Honolulu brings $377.91 million G.O.s, reoffered near pricing levels; Nassau County sells $303 million

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, April 8 - As the shortened week winds down, primary action in municipals continued to heat up, led by a $377.91 million sale of general obligation bonds from the City and County of Honolulu.

Meanwhile, Wednesday proved to be a quiet day, traders said, but spreads tightened a bit during the session.

"It was kind of quiet, but then we had a lot going on," one trader said.

"The Cal bonds were trading up pretty smartly," he said about the $6 billion in California G.O. bonds, which tightened 10 to 15 basis points.

The improvement made itself a ray of sunshine for the Golden State, which struggled through the retail offer period for the $434.43 million series 2009 lease California State Public Works Board revenue bonds.

"It looked like it needed help," he said, even though the deal was "incredibly cheap," which it had to be because "it was only A rated."

"They had a two-day retail order period which didn't produce tremendous interest," he said. "They've got a lot of wood to chop on that."

Still, the market has "some supply out of the way," and although "there is still some stuff lurking," the sentiment was strong, especially ahead of a holiday weekend, he said.

The recently upsized City of New York bonds traded up about 5 bps, he said.

"There was a little bit of a tail wind," he added.

Another trader said he saw a huge amount of interest in the 5.45% 2031s, which were reoffered at par Wednesday. The 2031s were priced Wednesday at 5.48%.

The 3% 2015s were unmoved from pricing during reoffering on Wednesday at 3.52%. The 5% 2023s were seen at 4.987% after pricing at par on Tuesday.

Honolulu says 'aloha'

Honolulu's bonds (Aa2/AA/) were issued in three tranches, said a source connected to the deal, which was sold through Merrill Lynch & Co. Inc. and Piper Jaffray & Co.

The sale included $294.01 million in series 2009A bonds, $33.98 million in series 2009B bonds and $49.92 million in series 2009C bonds.

The 2009A bonds are due 2014 to 2027 with term bonds due 2030, 2033 and 2034. The coupons on the serials range from 2.75% to 5%, and yields range from 2.48% to 4.755%. The 2030 bonds have a 5.25% coupon to yield 4.9%, and the 2033 bonds have a 5% coupon to yield 5.013%. The 5% 2034s were priced to yield 5.03%.

The 2009B bonds are due 2012 to 2017 with coupons from 3.88% to 5.42%. The yields range from 3.879% to 5.4%.

The 2009C bonds are due 2011 to 2013 with a term bond due 2018. The serials have 2% to 5% coupons and yields from 1.36% to 2.09%. The 2018 bonds have a 4.75% coupon to yield 4.88%.

Proceeds will be used to refund the city and county's outstanding debt.

In reoffering, one trader said he saw the bonds moving, but not by more than a few basis points. The largest movement came from the series 2009A 2023s, which were reoffered at 4.031% after pricing at 4.11%. The 5% 2033s were reoffered late in the day at 5.02% after pricing at 5.01%. The 2009B bonds and 2009C bonds were little moved.

Nassau County prices

In other primary news, the Nassau County Interim Finance Authority in New York priced a $303 million series 2009 sales tax secured bond (Aa2/AAA/AA+), according to general counsel Jeremy Wise.

The details of the sale were not yet available, but "we got extremely good rates - very favorable pricing," Wise said.

Goldman, Sachs & Co. acted as the lead underwriter for the negotiated bonds due 2009 to 2025.

Proceeds will be used for capital expenditures.

The authority is located in Mineola, N.Y.

American Water Works

American Water Works Co., Inc. in New Jersey priced $80 million in tax-exempt water facility revenue bonds (A3/A/) through the Pennsylvania Economic Development Financing Authority, a press release said.

Morgan Stanley & Co. acted as underwriter for the bonds, which priced with a coupon of 6.2% and mature on April 1, 2039.

"The proceeds from the long-term bond offerings will be used to fund our capital investments and reduce short-term debt," Don Correll, president and chief executive officer of American Water, said in the release.

"Our success in meeting our liquidity needs has allowed us to stay on track to meet our long-term plan of investing $4 to $4.5 billion in our infrastructure the next five years," he added.

American Water Works is located in Voorhees, N.J.

Moody's knocks munis

Elsewhere, Moody's Investors Service assigned a negative outlook to all local and state governments due to recession woes and fears that a large number of governments may default on their debt.

Moody's analysts said that tough economic times may put a great deal of pressure upon governments, especially when it comes to tax income.

This could have an impact upon retail investors, who have recently been purchasing municipals in large amounts.

One market source, however, wasn't particularly moved by the news.

"Any time you have a headline like that, it's going to be cause for concern," said one sellside source reached Wednesday.

"But the economy has been going south for a long time now and Moody's is just now making a statement like this? I think if retail was going to be scared away by the potential problems of local governments, they would have been scared off before now."

Another market source reached earlier this week said retail investors have been drawn to municipals because equities are incredibly risky and Treasuries have not brought impressive yields.

Harris toll road bonds

Moving to upcoming bond sales, Harris County in Texas is expected to sell $220 million in series 2009A toll road senior lien revenue bonds during the week of April 20, said a preliminary official statement.

The bonds (Aa3/AA-/AA-) will be sold through senior manager Siebert Brandford Shank & Co. LLC.

Proceeds will be used to repair roads damaged during Hurricane Ike in 2008.

The county seat is Houston.

Long Beach USD trades

Looking to the secondary market, a trader said activity was fairly quiet, but a few bonds were moving.

The Long Beach Unified School District of California saw its G.O.s reoffered Wednesday. The bonds were seen mostly unchanged from pricing levels set Tuesday. The 3% 2013s were seen at 2.14%, and the 4% 2016s were seen at 3.16%. The 4% 2017s were seen at 3.42%, and the 4% 2018s were seen at 3.67%. The trader said he saw particular interest in the 2018s.

A good portion of the long bonds were not reoffered.

In other trades, Kern County, Calif.'s series 2009 certificates of participation were moving Wednesday. The 5.3% 2027s were seen at 5.349%.

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