheri Kasprzak

New York, May 24 - Municipals were again unchanged on Tuesday. The primary market is expected to offer up just $2 billion of new issues this week ahead of the Memorial Day weekend.

"It's going to be a quiet week," said one trader. "There's almost a holiday feeling to the market. Very quiet, not a lot trading, not a lot in primary."

Although the trader noted that some slight cheapening has occurred in the primary market, he said he's not particularly concerned.

"It's not enough to make me say we're headed for a correction," he added.

Massachusetts targets retail

The Commonwealth of Massachusetts' $490 million sale of series 2011 consolidated general obligation bonds, which priced Tuesday, did experience some cheapening during its two-day retail order period, said market insiders.

Although the full details were not immediately available Tuesday evening, the state came to market with $485 million of series 2011B bonds and $5 million of series 2011C Build Massachusetts bonds.

The 2011C bonds, said Alan Schankel, managing director with Janney Montgomery Scott LLC - a co-manager for the deal - were marketed to retail investors and sold in $1,000 pieces of zero-coupon bonds. The bonds are due in 2014.

The 2011B bonds are due 2013 to 2025 with 2% to 5% coupons.

The bonds (Aa1/AA/AA+) were sold through senior manager J.P. Morgan Securities LLC.

Proceeds from the offering will be used to fund capital expenditures included in the current spending plan.

Lansing utility bonds price

Elsewhere in the primary market, the Lansing Board of Water and Light of Michigan brought to market $250 million of series 2011A utility system revenue bonds, said a pricing sheet.

The bonds (Aa3/AA-/) were sold through Bank of America Merrill Lynch.

The bonds are due 2015 to 2031 with term bonds due in 2034, 2037 and 2041. The serial coupons range from 3% to 5%. The 2034 bonds have a 5% coupon priced at par, and the 2037 bonds have a 5% coupon priced at 99.277. The 2041 bonds have a 5.5% coupon priced at 108.551.

The board intends to use the proceeds to finance the construction of 100MW gas-fired combined cycle steam and electric generation facilities and to fund general capital improvements to the utility system as a whole.

Geisinger sells $137.5 million

Also during the session, the Geisinger Authority of Pennsylvania came to market with $137.5 million of series 2011A health system revenue bonds for the Geisinger Health System, said a pricing sheet.

The deal included $100 million of series 2011A-1 bonds and $37.5 million of series 2011A-2 bonds.

The bonds (Aa2/AA/) were sold through J.P. Morgan Securities LLC.

The 2011A-1 bonds are due 2019 to 2023 with term bonds due in 2036 and 2041. The serial coupons range from 4% to 5%. The 2036 bonds have a 5.05% coupon priced at par. The 2041 bonds have a 5.125% coupon priced at par.

The 2011A-2 bonds are due 2012 to 2016 with term bonds due in 2024, 2025 and 2028. The serial coupons range from 0.5% to 5%. The 2024 bonds have a split maturity with a 4.125% coupon priced at 99.452 and a 5% coupon priced at 106.633. The 2025 bonds have a 4.25% coupon priced at 99.063. The 2028 bonds have a 5% coupon priced at 103.089.

Proceeds will be used to finance or reimburse the costs of capital improvements at Geisinger Health facilities.

Geisinger Health System is based in Danville, Pa.

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