The state finally went to market with a general obligation bond offering, but was only able to sell a portion of what it wanted because of challenging market conditions that forced it and other municipal bond sellers to reduce bond sales in recent days.

The state said it sold $227.8 million of bonds, with $100 million of this going to fund new projects, $101.8 million to refund debt issued at higher rates and $26 million for completing the acquisition of Kukui Gardens.

The state has been trying to sell more than $600 million of bonds since September, but has been prevented because of a sell-off in municipal debt in mid-September after Lehman Brothers Holdings filed for bankruptcy.

Now that state and local governments are returning to the market, there is an abundance of issues to be sold, with borrowing costs going higher, Bloomberg News reported.

"This is what could be done," said Lenny Klompus, senior communications adviser to Gov. Linda Lingle. He said the state will go back into the market to sell more bonds when the time is right.

"We're certainly not finished going out to the bond market," Klompus said.

Georgina Kawamura, the state's director of budget and finance, said the decision to sell the reduced amount of bonds was "the responsible course of action, considering the current challenges of the bond market."

The Hawai'i bonds were sold with an overall interest rate of 4.67 percent. The state said it received in excess of $200 million in retail orders, many of which were from state residents. Of the bonds issued, $201.8 million were sold on a tax-exempt basis.

Bloomberg reported many issuers are building demand for their issues by going to smaller investors and in some cases, new issues are being sold almost entirely to retail investors.

Hawai'i's bond sale was managed by Citigroup Global Markets and Merrill Lynch.

Last month, Moody's Investors Service, Standard & Poor's Ratings Service and Fitch Ratings affirmed the state's bond ratings of Aa2, AA and AA respectively.