Municipals weaker with Treasuries ahead of $5.8 billion deals; Jefferson County warrants ahead

By Sheri Kasprzak

New York, Nov. 12 - Municipals closed out the first session of the week on a weaker note as Treasuries hit a bump following the auction of $30 billion of three-year Treasury notes.

Yields were higher by 1 basis point to 3 bps across the curve with shorter maturities seeing the most weakness.

With little primary action on Tuesday because of the Veterans Day holiday Monday, the market was waiting to see how pricing levels come in on the week's still-impressive $5.8 billion new-issue calendar.

Amid the larger offerings, the California State Public Works Board is set to price $625 million of series 2013I lease revenue bonds (A2/A-/A-) through RBC Capital Markets LLC and Goldman Sachs & Co.

The board plans to use the proceeds from the offering to finance a new animal health and food safety laboratory and the construction of a new courthouse in San Diego.

Jefferson County deal set

Looking ahead, during the week of Nov. 18, Jefferson County, Ala., is slated to hit the market with $1.74 billion of sewer revenue warrants.

On Tuesday, Fitch Ratings said it intends to give the warrants BB+ and BB ratings for the senior and subordinated bonds, respectively.

The offering will be conducted in six tranches through senior manager Citigroup Global Markets Inc.

The county plans to use the proceeds to refund and retire existing sewer revenue bonds and to pay past-due debt service on those refunded bonds.

Concerns diminish

Jefferson County, which famously filed for bankruptcy back in November 2011, seemingly no longer faces the problems that forced it into bankruptcy, Fitch said in its ratings report Tuesday.

"The onerous regulatory requirements, risky financing structures and corruption - among other things - that led to the county's filing for Chapter 9 bankruptcy protection in November 2011 and the need to seek concessions for a significant portion of system obligations appears to be either actually or effectively eliminated," Fitch wrote.

"General concerns remain regarding pressures the system faces post-bankruptcy, but these concerns are not anticipated to affect system operations or debt repayment going forward beyond what is contemplated at the current expected rating level."

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