Primary activity jumps, new issues surge despite insurance woes; California GOs yield from 2.05% to 4.1%

By Cristal Cody and Sheri Kasprzak

New York, Feb. 7 - If issuers were skittish about putting their offerings on the table, you'd never know it by the flurry of activity on Thursday.

With several bonds pricing and several more upcoming bonds announced, the market was flooded, led by a massive $3.2 billion offering from California.

"It was a big day," said one market insider when asked about the sudden deluge of deals.

"I do think a lot of issuers have been holding back, but the bond insurers seem to be pulling it together and getting the financings they need to avoid downgrades. That does give issuers a lot more room to breathe, so they're getting on with it."

California's $3.2 billion deal

California got on with it in a big way, pricing a $3.183 billion economic recovery bond package, with 52% sold through orders from individual investors, Tom Dresslar, spokesman for California Treasurer Bill Lockyer, said in an interview.

The bonds priced with a true interest cost of 2.997%.

"It was a good time to go the market with these particular credits," he said. "They were highly rated and backed by a special revenue stream. Combine that with what's going on in the stock market and you had a good environment for selling bonds."

Proceeds from the series 2008A fixed rate bonds (Aa3/AA+/AA-) of $1.26 billion and series 2008B bonds of $1.9 billion will help finance a portion of the state's accumulated state budget deficit.

The bonds have maturities from July 1, 2008, to 2011 and in 2023.

Series 2008A bonds priced with coupons that range from 3% to 5% and 4% in 2023, with yields from 2.05% to 2.62% and 4.10% in 2023.

Series 2008B bonds priced with coupons from 4% to 5% and yields from 2.6% to 2.81%. There is a mandatory tender in 2010 to 2011 and the final maturity is July 1, 2023.

Lehman Brothers and Citigroup Global Markets are the senior managers, with 29 additional underwriters as co-managers.

New York State Thruway bonds

In other pricing news, the New York State Thruway Authority priced $239.14 million highway and bridge service contract bonds on Thursday, selling the majority through retail sales, the issuer told Prospect news.

The authority sold $200 million to individual investors and trust departments on Wednesday and nearly $40 million to institutions on Thursday, said Michael Sikule, director of investments and assets management for the authority.

"We had a phenomenal response to retail," he said. "Morgan Stanley was saying the retail was going to be strong, but we didn't expect it to be this strong. It's just what the market is right now. There's not many alternatives for folks to invest in."

The authority priced $239.14 million series 2008 local highway and bridge service contract bonds (AA-/A+) with a maturity structure from April 1, 2008, through 2017. The bonds priced with a true interest cost of 2.942%.

Coupons ranged from 3% to 5% with yields from 1.75% to 3.5%.

Morgan Stanley is the lead manager of the negotiated deal, with nine additional underwriters as co-managers.

Proceeds will be used to refund maturities from outstanding highway and bridge service contract bonds.

Looking ahead, the authority plans to price up to $700 million dedicated highway and bridge trust fund bonds with 20-year serials the week of March 3, Sikule said. The pricing will include about $370 million of refunding bonds.

Illinois Toll Authority bonds

Another major pricing Thursday came from the Illinois State Toll Highway Authority, which priced $766.2 million senior refunding revenue bonds with an initial 1.6% initial interest rate, the issuer said Thursday.

The series 2008 A-1 and series A-2 variable-rate senior refunding revenue bonds priced Wednesday, said Mike Colsch, the authority's chief financial officer.

The rates for the bonds (Aa3/AA) reset weekly.

Goldman, Sachs & Co., is the senior manager of the deal, which has 11 co-managers.

Proceeds will be used to refund a portion of the authority's series 2006 A-1 bonds and all of the series 2006 A-2 bonds.

Anchorage's $95 million TANs

Also priced on Thursday were $95 million general obligation tax anticipation notes from Anchorage, Alaska, a source familiar with the offering said.

The notes, rated SP1+ by Standard & Poor's, are due Dec. 30, 2008 and priced with a 2.5% coupon to yield 1.87%.

The city plans to use the proceeds to pay its ongoing expenses until it can collect its ad valorem taxes and other revenue sources.

The bonds were sold on a competitive basis and JPMorgan Chase & Co. won the bid.

Harris County, Texas was also set to price $351.27 million in bonds on Thursday.

The bonds included $35 million series 2008A permanent improvement refunding bonds, $40 million series 2008A unlimited tax road refunding bonds, $120 million series 2008A flood control district contract tax refunding bonds and $156.27 million series 2008B flood control district contract tax refunding bonds (Aa1/AA+/AA+).

The bonds were sold on a negotiated basis through lead managers Morgan Keegas & Co. and Estrada Hinojosa & Co. Rice Financial Products Co., Jackson Securities, Southwest Securities and RBC Capital Markets were the co-managers.

All of the bonds besides the flood control district bonds have serial maturities from Oct. 1, 2008 to Oct. 1, 2028. The flood control district bonds are variable-rate bonds.

The full terms of the offering could not be determined Thursday.

Proceeds are for the refunding of outstanding bonds.

In other pricing news Thursday, Indiana University was expected to price $85.615 million in student fee bonds, series S (Aa1).

The bonds were priced in a serial structure from 2008 to 2027 with a term bond due 2032. The full terms were not available Thursday.

JPMorgan Chase & Co. was the lead manager with City Securities Corp., Siebert Brandford Shank & Co. and Lehman Brothers as the co-managers.

The university plans to use the proceeds for refunding tax-exempt commercial paper and financing new projects.

Denver's GOs price

Denver, Colo., priced $174.135 million in general obligation justice system facility bonds (Aa1) on Wednesday, the city reported Thursday.

The bonds priced in a serial structure from 2008 to 2025, according Margaret Danuser, the city's debt administrator.

The bonds have coupons from 3% to 5.5% and yields ranging from 1.98% in 2008 to 4.1% in 2025, according to a term sheet released Thursday by the city.

Proceeds from the offering will be used for improvements to jail and courthouse facilities.

The bonds were sold competitively through led manager Piper Jaffray and co-managers JPMorgan, Morgan Stanley and Harvestons Securities.

New York MTA plans $750 million offering

Moving to upcoming deals, the Metropolitan Transportation Authority of New York City said Thursday it will price $750 million in transportation revenue bonds on Feb. 11.

The bonds will be sold on a negotiated basis and will have a serial structure from 2009 to 2028 with term bonds due 2033 and 2038, according to a preliminary official statement.

JPMorgan Chase & Co., Lehman Brothers and UBS Investment Bank are the lead managers.

Goldman, Sachs & Co. is the financial advisor for the city.

Proceeds will be used to finance transit and commuter projects, as well as to refinance debt held by the authority or the MTA Bridges and Tunnels.

Buffalo school bonds

In other upcoming offerings, the Erie County Industrial Development Agency plans to price $170 million school facility revenue bonds for the Buffalo city school district the week of Feb. 11.

"We're shooting for next week," said David Kerchoff, assistant treasurer for the agency.

The bonds should close by the end of the month.

The series 2008A bonds (Aaa/AAA/-) have serial maturities from 2009 through 2029.

Financial Security Assurance Inc. will guarantee principal and interest on the bonds under an insurance policy.

Citi is the lead underwriter of the negotiated pricing, with Depfa First Albany Securities LLC, Siebert Brandford Shank & Co., Sterne, Agee & Leach Inc. and UBS Investment Bank as co-managers.

Proceeds will be used to help finance the redevelopment program of Buffalo's public schools.

Thomas Jefferson University bonds

Thomas Jefferson University plans to price $71.55 million revenue bonds on March 5, according to a release Thursday from Moody's Investors Service.

The series 2008A and 2008B weekly variable rate bonds are being issued through the Pennsylvania Higher Educational Facilities Authority.

Moody's assigned an A1 rating to the $25 million series 2008A bonds and $46.55 million series 2008B bonds.

UBS Securities LLC is the underwriter for the negotiated pricing.

Proceeds from the series 2008A bonds will be used to fund capital projects and improvements, and proceeds from series 2008B bonds will be used to refund the university's series 2005 revenue and refunding bonds.

Additional information was not available.

Pasadena, Texas to bring $55.4 million

Elsewhere, Pasadena, Texas said it will price $55.4 million in waterworks and sewer system revenue bonds on Feb. 19, according to an official notice of sale released Thursday.

The bonds will be sold on a competitive basis with RBC Capital Markets as the financial advisor for the city.

The bonds will have a serial structure from 2010 to 2033, the notice of sale said.

Proceeds will be used for improvements to the city's water and sewer system.

Also in the future, a representative from Illinois State University said Thursday that it intends to sell $51.82 million in bonds through two offerings.

The university is planning to sell $30.005 million in series 2008 auxiliary facility system revenue bonds and $21.815 million in series 2008 certificates of participation.

The revenue bonds, according to Stephen Bragg, vice president of the university's office of management and budget, will price on Feb. 27 and the certificates of participation on April 1. The bonds, which were rated A2 on Thursday by Moody's Investors Service, will be sold on a competitive basis, Bragg noted.

"We're going to our board of trustees for approval of the bonds on Feb. 15," said Bragg.

Proceeds from both will be used for various capital projects on campus, including a new student fitness and kinesiology and recreation center, as well as a power plant.

In other educational bond news, the School Board of Manatee County in Florida intends to price $56.895 million, according to a preliminary official statement released Thursday.

The exact pricing date could not be determined by press time.

The certificates (Aaa/AAA/AAA) will be sold on a negotiated basis through lead manager UBS Investment Bank. Citigroup Global Markets, Wachovia Bank and Merrill Lynch & Co. are the co-managers, the official statement said.

The certificates will have serial maturities due 2009 to 2021 and the proceeds will be used to refund the board's 1998 certificates.

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