Munis little changed; market braces for $9.5 billion new issues; New York Thruway deal ahead

By Sheri Kasprzak

New York, June 25 - Municipals were mostly unchanged on Monday as secondary action remained extremely light, traders reported.

"There's really next to nothing trading," said one trader reached in the afternoon.

"It's been very quiet. Everyone is focusing on the new issues coming up."

Despite some volatility in Treasuries, municipals managed to hold their own, the trader noted.

Meanwhile, the coming week will bring about $9.5 billion of new deals, said Tom Kozlik, municipal credit analyst with Janney Montgomery Scott LLC.

"This is the last full week of issuance before the July 4th holiday split-week, and we expect issuance to be solid at about $9.5 billion, led by a $1.1 billion New York Thruway revenue bonds [issue] and a $500 million Long Island Power Authority issue," Kozlik said.

LIPA to bring $500 million

The Long Island Power Authority offering, Kozlik said, is the authority's largest sale since 2008, and the deal has an underlying rating of A3 from Moody's Investors Service with a negative outlook "due to weakening cash flows and limited liquidity."

The bonds will be sold through senior managers Morgan Stanley & Co. LLC and Goldman Sachs & Co. in two tranches. The deal includes $250 million of series 2012A bonds and $250 million of series 2012B bonds.

The authority intends to use the proceeds to fund capital expenditures and to refund existing debt.

The authority last came to the market early in June with $324 million of series 2012 electric system general revenue bonds. That deal included $175 million of series 2012C bonds and $149 million of series 2012D bonds. The 2012C bonds are due May 1, 2033, and the 2012D bonds are due Dec. 1, 2029. Both bonds initially bear interest at the weekly rate.

New York thruway deal set

One of the largest sales of the week comes from the New York State Thruway Authority, which plans to price $1,101,345,000 of series I general revenue bonds (A1/A/).

Citigroup Global Markets Inc. and Siebert Brandford Shank & Co. LLC are the senior managers for the bonds, which are due 2013 to 2032 with term bonds due in 2037 and 2042.

The bonds will fund the authority's 2012 to 2015 multi-year capital program and to pay principal and interest on its series 2011A general revenue bond anticipation notes.

Durham details G.O. deal

Also on Monday, the City of Durham, N.C., revealed additional information on its $66,865,000 sale of series 2012 general obligation bonds.

The county sold the bonds (Aaa//AAA) competitively last week. The bonds were sold in four tranches: $11.32 million of series 2012A G.O. bonds, $4.82 million of series 2012B taxable G.O. bonds, $38.62 million of series 2012C G.O. bonds and $12,105,000 of series 2012D G.O. refunding bonds.

Bank of America Merrill Lynch won the bid for the 2012A bonds with a 2.438% true interest cost and also took the series 2012C bonds with a 2.611% TIC and the 2012D bonds with a 1.853% TIC, Chad Cowan, treasury manager for the city, said in an interview Monday. The series 2012B bonds were won by FTN Financial with a 0.619% TIC.

The 2012A bonds are due 2013 to 2032 with 2% to 4% coupons. The 2012B bonds are due 2013 to 2015 with 1% coupons. The 2012C bonds are due 2013 to 2032 with coupons from 3% to 5%. The 2012D bonds are due 2013 to 2025 with coupons from 2% to 5%.

Cowan said Monday that the city is required to sell its G.O. new money debt competitively with a few exceptions.

"We could have sold the refunding [portion] negotiated but chose to do it competitively for the sake of simplicity," Cowan said.

Rather than hiring a team to sell the bonds, Cowan noted, the city chose to bid the whole issue competitively.

Proceeds will be used to finance capital improvements within the city and to refund its series 2005A G.O. bonds.

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