Munis see some firmness; Iowa Fertilizer prices for retail; Stanford brings $301.69 million

By Sheri Kasprzak

New York, April 30 - Municipals were somewhat firmer on Tuesday, particularly 10 years and out, as some of the week's larger deals priced for retail including a $1,194,000,000 deal for Iowa Fertilizer Co., market sources reported.

"Short bonds are pretty stagnant, but outside of 10 years, yields are down maybe 2 to 3 bps," one trader said.

"We're getting in some levels on retail [order periods], so that's giving us some direction."

Secondary action was relatively strong, said a trader, despite the busy primary calendar.

Iowa Fertilizer ahead

The Iowa Finance Authority is expected to price for institutional investors $1,194,000,000 of series 2013 Midwestern disaster area revenue bonds for Iowa Fertilizer on Wednesday after a retail order period on Tuesday.

Initial levels were seen between 5% and 5.5% for the 2019, 2022 and 2025 bonds, said a market source familiar with the issue.

According to Fitch Ratings, projected average debt service coverage levels of 1.16 times are expected for the bonds, but a 10% change in nitrogen prices could result in a 0.4x to 0.5x change in coverage.

"Another risk point is the large natural gas input required for production, both of which contributed to the non-investment-grade ratings," noted Alan Schankel, managing director with Janney Montgomery Scott LLC.

Standard & Poor's rates the offering BB-, making the deal one of the few high-yield munis offered recently.

Citigroup Global Markets Inc. and BofA Merrill Lynch are the senior managers for the sale, the proceeds of which will be used to construct a nitrogen-based fertilizer and industrial production facility in southeastern Iowa, near the Illinois border.

Stanford bonds price

One of the week's larger offerings hit the market Tuesday. The California Educational Facilities Authority brought $301.69 million of series U revenue bonds for Stanford University, said a pricing sheet. The offering was upsized from $240 million.

The bonds (Aaa/AAA/AAA) were sold through Goldman Sachs & Co. and Barclays.

The deal included $262.33 million of series U-3 bonds and $39.36 million of series U-4 bonds.

The series U-3 bonds are due June 1, 2043, have a 5% coupon and priced at 134.576. The U-4 bonds are due June 1, 2043, have a 5% coupon and priced at 134.576.

Proceeds will be used to redeem taxable commercial paper and to refund the university's series P revenue bonds.

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