Munis finish busy session weaker; CPS Energy brings $375 million at Treasuries plus 145 bps

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, June 2 - Yields on municipals were higher by as much as 2 to 3 basis points, a trader said, as the primary market was saturated with new deals.

"We're off by a few basis points," said the trader. "Secondary is really being stifled by new deals."

Elsewhere, flows were mixed on Tuesday as retail demand for munis remained strong, a trader said at the close.

"That's a little more challenging," he said of the institutional side. "The psychology [in institutional] seems to be changing."

On the institutional side, the trader noted that municipals are not moving so well as inflation fears creep into the market, he said.

"Yields aren't as compelling [as when they outpaced Treasuries]," he said.

Meanwhile, the primary market was overloaded with new issues, led by CPS Energy's $375 million upsized sale of series 2009 electric and gas system Build America Bonds. The bonds, which were sold through the City of San Antonio, were upsized from $351.18 million, said Paula Gold-Williams, controller for CPS Energy.

The San Antonio-based corporation had intended to sell a portion of the bonds as tax-exempt revenue bonds but decided to sell the bonds fully as taxable Build America Bonds.

The bonds (Aa1/AA/AA+) were sold through senior manager Goldman, Sachs & Co.

The 30-year bonds were priced at Treasuries plus 145 bps. The coupon came at 5.985%.

"We had initially planned on doing a portion tax-exempt and a portion taxable, but as we watched the market, we saw pretty good stability in Treasury yields, so we decided to do it fully taxable," Gold-Williams said.

"We got a good deal. With the subsidy, we expect below 4% [yield]. We're very appreciative of our investors. We have some new investors and investors that are familiar to us. We are very excited."

Proceeds will be used to pay for capital improvements and to refund CPS Energy's series 1998A bonds.

New Hampshire HEFA sells

In other pricing news, the New Hampshire Health and Educational Facilities Authority sold $199 million in series 2009 private university revenue bonds for Dartmouth College, said Dave Bliss, executive director of the authority.

The bonds (Aa1/AA+/) were sold through Morgan Stanley & Co. Inc.

The bonds are due 2019, 2028, 2029 and 2039 with coupons from 5% to 5.25% and yields from 2.3% to 4.77%.

Proceeds will be used to construct a new life sciences building, renovate a residence hall and maintain Memorial Stadium at Dartmouth.

The college is based in Hanover, N.H.

Also on Tuesday, the Indiana Finance Authority priced $131.85 million in series 2009 environmental facilities refunding revenue bonds on Tuesday for the Indianapolis Power & Light Co., said a sellside source who saw the offering.

The sale included $41.85 million in series 2009A bonds, $30 million in series 2009B bonds and $60 million in series 2009C bonds.

All of the bonds are due Jan. 1, 2016, and all the bonds (Baa1/BBB/BBB+) priced at par to yield 4.9%.

J.P. Morgan Securities Inc. and Goldman Sachs were the lead managers.

Proceeds will be used to refund the company's series 2005A, 2005B and 2006A bonds.

Capital area counties price

Harford County, Md., priced $145.99 million in series 2009 consolidated public improvement and refunding bonds, according to Les Guthorn, Public Advisory Consultants' managing director.

The $120 million series 2009 consolidated public improvement bonds were won by Citigroup Global Markets Inc. over five other bidders with a true interest cost of 3.7478463%. The bonds carry maturities from 2010 to 2029.

The $25.99 million series 2009 refunding bonds were won by Robert W. Baird & Co. Inc. over four other bidders with a TIC of 2.3011376%. The bonds carry maturities from 2010 to 2020.

"We expected a bid around that area," Guthorn said. "The market received the bid well."

Proceeds will be used to fund capital improvements projects, including county general improvements, water and sewer improvements and to refund series 1996, 1997 and 1999 general obligation bonds.

Public Advisory Consultants acted as financial adviser to the deal.

The county seat is Bel Air, Md.

Also in the capital region, Fairfax County, Va., priced $156.605 million series 2009 sewer revenue bonds at a TIC of 4.44% (Aa2/AAA/AAA), according to Sarah Greear, Public Financial Management Inc. senior managing consultant.

"We were hoping to beat 4.5% and we did," Greear said.

Citigroup won the auction over four other bidders.

The bonds carry maturities from 2010 to 2039.

Proceeds will be used for upgrades to the wastewater treatment system and to make deposit to a reserve subfund.

Public Financial Management acted as financial adviser to the deal.

The county seat is Fairfax, Va.

Cougars catch $71.18 million

University of Houston Board of Regents, Texas, priced $71.175 million in series 2009A consolidated revenue and refunding bonds at a TIC of 4.3541% (Aa3/AA-/), according to Drew Masterson, a First Southwest Co. managing director.

The winning bid came within two bps of expectations, Masterson said.

"We were pleased with the number of bidders and the aggressiveness of the bidders," he said.

Wachovia Securities LLC won the auction over seven other bidders. First Southwest acted as financial adviser to the deal.

The bonds carry maturities from 2010 to 2034.

Proceeds will be used to construct, acquire, improve, purchase or enlarge facilities in the university system.

The board of regents is located in Houston.

El Monte goes for $54 million

The El Monte Union High School District, Calif., priced a $54 million series 2009A unlimited tax G.O. bond at an all-in TIC of 5.458% (A2/A+/), according to Tony Ortega, assistant superintendent for business.

The district was hoping for "no more than 5.5%," Ortega said.

RBC Capital Markets acted as underwriter for the negotiated bonds with maturities from 2010 to 2034.

Proceeds will be used to fund modernization and new construction projects at existing school sites.

The school district is located in El Monte, Calif.

DART sale ahead

Looking to upcoming sales, Dallas Area Rapid Transit is expected to price $1 billion in series 2009 revenue bonds and Build America Bonds, said a preliminary official statement. The deal is expected to price in June.

The sale includes 2009A senior lien sales tax revenue bonds and series 2009B senior lien sales tax taxable Build America Bonds.

The exact breakdown of tax-exempt and taxable Build America Bonds has not been determined at this time.

The bonds (Aa3/AAA/) will be sold on a negotiated basis with Siebert Brandford Shank & Co. LLC as the lead manager.

The maturities have not been set.

Proceeds will be used to make a deposit to an acquisition and expansion fund.

Harris County sale ahead

Looking to upcoming sales, Harris County, Texas, plans to price $395 million in series 2009 tax anticipation notes on June 9, said a preliminary official statement.

The notes are due Feb. 25, 2010.

The TANs will be sold on a competitive basis with First Southwest as the financial adviser.

Proceeds will be used to pay for general expenses ahead of the collection of various taxes.

The county seat is Houston.

Coming up next week, the Massachusetts Health and Educational Facilities Authority is scheduled to price $120 million in 2009 revenue bonds for Baystate Medical Center June 9, said a preliminary official statement.

The bonds (A2) will be sold through senior managers Citigroup and J.P. Morgan Securities Inc.

The sale includes series 2009I fixed-rate bonds and series 2009K long-term interest rate bonds.

The maturities for the bonds have not yet been determined.

Proceeds will be used to acquire, develop, construct, install and equip a new inpatient building for the medical center in Springfield, Mass.

Secondary weakens

For the second straight session this week, the secondary market saw some weakness as the primary market dominated activity.

"There's really not a lot moving," said one trader reached during the afternoon.

Still, the Maine Educational Loan Authority saw its series 2009A-2 student loan revenue bonds moving. The 3.5% 2014 bonds were seen at 3.25%.

The Clackamas County Hospital Facility Authority saw that its series 2009A Legacy Health System bonds were also in action. The 4% 2014s were seen at 3.461%.

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