Bad driver bonds look like blowout despite pricing seen as aggressive.

New Jersey's $709 million of bad driver insurance pool bailout bonds were all sold yesterday, despite what some saw as an aggressive pricing.

"Our deal is closed; it's in wonderful shape," said Andrew Rowley, a managing director and director of the syndicate desk at senior manager Morgan Stanley & Co.

"It was heavily oversubscribed in the longer end," Rowley said.

In the process, underwriters for the New Jersey Economic Development Authority priced and repriced the $708.5 million of market transition facility senior lien series 1994A.

The offering contained serial bonds priced to yield from 4.75% in 1997 to 6.05% in 2009. A 2011 term, containing $119 million was priced to yield 6.13%.

At the repricing, the yield on the 2006 maturity was lowered by three basis points, while yields on the 2007 to 2009 maturities were cut by five basis points. The yield on the 2011 term was lowered by seven basis points.

For the 2009 and 2011 maturities, the preliminary pricing was already five basis points lower than the consensus scale the management team issued before the deal was priced.

Stella Wong, a senior portfolio manager at Franklin Advisers Inc., said she bought a "small interest" in the deal.

"We would have had a greater interest at the preliminary prices offered," Wong said. While Franklin bought the bonds only for its plus-$530 million New Jersey fund, the firm had considered the bonds for its $1.7 billion national insured fund and $6.7 billion federal tax-free fund, Wong said.

She noted that the consensus scale initially called for a 6.25% yield on the 2011 term. Preliminary pricing whittled that down to 6.20% and the final yield came in at 6.13%.

Because of the bump in yields, Franklin decided to scale back its order, Wong said.

"Since it was a pretty aggressive bump, we backed off a bit," she said.

Joe Dearie, a managing director and portfolio manager at the Smith Barney Shearson Managed Municipals Fund, said he was prepared earlier in the day rescind his order if the repricing proved too painful. He stayed in, however.

"We thought that the repricing was a tad on the aggressive side, but it wasn't so bad that we would pull the order," he said.

Deane Iiked the deal because "it was not too long," and consisted of "very high-quality New Jersey exempt" paper.. It's status as a new credit added to its appeal, he said.

"I also feel a lot more comfortable with this governor [Christine Todd Whitman] than I did with the last one [James Florio]," Dearie said.

The New Jersey development authority sold the bonds to help plug a $1.3 billion gap in its auto insurance pool, known as the Market Transition Facility. The bonds will be paid off by bad driver surcharges assessed by the New Jersey Department of Motor Vehicles.

Insurance companies, which sued New Jersey to avoid paying any portion of the $1.3 billion deficit, agreed last month to drop the suit and put up more than $700 million toward the shortfall.

In light secondary activity yesterday, municipals moved up 1/8 to 1/4 point overall. Dollar bonds were quoted up 1/8 point overall, though the more active issues "didn't budge," one analyst said. Yields on high-grade issues were lower by about three basis points on the long end.

The 30-year Treasury bond ended up nearly 1/8 point to yield 7.67%.

In debt futures, the September municipal futures contract closed up nearly 1/8 to 89 5/32s. Yesterday's September MOB spread was negative 378, compared to negative 376 on Tuesday.

Elsewhere yesterday, Standard & Poor's Blue List of municipal bonds was up $37.6 million to $1.74 billion. Today, the 30-day visible supply of municipal bonds totals $7.47 billion, down $231.9 million from yesterday. That comprises $5.58 billion of competitive bonds, down $7.9 million from yesterday, and $1.89 billion of negotiated bonds, down $224.1 million.

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