Yields firm as primary action tapers; Metropolitan Pier & Exposition seen selling $1.18 billion

By Sheri Kasprzak

New York, Oct. 6 - Municipal yields edged down for the first time during the week as primary activity tapered off slightly and Treasuries improved.

Yields were seen down by 2 to 3 basis points across the curve, said a trader in the afternoon.

"There's a firmer feeling," he said. "I'm thinking that there's more moving in secondary, primary seems to be slowing down, and the market is finally working its way through the stuff that's been pricing. There's been a continuous stream of [new] issues the last couple of weeks, so it was a needed break, if you ask me."

Heading up the day's more subdued primary action was a reportedly $1.178 billion sale from the Metropolitan Pier and Exposition Authority of Illinois. The authority priced $204.37 million in series 2010A bonds, $940.6 million in series 2010B refunding bonds and $33.22 million in series 2010C refunding bonds through Morgan Stanley & Co. Inc. and Goldman, Sachs & Co., a sellsider watching the deal said.

The 2010A bonds are due 2050 and have a 5.5% coupon. The 2010B bonds are also due 2050 and reportedly have a 5% coupon. The 2010C bonds have split maturities in 2050 with 5%, 5.2% and 5.25% coupons. The full pricing data was not immediately available.

Proceeds will be used to renovate and expand the Hyatt Regency McCormick Place Hotel by constructing a 450-room tower over the building's existing parking structure, as well as to refund existing debt.

The authority is based in Chicago.

Cottage Health bonds price

In other pricing news, the California Statewide Communities Development Authority sold $292.6 million in series 2010 revenue bonds for the Cottage Health System Obligated Group, said a pricing sheet.

The bonds (/A+/AA-) were sold through Morgan Stanley.

The bonds are due 2011 to 2020 with term bonds due 2030 and 2040. Coupons range from 2% to 5%. The 2030 bonds have a 5.25% coupon priced at 105.01. The 2040 bonds have a 5% coupon priced at par.

The authority plans to use the proceeds to refund the Santa Barbara, Calif.-based health system's series 2008A-E variable-rate revenue bonds and make payments to terminate the group's interest rate swaps.

Detroit schools go cheap

Also in the primary Wednesday, the School District of the City of Detroit came to market with $210.54 million in series 2010 school building and site unlimited tax general obligation bonds (Aa2/AA-/) through Siebert Brandford Shank & Co. LLC and J.P. Morgan Securities LLC.

Detroit's bonds went cheap, according to one sellsider familiar with the deal.

"They got it done," he said. "They had to go cheap, but the city has had a lot of problems. The yields were way high, even on the 30-year bonds. The market has been shaky lately, but not that shaky. Detroit's population is dropping, so its taxpayers are leaving. It's got a sagging economy. Lots of problems to iron out."

The district sold $160.91 million in series 2010A taxable direct-payment qualified school construction bonds and $49.63 million in series 2010B direct-payment Build America Bonds.

The 2010A bonds are due May 1, 2029 and have a 6.645% coupon priced at par. The 2010B bonds are due May 1, 2040 and have a 6.845% coupon priced at par.

Proceeds will be used to acquire land, construct new schools, remodel and expand existing schools, purchase and upgrade technology, develop outdoor athletic facilities and upgrade security measures.

East Bay sells bonds

Also during Wednesday's pricing session, the East Bay Municipal Utility District of California priced $208.095 million in series 2010 refunding bonds, said a term sheet.

The sale included $58.095 million in series 2010A refunding bonds and $150 million in series 2010B Build America Bonds.

The bonds (Aa2//AA+) were sold on a negotiated basis with Bank of America Merrill Lynch as the senior manager.

The 2010A bonds are due 2011 to 2029 with 2% to 5% coupons. The 2010B bonds are due 2032 to 2033 with a term bond due 2040. The serial coupons range from 5.026% to 5.076%, priced at par, and the 2040 bonds have a 5.176% coupon priced at par.

Proceeds will be used to refund existing variable-rate debt and state loans, as well as fund the district's current capital program and reimburse the enterprise for capital expenditures previously funded with cash reserves.

The district is based in Oakland, Calif.

Dasny bonds price

Elsewhere on Wednesday, the Dormitory Authority of the State of New York released the terms of its downsized $1.317 billion sale of series 2010 state personal income tax revenue bonds sold during the first part of the week. The authority had intended to price $1.363 billion of the PITs.

The authority refused to comment on the reduction in the deal's size or on the deal specifics.

The offering included $562.51 million in series 2010E general purpose tax-exempt revenue bonds, $55.49 million in series 2010F tax-exempt bonds, $149.455 million in series 2010G federally taxable bonds and $549.405 million in series 2010H Build America Bonds, according to a pricing sheet released Wednesday.

The 2010E and 2010F bonds were sold through M.R. Beal & Co. and Bank of America Merrill Lynch. The lead managers for the 2010G and 2010H bonds were M.R. Beal, Bank of America and Siebert Brandford Shank.

The 2010E bonds are due 2012 to 2030 with term bonds due 2035 and 2040. The coupons range from 2% to 5%. The 2035 bonds have a 5% coupon priced at 107.722. The 2040 bonds have a 5% coupon priced at 107.158.

The 2010F bonds are due 2011 to 2030 with a term bond due 2035. The coupons range from 2% to 5%. The 2035 bonds have a 5% coupon priced at 115.118.

The 2010G bonds are due 2011 to 2020 with coupons from 0.749% to 4.076%, all priced at par.

The 2010H bonds are due 2021 to 2022 with term bonds due 2033 and 2040. The coupons range from 4.246% to 4.346%, priced at par. The 2033 bonds have a 5.389% coupon priced at par.

Proceeds will be used to fund capital projects at the State University of New York and the City University of New York, as well as fund economic development grants under a variety of state-run projects.

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