Munis seen shaky, mixed in active pricing day; Carolinas Health Care sells $222.65 million

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, Aug. 13 - Primary action continued to dominate the municipals market Thursday, and insiders said the market was decidedly mixed by the end of the day. Primary is expected to continue to be hot in the coming week, with billions in sales planned.

"It's been a wild day," said one trader. "I'd say we're really mixed in terms of tone. The long end seems to be better by a bit, and the short end is a little weaker."

Meanwhile, another trader said there was good retail business on Thursday as investors hunted for higher yields.

The new issues traded less as mostly "institutions are selling to reposition," he said.

Along with the retail customers, "they just seem to want high-yield muni papers," he said, although there were a few looking to balance with short-term high-quality products.

The two models have created a gap in interest for bonds due eight to 17 years out, he said.

Some of the bond that have filled the gap carry mid-range maturities but also are "cheaper insured revenue bonds," he said.

The draw to the insurance may be as simple as "people are used to buying insured paper," he said.

Still, much of the buying has become irrational, the trader said, and a deal may come along that will perform poorly and force the market to take stock.

"If they stop and think a little bit that could be tough on the market," he said.

The primary market continued to dominate and yields were being adjusted because of that, said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott LLC.

"There is a strong supply of municipal debt in the primary market this week, and that supply is forcing some dealers to adjust yields upwards on unsold balances, but so far those adjustments haven't impacted the secondary markets much," LeBas said.

Carolinas Health Care prices

Moving to Thursday's pricing action, the Charlotte-Mecklenburg Hospital Authority in North Carolina priced $222.645 million series 2009A health care revenue refunding bonds (Aa3/AA-/) at a 5.34% true interest cost on behalf of the Carolinas Health Care System, according to Mark Keener, vice president and treasurer.

"We were very pleased," Keener said.

The bonds priced with an average coupon of 5.16% and an average yield of 5.26%.

The bonds carry serial maturities from 2010 to 2029. Two term bonds due 2034 have a five-year and a 10-year call, respectively, and there is a third term bond due 2039.

Merrill Lynch & Co. Inc. and J.P. Morgan Securities Inc. acted as lead underwriters for the negotiated deal.

Proceeds will be used to refund the health-care system's series 1997A, 2007J, 2007K and 2007L bonds.

"The majority of the refunding is variable-rate," Keener said.

The authority looked to "lower some of the future bank liquidity and renewal risk" left in many of the older variable-rate bonds.

"A few series were with some banks that had some ratings issues," he said.

The hospital authority and health-care system are both based in Charlotte, N.C.

New Jersey Economic Development sells bonds

In other offerings, the New Jersey Economic Development Authority priced Thursday $200 million in series 2009BB school construction bonds, according to a pricing sheet.

The bonds (A1/AA-/A+) were sold through lead manager JPMorgan.

The bonds are due 2011 to 2030 with a term bond due 2034. The coupons range from 3% to 5.25%.

Proceeds will be used to construct schools throughout the state of New Jersey.

The Bulls and Bexar County

Bexar County, Texas, sold $154.31 million series 2009A-B combination flood control tax and revenue certificates of obligation (Aa1/AA+/AA+), according to John Yu of Loop Capital Markets LLC.

The $103.69 million series 2009A bonds priced at a 4.79% TIC with serial maturities from 2016 to 2030 and term bonds due 2033 and 2035.

The $50.62 million series 2009B Build America Bonds priced at a 4.35% TIC. The bonds mature in 2039.

Loop Capital Markets acted as underwriter for the negotiated deal.

Proceeds will be used to fund a countywide flood control project.

The county seat is San Antonio.

Connecticut brings housing bonds

Also on Thursday, the Connecticut Housing Finance Authority sold $65 million in series 2009B housing mortgage finance program bonds, said a pricing sheet.

The bonds (Aaa/AAA/) were sold through senior manager Goldman, Sachs & Co.

The sale included $60 million in series 2009B-1 non-AMT bonds and $5 million in series 2009B-2 bonds.

The 2009B-1 bonds are due 2010 to 2019 with term bonds due 2029, 2034 and 2039. The serial coupons range from 0.7% to 3.85%. The 2029 bonds have a 4.875% coupon. The 2034 bonds have a 5.2% coupon, and the 2039 bonds have a 5.3% coupon.

The 2009B-2 bonds are due 2010 to 2014 with coupons from 1.6% to 3.43%.

All the bonds priced at par.

Proceeds will be used to fund mortgage loans.

Billions in sales ahead

Moving to upcoming sales, a few billion-dollar sales are in the pipeline, led by the Regents of the University of California's planned $1.37 billion in general revenue and Build America Bonds (Aa1/AA/) scheduled to price Wednesday, according to a calendar of upcoming sales.

The university will sell $1.045 billion in Build America Bonds and $325 million in tax-exempt bonds.

Barclays Capital Inc. will act as underwriter for the negotiated deal.

A retail offer period will be held on Tuesday.

The Regents of the University of California is located in Oakland, Calif.

Another billion-dollar sale scheduled during the coming week comes from the Dormitory Authority of the State of New York. Dasny plans to bring $1.24 billion in series 2009 state personal income tax bonds to market Tuesday, said a sales calendar.

The deal includes $395 million in series 2009D bonds, $135 million in series 2009E federally taxable bonds and $710 million in series 2009F federally taxable Build America Bonds.

M.R. Beal & Co. Inc. and Morgan Stanley & Co. Inc. are the lead managers for the 2009D and 2009E bonds. Merrill Lynch is the senior manager for the 2009F bonds.

The 2009D bonds are due 2010 to 2020, and the 2009E bonds are due 2010 to 2019. The maturity dates were unavailable for the 2009F bonds.

Proceeds will be used to fund capital projects at the State University of New York and the City University of New York.

Texas Transportation to bring a billion

Out west, the Texas Transportation Commission plans to sell $1,112,235,000 in series 2009 mobility fund bonds and Build America Bonds Wednesday, said a preliminary official statement.

The sale includes series 2009A taxable Build America Bonds and series 2009B mobility fund bonds, but the exact breakdown has not yet been determined.

The bonds (Aa1/AA+/AA+) will be sold on a negotiated basis with Merrill Lynch as the senior manager. The co-managers are Estrada Hinojosa & Co., First Southwest Co., Jefferies & Co., JPMorgan, Loop Capital Markets, Morgan Stanley, Piper Jaffray & Co., Southwest Securities Inc. and Wachovia Bank NA.

The maturities have not been set.

Proceeds will be used to construct, acquire, improve and expand state highways.

Big D to price bonds

Elsewhere, the Dallas Convention Center Hotel Development Corp. will price $400 million in hotel revenue bonds (A2/A+/) on Tuesday, according to a calendar of upcoming sales.

The bonds will come as both tax-exempt and as Build America Bonds.

Citigroup Global Markets Inc. will act as underwriter for the negotiated deal.

Elsewhere in the Lone Star State, the City of Houston plans to sell $490.81 million in series 2009 public improvement refunding bonds Tuesday, according to a calendar of upcoming deals.

The bonds (Aa3/AA/) will be sold through lead manager Loop Capital Markets.

Proceeds will be used to refund the city's commercial paper notes and existing public improvement bonds.

D.C. to price $270 million in bonds

On Wednesday, the District of Columbia is expected to bring to market $270.09 million in series 2009C income tax secured revenue refunding bonds, said a preliminary official statement.

The bonds (Aa2/AAA/AA) will be sold on a negotiated basis with Barclays Capital as the senior manager.

The bonds are due 2009 to 2028.

Proceeds will be used to refund the city's series 1999A and 1999B bonds.

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