Pasadena prices $55.4 million to yield 2.39% to 4.95%; Puerto Rico plans $4.3 billion pension bonds

By Cristal Cody and Sheri Kasprzak

New York, Feb. 19 - The muni market got off to a sluggish start on Tuesday following the Presidents' Day holiday, led by a $55.4 million offering of waterworks and sewer system revenue bonds priced by the city of Pasadena, Texas.

Also on Tuesday, it was announced that Puerto Rico will bring $4.3 billion in bonds that may give a shot in the arm to the commonwealth's crumbling pension infrastructure.

The bonds are expected to price Feb. 25, and it's about time, said one market insider.

"They've been saying for a long time now that they were going to do something, issue bonds to get them out of this mess," he said.

"I don't know what the latest numbers are, but Puerto Rico has had a major pension deficit for the past several years."

The bonds have a 50-year term and were rated Baa3 by Moody's Investors Service and BBB- by Fitch recently.

No other details could be gathered by press time Tuesday.

Pasadena's bonds price

Moving back to those bonds from Pasadena, the city priced $55.4 million in waterworks and sewer system revenue bonds competitively. Prager, Sealy & Co. won the bid Tuesday, according to final pricing terms released to Prospect News.

The bonds (A3/-/A-) priced with a true interest cost of 4.935% and coupons that ranged from 5% in 2010 to 4.74% in 2033 with yields from 2.39% to 4.95%.

The bonds have serial maturities from 2010 to 2033.

Proceeds will be used to purchase additional ownership in Houston's southeast water treatment plant and for local projects.

Also set to price Tuesday was $64.12 million in general obligation bonds from the Greater Cleveland Regional Transit Authority.

The bonds (Aa3/A) were sold on a negotiated basis through National City Investments, KeyBanc Capital Markets and SBK-Brooks Investment Corp. with the 2008A bonds due from 2008 to 2027 and the 2008B bonds due from 2009 to 2016.

The exact pricing terms, according to a source at the issuer, were not immediately ready.

Proceeds will refund the authority's 1998R bonds and will also be used for capital improvements.

Orlando heads to market

Orlando, Fla., plans a Feb. 26 negotiated sale for its $181.76 million series 2008A bonds, $42.36 million series 2008B bonds and $73.87 million series 2008C bonds.

The series 2008A senior tourist development tax revenue bonds, series 2008B second lien subordinate tourist development tax revenue bonds, and series 2008C third lien subordinate tourist development tax revenue bonds are insured under a financial guaranty insurance policy by Assured Guaranty Corp. (Aaa).

The bonds are backed by 6 cents contract payments.

Chris McCullion, assistant treasurer for Orlando, said the city's agreement with Orange County to levy a 6 cents hotel tax on anyone who stays in a room provides the city with a portion of the tax.

"So one half of the six cents of that tax gets sent to us monthly," he said. "That revenue stream is the repayment source of the bonds."

Series 2008A and B bonds have serial maturities from Nov. 1, 2008, to Nov. 1, 2038. Series 2008C bonds mature in 2038.

Moody's assigned an A3 rating to series A bonds and a Baa1 rating to series 2008B bonds.

Citigroup Global Markets is the senior book runner for series 2008A bonds, and Goldman, Sachs & Co. is senior manager for series 2008B and 2008C bonds.

Proceeds will be used to make improvements to the city's tourism locations, including a new community event center and renovations to the Citrus Bowl football stadium.

North Dakota HFA to price

North Dakota Housing Finance Agency will price $65.85 million in housing finance program bonds on Feb. 26, according to Patrick Nagel, the agency's chief financial officer.

The deal includes $50 million in series 2008A housing finance program bonds and $15.85 million in series 2008B housing finance program taxable bonds, a preliminary official statement confirmed Tuesday.

The bonds will be sold on a negotiated basis through remarketing agent Citigroup Global Markets.

The 2008A bonds are due from 2009 to 2018 with term bonds due 2023, 2028, 2032, 2038 and 2039. The 2039 bonds will be variable rate, the official statement said. The 2008B bonds are due 2038.

Having a variable-rate bond is a risk, Nagel admitted in an interview, but said the agency had little choice to achieve the rate they wanted.

"We will be using the variable rate, and because it is riskier, we try to shy away," he said.

"We have not done any variable-rate bonds in the last two years, but to achieve the rate we wanted, we really didn't have any choice but to go for the variable-rate bond."

Also, the bonds will be sold uninsured, but that choice had little to do with woes in the bond insurance arena, Nagel noted.

"All of our bonds are uninsured," he said.

"We tried it once about 10 years ago and for what we paid for the insurance, we just saw no real benefit."

Proceeds from the bonds will be used to make single-family home mortgage loans to citizens of North Dakota.

Michigan bonds to price Feb. 28

Michigan Strategic Fund plans to price $77.37 million state HOUSE OF REPRESENTATIVES limited obligation revenue and revenue refunding bonds on Feb. 28, according to a release Tuesday from Moody's Investors Service.

Series 2008 bonds, rated A2 by Moody's, are expected to be insured. The bonds will have a final maturity in October 2023, Moody's said in the release.

The majority of proceeds will defease debt issued in 1998 to finance construction of an office building for the House of Representatives. About $68 million of the original $100 million issue remains outstanding.

About $4 million of proceeds will be used to pay off an elevator loan and to provide funding for additional capital improvements to the building.

Michigan Strategic Fund, housed within the Michigan Department of Treasury, will take control of the building's ownership.

Additional information was not available.

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