Port Authority of New York and New Jersey sells $100 million; Hawaii brings $78.67 million

By Aaron Hochman-Zimmerman and Sheri Kasprzak

New York, May 6 - As municipal bonds firmed Wednesday, primary action remained fairly strong, market insiders said.

The Port Authority of New York and New Jersey led the activity with a $100 million consolidated bond sale. Primary action also included a $78.67 million sale of revenue bonds from the Hawaii Department of Budget and Finance.

In secondary market action, the tone firmed up as Build America Bonds were seen trading slightly better.

"We're definitely seeing some improvement with BABs," said one trader reached Wednesday afternoon.

"Overall, we're firmer today than yesterday."

In Build America Bonds action, the Sedgwick County Unified School District No. 259 of Kansas saw its Build America Bonds reoffered Wednesday lower by as much as 50 basis points during the session. The 2028 bonds were reoffered at 5.724% after pricing at 6.220% Tuesday.

Treasuries were up slightly early in the session but were little changed later in the day, said the trader.

Build America Bonds were not exactly a hit with everyone.

Even though the State of Utah successfully sold $111.1 million in series 2009B general obligation bonds, the state decided not to issue Build America Bonds for the 2015 bonds.

The "crossover point" is at 20 years, when the tax implications of the Build America Bonds become advantageous, said state treasurer Richard Ellis.

"We were very pleased with it," Ellis said about Tuesday's deal, which priced at a 1.75% true interest cost.

Utah has structured its debt calendar to shorter issues and does not expect many changes linked to the federal stimulus package in its current form.

Money flowing to the state from Washington, D.C., will likely be spread around to shore up the state's many projects without funding new ones.

Utah expects to offer another major G.O. issue in the fall, Ellis said.

Port Authority sale

Back to the Port Authority of New York and New Jersey sale, the authority sold $100 million in 156th series consolidated bonds, said Steve Coleman, spokesman for the authority.

The bonds are due 2025 to 2039 with coupons from 4% to 5%. Merrill Lynch & Co. Inc. won the competitive bid with a 4.792596% TIC.

Proceeds will be used to pay for capital projects.

In limited reoffering news, a trader said the bonds were reoffered at around pricing terms.

"I'm only seeing limited maturities reoffered for these," the trader said.

The 4.5% 2031 bonds were among the few reoffered. Those bonds were seen at par.

"The Port Authority's ability to sell bonds competitively in the current economic climate demonstrates both greater activity in the credit markets for municipal bonds, as well as the agency's continued financial health," said a statement released in the afternoon by the authority.

The authority also said in the statement that it plans to continue a strategy of smaller and more frequent bond issues similar to Wednesday's sale.

"It's a valid strategy," one sellside source said.

"In this climate, it is a bit easier to sell bonds in smaller chunks, rather than hitting investors with a huge offering."

Hawaii Budget and Finance

Elsewhere, the Hawaii Department of Budget and Finance priced $78.67 million in series 2009A-B special purpose revenue bonds (Aaa/VMIG 1/AAA/A-1/) on behalf of the Queen's Health Systems, according to chief financial officer, Rick Keene.

"The closing went very smoothly, we had a lot of support from Bank of America and Merrill Lynch," Keene said.

The yields were "a little better than we expected ... to the low end of the range," he said, despite some concerns about the state of the market.

Banc of America Securities LLC acted as lead underwriter for the 2009A bonds, while Merrill Lynch acted as lead for the 2009B bonds.

Each $39.335 million tranche matures on July 1, 2029.

Proceeds from the negotiated sale will be used to refund series 2003B and 2006B bonds.

The Hawaii Department of Budget and Finance and Queen's Health Systems are both located in Honolulu.

Georgia sells $314.53 million

In other primary news, the State of Georgia priced $314.53 million in series 2009 G.O. bonds on Tuesday, said a sellside source.

The bonds were sold on a negotiated basis with Morgan Stanley & Co. Inc. as the lead manager.

The sale included $9.5 million in series 2009C bonds and $305.03 million in series 2009D bonds.

The 2009C bonds are due 2010 to 2014 with coupons from 1% to 2% and yields from 0.43% to 1.88%.

The 2009D bonds are due 2010 to 2029 with coupons from 1.5% to 5% and yields from 0.39% to 4.25%.

Proceeds will be used to acquire and improve lands, highways, structures, equipment and facilities as well as repay existing debt.

In reoffering news, the bonds were seen moving near pricing levels, a trader said Wednesday afternoon.

Elsewhere in reoffering news, the City of Atlanta's recently priced $78.025 million in G.O. refunding bonds were seen moving. The 5.25% 2020s were seen at 4% after pricing at 4.12%. The 4.125% 2022s were seen at 4.06% Wednesday after pricing at 4.41%. The 5.25% 2023s were seen at 4.29%. The bonds priced at 4.52%.

The bonds (Aa2/AAA/AAA) priced Friday through Loop Capital Markets LLC and Wachovia Bank. The bonds are due 2010 to 2023 with coupons from 3% to 5.25% and yields from 1.33% to 4.52%.

Proceeds will be used refund the city's series 1998 bonds.

In other reoffering news, the Sacramento Municipal Utility District saw its series 2009V electric system revenue bonds moving. The bonds, which are due 2036, were seen trading at 6.094%. The bonds priced Tuesday at par.

Secondary remains light

Despite an improved tone in the secondary market Wednesday, traders said volume remained fairly light.

"We're still not picking up much today," said one trader reached in the afternoon.

In specific trades, the Arlington, Texas, special tax revenue bonds sold recently were moving. The 5% 2028s were seen at 5.08%.

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