Large Deals Bring $6B to Primary Market

Volume will inch higher this week as issuers are expected to bring more than $6 billion of new issuance to the primary market, led by sizable offerings that include a California health care sale, a flurry of deals from New York and New Jersey, and a Texas airport financing.

The slate will be part of an estimated $6.40 million scheduled for pricing, according to Ipreo LLC and The Bond Buyer.

Traders said there should be a warm reception for deals pricing Monday and Tuesday. Later in the week trading may hinge  on Federal Reserve Board Chairman Ben Bernanke’s statements during a Wednesday news conference following a two-day policy meeting by the Federal Open Market Committee.

Last week, according to Thomson Reuters, a revised $6.33 billion in new deals arrived just as investors began coming off the sidelines after a six-week selloff that pushed municipal yields 60 basis points higher.

“The recent back-up should bode well for the deals early in the week,” said a New York trader at a large Wall Street firm.  “People are going to be watching the Fed as well, so it’s hard to say what their buying compunction will be after that.”

“It’s tough to tell,” agreed another New York trader on Friday when asked how investors will welcome new deals, including the $763 million sale of health care revenue bonds from the California Health Facilities Financing Authority slated for pricing on Wednesday by Morgan Stanley & Co.

The bonds, which will be sold on behalf of St. Joseph Health System, are rated A1 by Moody’s Investors Service, and AA-minus by Standard & Poor’s and Fitch Ratings and are structured as serial and terms maturing out to 2045.

“It’s stronger today,” he said on Friday, “but it depends on Treasuries, and you just don’t know what Bernanke will say.”

Besides the California health deal, this week’s calendar also includes large deals from New York and New Jersey – the largest of which is a $400 million sale of revenue debt from the New York City Municipal Water Finance Authority.

The negotiated deal will be led by Citi and is slated to be priced on Tuesday, following a one-day retail order period on Monday.

The Metropolitan Transportation Authority is expected to issue $350 million of revenue bonds on Thursday in a negotiated deal being senior-managed by RBC Capital Markets.

The bonds, which will be offered to retail investors on Wednesday before the official pricing, are rated A2 by Moody’s and A by the other two major rating companies.

The third large deal in the Empire State will be a $218 million sale of multi-family housing revenue bonds expected to be priced on Thursday by JPMorgan. The debt, which is rated Aa2 by Moody’s and AA-rated by Standard & Poor’s, consists of two series of fixed-rate bonds that are not subject to the alternative minimum tax.

The New Jersey Economic Development Authority will price $220 million of special facilities revenue bonds on behalf of Continental Airlines on Tuesday in a negotiated deal led by Citi. Yield-starved investors may flock to the deal for its attractive returns if they can swallow the ratings of B2 from Moody’s and B from Standard & Poor’s which will be offered in 2030 and 2033.

A $366.99 million joint revenue improvement offering from the Dallas-Fort Worth International Airport is being planned for pricing on Thursday by Jefferies LLC. The bonds will be subject to the alternative minimum tax and will are expected to be rated A2 by Moody’s, A-plus by Standard & Poor’s and A by Fitch.

Investors’ renewed interest was underscored by the significant demand for last week’s largest deal,an $829 million offering for Rutger’s University, which traders said was between three to nine times oversubscribed. Yields on the tax-exempt portion were lowered by as much as seven basis points from the preliminary scale.

The final 2043 yield carried a 5% coupon and was priced to yield a 4.20% -- which came at 68 basis points higher than the comparable benchmark triple-A general obligation scale in 2043 last Thursday when the deal was priced, according to Municipal Market Data.

The bonds are rated Aa3 by Moody’s and AA-minus by Standard & Poor’s and Fitch.

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