Auction-rate conversions slow as Rush University Medical Center converts revenue refunding bonds

By Cristal Cody and Sheri Kasprzak

New York, March 10 - The number of issuers coming out with conversion notices for their auction-rate securities abated a bit on Monday, but that doesn't mean more issuers aren't looking for a fixed rate.

"It very well could be," said one sell-sider when asked about the drop in the number of auction-rate issuers looking to convert.

"There was a rush to convert right after this whole crisis started. It may be backing off right now, but I predict you'll see more."

In fact, on Monday, the Rush University Medical Center Obligated Group out of Chicago announced plans to convert $101.2 million in revenue refunding bonds from an auction-rate mode to another mode.

The series 2006B-1 and 2006B-2 bonds were priced through the Illinois Finance Authority.

Even so, sources at the medical center told Prospect News it was hard to tell at this time when or if the restructuring will be completed.

Oklahoma issuers restructure bonds

Meanwhile, issuers in Oklahoma are taking a hard look at the millions of dollars in auction-rate debt.

Several are considering converting or restructuring the bonds over the next few weeks, Jim Joseph, state bond advisor for the Oklahoma Bond Advisor's Office, said Monday in an interview.

"We've got some variable-rate bonds that are insured by these insurance companies that are getting downgraded," he said. "That's impairing our ability to remarket these bonds."

The Oklahoma Capital Improvement Authority board of directors will meet Tuesday to discuss restructuring options on $120 million outstanding variable rate debt, Joseph said.

"One option is to refinance them and get rid of the insurance company," Joseph said.

The Oklahoma Turnpike Authority (AA-/AA-) plans to restructure $424 million bonds without insurance from XL Capital Assurance, he said.

"That's one of the ones that's downgraded to such an extent that it's making it difficult for the turnpike to remarket those," Joseph said.

"They will stay in a weekly mode, but they will be remarketed on the credit of the authority."

The Oklahoma Municipal Power Authority also plans to remarket the term rate on $60 million variable rate bonds.

Tuesday a busy pricing day

In a week that is shaping up to be big for pricings, Tuesday will be filled with several offerings, led by $1.025 billion in fixed-rate power supply revenue bonds from the California Department of Water Resources.

Another sizable deal pricing Tuesday comes from New York, which plans to bring $448.025 million in general obligation bonds in a negotiated sale led by Lehman Brothers.

Also pricing is $161.73 million in state personal income tax bonds from New York State Environmental Facilities Corp.

University of Texas prices bonds

In light pricing action Monday, the Board of Regents of the University of Texas System priced $685.485 million in series 2008B revenue refinancing system bonds, an official statement said.

The bonds (Aaa/AAA/AAA) were sold through lead managers JPMorgan and Lehman Brothers.

The bonds are due in 2016, 2025, 2032 and 2039 with each term bond comprised of $171.37 million, except for the 2039 bonds, which include $171.375 million.

The variable-rate bonds bear interest at the weekly rate through March 26, when the bonds will reset every week.

The university plans to use the proceeds to refinance a portion of the university's commercial paper notes and certain parity debt obligations, as well as improvements to the campus.

Upcoming offerings

This March, the Triborough Bridge and Tunnel Authority will price $750 million in general revenue bonds, a preliminary official statement said, but the exact pricing date could not be determined Monday.

The offering includes series 2008A and 2008B bonds.

The bonds will be sold on a negotiated basis through lead managers Lehman Brothers, UBS Investment Bank and Bear, Stearns & Co.

Proceeds will be used for bridge and tunnel projects, as well as commuter and transit projects.

In other upcoming deals, the Pima County Industrial Development Authority in Arizona plans to sell $125.074 million in series 2008A industrial development revenue bonds in March.

The offering is being conducted for the Tucson Electric Power Co. and the bonds will be sold on a negotiated basis through lead managers Morgan Stanley and JPMorgan.

The bonds are due 2029 and are variable-rate.

The proceeds will be used to redeem the authority's series 1997B revenue bonds and 1997C revenue bonds.

The pricing date could not be determined by press time Monday.

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