Illinois toll agency leads muni sales with Build America Bonds

The Illinois State Toll Highway Authority leads municipal borrowers today with a $500 million offering of taxable Build America Bonds to finance expansion and rebuilding of interstates in the greater Chicago area.

The agency will offer 15-year securities that can be called after 10 years and 25-year bonds that can be redeemed before maturity only at a premium. Braintree, Massachusetts's $122 million debt offering will be among today's largest tax-exempt deals.

This year's Build America Bonds program, which rebates 35 percent of the interest costs on taxable bonds sold by state and local governments, hasn't been enough to push overall municipal issuance ahead of last year's pace. Municipal bond sales fell 14 percent through last week to $127.9 billion, compared with the comparable period in 2008, according to data cited by Merrill Lynch & Co. in a report yesterday. The bank cited a decline in variable-rate issues and refinancing deals this year,

"The muni market continues to lag last year in issuance," said Phil Fischer, municipal strategist at the New York-based unit of Bank of America Corp., in the report.

The Illinois authority's offering will represent the fourth largest issue from the federally subsidized borrowing program that has already produced $8.4 billion in deals, according to data compiled by Bloomberg. Goldman Sachs Group Inc. and Morgan Stanley were hired to lead underwriting on the deal.

Blue Valley School District in Johnson County, Kansas, auctioned 20-year taxable bonds at a price to yield 5.85 percent yesterday, or about 3.8 percent after the issuer's cash subsidy. The school system can call the bonds at par, or face value, beginning in October 2018, according to Bloomberg data.

An index of top-rated, tax-exempt municipal bonds due in 20 years had a yield of 4.68 percent yesterday, unchanged from the previous two trading days, according to a daily survey by Municipal Market Advisors of Concord, Massachusetts.