Municipals end flat to slightly firmer; Washington Suburban Sanitary brings $250 million

By Sheri Kasprzak

New York, Nov. 6 - Municipal bonds rounded out Election Day on a slightly firmer note, with yields seen about a basis point better in spots despite weaker Treasuries, traders said.

New issues were receiving a good reception, and the market seemed rather even-keeled even as voters headed to the polls, market sources said.

"Although we do not expect any immediate reaction by municipal markets to Election Day results, uncertainty will transition into discussion of the impact on muni issuers of likely federal spending reductions whether through fiscal cliff process or sequestration or otherwise, with the future of tax exemption also in question," said Alan Schankel, managing director with Janney Montgomery Scott LLC.

One trader said the fact that new issues were pricing well was a major reason that the market performed well in spite of weaker Treasuries.

"There's just been a good reception [to new deals]," he said.

"A lot of deals we've seen today have been oversubscribed and bumped."

Credit quality in question

Even though Election Day didn't immediately have an impact on munis, Hurricane Sandy certainly did.

Moody's Investors Service said that some storm restoration costs could weaken some hard-hit names, the Long Island Power Authority of New York in particular.

The authority is currently rated A3 with a negative outlook. No action has been taken yet by the ratings agency, but the storm's damage could leave LIPA with a weakened financial status.

Meanwhile, the State of New Jersey received a MIG2 from Moody's on its planned $2.6 billion note deal, which was postponed in light of the storm last week. A similar $2.2 billion note sale from 2011 was rated MIG1.

"Although Moody's cites a record of successful borrowing and strong cash-management procedures, the rating agency notes declining liquidity, with year-to-date receipts coming in below budget," said Schankel concerning New Jersey.

Sanitary district prices

In competitive offerings Tuesday, the Washington Suburban Sanitary District of Maryland came to market with $250 million of series 2012 consolidated public improvement bonds, according to a pricing sheet.

The bonds (Aaa/AAA/AAA) were sold competitively with Bank of America Merrill Lynch winning the bid, said Jim Neustadt, spokesman for the district. The true interest cost came in at 2.266981%.

The bonds are due 2013 to 2032 with 2% to 5% coupons.

"By law, we must sell our debt competitively," Neustadt said in an interview.

"We don't really know if the Hurricane Sandy had any effect [on pricing], but we are extremely pleased with the rate. Our CFO Tom Traber says it's the lowest rate he's seen in the 30 years he has been with the commission."

Proceeds will be used to finance the construction or reconstruction of water supply facilities, water supply lines and transmission mains, sewage disposal facilities, sewer collection mains and trunk sewers and commission-built water and sewer pipes in subdivisions.

City of Hope bonds price

In other primary action, the California Health Facilities Financing Authority brought $235,405,000 of series 2012A revenue bonds for the City of Hope, according to a pricing sheet.

The bonds (A1/A+/AA-) were sold through J.P. Morgan Securities LLC.

The bonds are due 2014 to 2027 with term bonds due in 2032, 2035 and 2039. The serial coupons range from 4% to 5%. The 2032 bonds have a split maturity with a 3.75% coupon priced at par and a 5% coupon priced at 114.658. The 2035 bonds have a 5% coupon priced at 113.108. The 2039 bonds have a split maturity with a 4% coupon priced at par and a 5% coupon priced at 111.85.

Proceeds will be used to repay all of the obligated group's long-term outstanding debt.

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