Munis close unmoved ahead of heavy supply; New York's tobacco issue leads pack of new deals

By Sheri Kasprzak

New York, June 27 - Municipals were largely unmoved on Monday as the market awaited a new slate of primary offerings, said traders.

Secondary activity was light, reported one trader, and with little going on in primary, there wasn't enough momentum to move yields up or down.

"It's a quiet day," said the trader. "It's getting to be a pretty typical pattern with Mondays being kind of directionless. I think the market is very supply-sensitive. There's been a wait-and-see approach to the market lately."

Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC, said in a report that about $5.5 billion of new issuance is expected in the week ahead, led by a massive tobacco deal out of New York.

The Tobacco Settlement Financing Corp. will come to market with $975.555 million of series 2011 asset-backed revenue bonds (/AA-/AA-) through Barclays Capital Inc. and Citigroup Global Markets Inc.

The offering includes $419.765 million of series 2011A bonds and $555.79 million of series 2011B bonds.

Proceeds will refund the corporation's series 2003A-1C and 2008B-1C bonds.

Deal follows dispute resolution

New York's tobacco offering coincides with the reported resolution of $7.1 billion of disputed revenues between tobacco companies and states, said Janney managing director Alan Schankel in a recent report.

The conflict began in 2003 when tobacco companies claimed that dropping profits reduced the amounts they were required to pay states under the 1998 Master Settlement Agreement, which required tobacco producers to pay for medical-related costs.

The resolution, according to Schankel, provides some immediate revenues to states and will minimize future disputes.

The New York offering, though linked to tobacco settlement revenues, also includes an appropriation-backed promise to pay, which garnered it AA- ratings from Standard & Poor's and Fitch, Schankel noted.

Citizens deal set

Another major offering for the coming week is from Florida's state-operated insurer Citizens Property Insurance Corp.

The corporation is set to bring $900 million of series 2011A coastal account senior secured bonds through Citigroup in an effort to meet its claims-paying needs for the 2011 hurricane season, specifically for its coastal account.

Houston deal ahead

Also ahead, the City of Houston is set to bring $450 million of series 2011 airport system revenue refinancing bonds sometime this week, said a sales calendar.

The bonds (/A/A+) will be sold on a negotiated basis with Goldman Sachs & Co. as the senior manager.

The bonds will be sold in two tranches, but the exact breakdown was unavailable Monday.

Proceeds will be used to refund the city airport system's series 1997, 1998A-C, 2000A and 2002A-B bonds.

U of Washington preps deal

Kozlik reported Monday that about $920 million in competitive offerings, spanning 70 issues, is expected for the week ahead. Amid those competitive deals is a $213.595 million sale of series 2011A general revenue and refunding bonds (/AA+/) from the University of Washington.

Seattle-Northwest Securities Inc. is the financial adviser for the bonds, which are due 2012 to 2035.

Proceeds will be used to finance or repay commercial paper notes used to finance capital projects and to refund existing university debt.

The university is based in Seattle.

Broad Museum bonds price

In light primary action on Monday, the California Infrastructure and Economic Development Bank priced $150 million of series 2011A revenue bonds for the Broad Museum, said a pricing sheet.

The bonds (Aa1) were sold through Morgan Stanley & Co. Inc.

The bonds are due June 1, 2021 and have a 5% coupon priced at 115.787.

Proceeds will be used to design, construct, install and furnish a museum facility in downtown Los Angeles.

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