Munis close firmer as new deals price; New Jersey Economic Development sells $1.04 billion

By Sheri Kasprzak

New York, April 3 - Municipals closed out the session on a firmer note, market insiders reported.

Yields were seen improved by 3 basis points to 5 bps, said one trader reached in the afternoon.

"There's been a good amount of interest in the new offerings, and that seems to be helping yields along, especially around 10 years or so," the trader said.

"Things seem to be pricing earlier than expected in some cases. I think a lot of issuers are hoping to get things done ahead of Friday. Retail was pretty receptive yesterday, and some issuers managed to get their deals done early because of strong retail."

New Jersey bonds price

Heading up the day's pricing action, the New Jersey Economic Development Authority came to market with $1,041,745,000 of series 2012 cigarette tax revenue refunding bonds, said a term sheet. The offering was slightly downsized from $1.08 billion, said one sellside source, despite the fact that the authority did get a solid reception from retail investors.

"Retail really came out for it," he noted.

The bonds (Baa1/BBB+/BBB+) were sold through Bank of America Merrill Lynch.

The bonds are due 2012 to 2029 with 2% to 5% coupons.

Alan Schankel, managing director with Janney Montgomery Scott LLC, said Tuesday that final pricing saw yields drop by as much as 20 bps during the day due to strong demand.

Proceeds will be used to refund an outstanding series 2004 bond issue.

Puerto Rico deal hampered

Coming up on Wednesday, the Puerto Rico Electric Power Authority is set to come to market with $475 million of series 2012 power revenue and refunding bonds through Morgan Stanley & Co. LLC.

The offering comes as the authority is dogged by downgrades and mounting debt.

Recently, the authority was downgraded by Moody's Investors Service to Baa1 from A3, bringing it in line with the commonwealth's general obligation debt.

"One negative factor is PREPA's very high level of accounts receivable, which according to Fitch, stand above 23% of revenues, twice the median for all Fitch-rated electricity systems," Schankel said.

"The commonwealth and local PR governments account for about 45% of the $1 billion plus in unpaid bills."

The authority intends to use the proceeds from the offering to finance capital improvements, repay advances made to the authority by the Puerto Rico Government Development Bank, repay interest on certain outstanding bonds and pay principal on outstanding bonds.

PANYNJ deal set

Also coming up on Wednesday, the Port Authority of New York and New Jersey is prepared to price $400 million of 172nd series consolidated bonds (//AA-) on a competitive basis.

The authority will use the proceeds to finance capital projects and refund debt.

PANYNJ's series 171 bonds were sold in January with coupons from 4% to 5%.

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