Muni yields weaken 3 to 12 bps on new supply; L.A. County Public Works sells $790 million

By Sheri Kasprzak

New York, Nov. 9 - The municipal market took a hit on Tuesday as new issues flooded in. Meanwhile, there's no end to the coming supply, with several multibillion-dollar offerings looming on the horizon, including a $10 billion note offering from the State of California.

A trader reported Tuesday afternoon that long bonds were the hardest hit, with yields up as much as 12 basis points. Short and intermediate bonds were seen up anywhere from 3 bps to 8 bps.

"There's just no end in sight," the trader said of the onslaught of new offerings.

"There's nothing but supply, and it's impossible to process it all."

Heading up Tuesday's deluge of new deals was a sale from the Los Angeles County Public Works Financing Authority, which brought $790.76 million of series 2010 lease revenue bonds.

The deal included $89.78 million of series 2010A tax-exempt bonds and $700.98 million of series 2010B Build America Bonds, according to a pricing sheet.

The bonds (A1/A+/A+) were sold through Bank of America Merrill Lynch.

The 2010A bonds are due 2014 to 2019 with coupons from 2% to 5%. The 2010B bonds are due 2020 to 2025 with term bonds due 2033 and 2040. Serial coupons range from 5.591% to 6.841%. The 2033 bonds have a 7.488% coupon priced at par. The 2040 bonds have a 7.618% coupon, also priced at par.

Proceeds will be used to construct an addition to the Harbor-UCLA Medical Center and seismic retrofit the facility, as well as to rehabilitate the county's Hall of Justice.

L.A. improvement bonds price

Also out of Los Angeles on Tuesday, the Municipal Improvement Corp. of Los Angeles sold $117.225 million of series 2010 lease revenue bonds, according to a pricing sheet.

The bonds (A2/A1//A+) were sold on a negotiated basis. De La Rosa & Co. Inc. was the senior manager for the 2010B and 2010C bonds, and Siebert Brandford Shank & Co. LLC was the senior manager for the 2010A and the 2010D bonds.

The sale included $30.335 million of series 2010A capital equipment lease revenue bonds, $49.82 million of series 2010B capital equipment recovery zone economic development lease revenue bonds, $18.365 million of series 2010C real property recovery zone economic development lease revenue bonds and $18.705 million of series 2010D capital equipment and real property lease revenue refunding bonds.

The 2010A bonds are due 2011 to 2020 with 3% to 5% coupons. The 2010B bonds are due 2011 to 2018 and 2020. The coupons range from 1.647% to 6.165%, all priced at par. The 2010C bonds are due 2011 to 2018 with term bonds due 2022, 2029 and 2040. The serial coupons range from 1.647% to 5.565%, all priced at par. The 2022 bonds have a 6.465% coupon priced at par, and the 2029 bonds have a 7.642% coupon, also priced at par. The 2040 bonds have a 7.842% coupon priced at par. The 2010D bonds are due 2011 to 2015 with 3% to 5% coupons.

The corporation intends to use the proceeds to retire commercial paper notes and prepay certain certificates of participation.

Medical center bonds price

Elsewhere in California, the University of California Medical Center issued $757.315 million of series 2010 revenue bonds in three tranches, according to a pricing sheet.

The deal included $48.14 million of series 2010G tax-exempt bonds, $700 million of series 2010H Build America Bonds and $9.175 million of series 2010I taxable bonds.

The 2010G bonds are due 2011 to 2020 with 2% to 5% coupons. The 2010H bonds are due 2021 to 2025 with term bonds due 2031 and 2048. Coupons range from 5.035% to 5.785%. The 2031 bonds have a 6.398% coupon priced at par, and the 2048 bonds have a 6.548% coupon, also priced at par. The 2010I bonds are due 2015, 2020 and 2025. The 2015 bonds have a 2.875% coupon priced at par, and the 2020 bonds have a 4.8% coupon priced at par. The 2025 bonds have a 5.75% coupon priced at par.

Barclays Capital Inc. as the senior manager for the bonds (Aa2/AA-/), the proceeds of which will be used to construct and equip a medical building adjacent to the Santa Monica-UCLA Medical Center and Orthopedic Hospital, as well as to refund the medical center's series 2000 bonds.

Harvard brings bonds

In other news, the Massachusetts Development Finance Authority priced $740.97 million of series 2010B revenue bonds for Harvard University, according to a pricing sheet.

The sale included $498.9 million of series 2010B-1 bonds, $181.265 million of series 2010B-2 bonds and $60.805 million of series 2010B-3 bonds.

The bonds (Aaa/AAA/) were sold through Morgan Stanley & Co. Inc.

The 2010B-1 bonds are due 2028 to 2030 with term bonds due 2020 and 2040. The coupons range from 5% to 5.25%. The 2010B-2 bonds are due 2034 with a 5.25% coupon. The 2010B-3 bonds are due 2020 to 2024 with 5% coupons across the board. The full pricing details were not immediately available Tuesday evening.

Proceeds will be used to refund the university's series FF, series BB and series L bonds.

NYC water prices deal

Another large sale came from the New York City Municipal Water Finance Authority. The authority brought to market $500 million of series 2011CC water and sewer system second general resolution revenue Build America Bonds, according to a pricing sheet.

The bonds (Aa2//AA+) were sold through Ramirez & Co. Inc.

The bonds are due June 15, 2042 and June 15, 2044. The 2042 bonds have a 6.282% coupon priced at par, and the 2044 bonds have a 5.882% coupon, also priced at par.

Proceeds will be used to refund commercial paper notes and provide funding for the authority's capital program.

California preps RANs sale

On the horizon, the State of California plans to price $10 billion of series 2010-2011 revenue anticipation notes on Nov. 17, according to a preliminary official statement.

The notes (MIG1/SP-1/F2) will be sold on a negotiated basis with J.P. Morgan Securities LLC as the senior manager. The co-senior managers are De La Rosa & Co. and Wells Fargo Securities LLC.

The offering includes an A-1 tranche and an A-2 tranche, both of which are due in 2011, but the exact size of those tranches has not been released.

The state plans to use the proceeds to finance cash flow needs for the state ahead of revenue collections.

Railsplitter tobacco sale set

Another major offering is coming up from the Railsplitter Tobacco Settlement Authority of Illinois, which is expected to come to market with $1,460,105,000 in series 2010 tobacco settlement revenue bonds, according to a preliminary official statement.

The bonds will be sold through senior managers Barclays Capital Inc. and Citigroup Global Markets Inc.

The bonds are due 2012 to 2021 with term bonds due 2024 and 2027.

Proceeds will be used to fund Illinois general expenses once the state transfers all of its tobacco revenue rights to the authority, per a 1998 master settlement agreement between Illinois (and most other states) and the major tobacco companies.

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