Municipals continue downward slide as supply dominates; Louisiana brings $334.99 million bonds

By Sheri Kasprzak

New York, May 6 – Municipals were still weaker on Wednesday as new-issue supply continued to dominate headlines, market insiders said. Traders reported yields on triple-A rated munis were higher by 3 to 4 basis points.

Heading up the day’s primary activity, Louisiana offered $334.99 million of series 2015 general obligation bonds even as the state faces a budget deficit that caused Louisiana State University to cancel a bond sale last month.

Deal in two tranches

The Louisiana deal included $263,475,000 of series 2015A bonds and $71,515,000 of series 2015B bonds, said a pricing sheet.

The 2015A bonds are due 2016 to 2035 with 4% to 5% coupons and 0.30% to 3.75% yields.

The 2015B bonds are due 2016 to 2035 with 3% to 5% coupons and 0.30% to 3.75% yields.

The bonds (Aa2/AA/AA) were sold competitively, but the issuer did not immediately respond to requests for the winning bidder.

Proceeds will be used to finance capital projects including those for education, environmental facilities, health and hospitals, housing, economic development, general government, quality of life, public safety, transportation and utilities.

L.A. Community College prices

Among the other larger deals priced Wednesday, the Los Angeles Community College District offered $312.42 million of series 2015C general obligation refunding bonds.

The bonds (Aa1/AA+/) were sold on a negotiated basis with Goldman Sachs & Co. as the senior manager.

The bonds are due 2015 to 2026 with 0.50% to 5% coupons and yields from 0.09% to 2.62%, said a pricing sheet. The yield on the 11-year maturity was lowered by 5 bps in final pricing to 2.62%, said a market source.

Proceeds will be used to refund the district’s election of 2001 series 2005A G.O. bonds.

Oregon to adjust pensions

Elsewhere in the muni market, the Oregon Supreme Court last week restored a 2% cost-of-living adjustment to about 120,000 retirees and employees who were members of the state’s pension plan before a 2013 law abolished the adjustment. The COLA is expected to lower the state’s funded ratio and raise ongoing required contributions, according to Fitch analysts.

“In our view, Oregon will be able to manage the immediate impact of the court’s restoration of the COLA as it has reserve funds available for retroactive payments and other sources of flexibility,” Fitch analysts Marcy Block, Douglas Offerman and Rob Rowan said in a report released Wednesday.

“Before the Supreme Court’s decision PERS had projected plan savings over time of approximately $5 billion from this and other pension reform efforts; a share of these savings is expected to remain in place as the court upheld other parts of the legislation. Funded ratios have been bolstered in recent years by strong investment results, and Fitch expects the state’s portion to remain well-funded, albeit at a lower level, than it was before the court decision.”

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