Munis finish stronger as the last large deals of the week price; Chicago airport bonds price

By Sheri Kasprzak

New York, Aug. 23 - Municipal yields were seen stronger on Thursday as the week's largest deals priced, said traders, finally outperforming Treasuries after a tough start to the week.

Yields were firmer by 2 basis points to 4 bps across the yield curve, said one trader reached in the afternoon.

"The bulk of the week's larger offerings have priced already, so it's giving us some direction. Not to mention Treasuries have recovered, which has taken some pressure off of muni yields as well."

Chicago airport bonds price

Amid those larger offerings was a $452,095,000 sale from the Chicago O'Hare International Airport. The airport priced series 2012 passenger facility charge revenue refunding bonds, said pricing sheets.

The deal included $114,855,000 of series 2012A non-AMT bonds and $337.24 million of series 2012B AMT bonds.

The 2012A bonds are due 2014 and 2017 to 2032 with 3% to 5% coupons. The 2012B bonds are due 2013 to 2032 with 2.5% to 5% coupons.

"The two 2032 maturities were priced with a 5% coupon carrying preliminary yields of 3.48% for the non-AMT and 3.93% for AMT, indicating that AMT tax status requires 45 bps additional yield," said Alan Schankel, managing director with Janney Montgomery Scott LLC.

The bonds (A2/A-/A) were sold through Citigroup Global Markets Inc.

Proceeds will be used to refund existing passenger facility charge bonds.

Frederick sells debt

In the competitive market, Frederick County, Md., sold $61.37 million of series 2012B general obligation public facilities taxable refunding bonds, said a pricing sheet.

The bonds were sold competitively with Raymond James/Morgan Keegan winning the bid with a 1.335% true interest cost, said Lori Depies, finance director for the county.

The bonds are due 2014 to 2020 with 1% to 1.66% coupons.

"Frederick County performs competitive sales for its bonds," Depies said in an interview.

"The bond sale today was a refunding opportunity identified by our financial adviser, Davenport & Co. They routinely monitor market conditions to identify refunding opportunities that will yield debt service savings for the county."

Proceeds will be used to advance refund county bonds.

North Texas water bonds price

Elsewhere during the session, the North Texas Municipal Water District priced $57,205,000 of series 2012 Upper East Fork Wastewater Interceptor System contract revenue refunding and improvement bonds, said a pricing sheet.

The bonds (Aa1/AAA/) were sold competitively with Bank of America Merrill Lynch winning the bid with a 2.6375536% true interest cost, said Judd Sanderson, the district's finance director.

The bonds are due 2013 to 2032 with 2% to 5% coupons.

"The district is not required to issue its bonds competitively but prefers to do so," Sanderson said Thursday.

Proceeds will be used to construct the Lower Cottonwood Gravity Outfall, the Wilson Creek Interceptor, the Dublin Road Relift Station, the Lower Cottonwood Gravity Outfall and other wastewater interceptor pipelines and related facilities as well as to refund existing debt.

MTA payroll tax ruling

The payroll tax of New York City's Metropolitan Transportation Authority has been ruled by the Nassau County Supreme Court as unconstitutional because it only applies to 12 counties in the state. The ruling could remove more than $1.2 billion of revenue from the authority.

The MTA has already said it will appeal the ruling.

"The MTA strongly believes that yesterday's ruling from Nassau Supreme Court is erroneous," said a statement released by the authority Thursday.

"We will vigorously appeal it and we expect it will be overturned since four similar supreme court cases making the same argument were previously dismissed."

Even so, it might be too soon to tell how this would impact the MTA's outstanding debt.

"I haven't really noticed any drastic impact," said one trader reached during the day.

"The ratings agencies might take a look at them if they can't win their appeal because that is a pretty big cut in revenues."

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