Dormitory Authority of New York, Municipal Electric Authority of Georgia price sizable deals

By Cristal Cody and Sheri Kasprzak

New York, Feb. 26 - Tuesday kicked off a particularly heavy week for pricing activity in the municipal bond market, led by two rather large deals from the Dormitory Authority of the State of New York and the Municipal Electric Authority of Georgia.

Most of the offerings coming up this week are fixed-rate and an underwriter reached Tuesday said that makes sense.

"We're hardly seeing any issuers who are even willing to go there," he said of variable-rate bonds.

"It's just way too risky, the market is not good at all, so most are just playing it safe and going the fixed-rate route."

From the issuers' perspective, some with variable-rate bonds are converting those to fixed-rate securities - an action that some have said will make them more appealing to investors.

An issuer source told Prospect News recently that his organization is converting their auction-rate bonds in an effort to rescue investors from holding on to the securities indefinitely.

Cleco Power bonds

Among the victims of the auction-rate crisis is Cleco Power LLC in Louisiana, which expects to reoffer $60 million revenue bonds sometime in March after receiving approval from Rapides Finance Authority.

"They're currently auction-rate bonds. The auction market is not very liquid or efficient at this point, so we want to remarket the bonds in a more stable market." Kathleen Nolen, Cleco's chief financial officer, said in an interview Tuesday.

"We'd like to get it done as soon as we can. We should see something on that in the next month."

The series 2007 bonds initially were issued on Nov. 1, 2007 and are due Nov. 1, 2037.

The bonds are being converted to bear interest at a term rate, but then may be converted to bear interest at daily, weekly, commercial paper or auction period rates.

Goldman, Sachs & Co. is the lead remarketing agent.

Proceeds are being deposited into a construction fund to finance sewage disposal facilities in Rapides Parish, La., at Cleco's solid fuel power plant.

Chattanooga Electric Power Board bonds

Although the day was crowded with pricing activity, one issuer that had been expected to price its bonds put them off.

Electric Power Board of Chattanooga, Tenn., postponed pricing $215.075 million electric system revenue bonds that were planned for sale on Tuesday, Greg Eaves, the board's chief financial officer, told Prospect News.

Eaves said the delay is because of an additional amendment to a lawsuit filed Friday by the Tennessee Cable Association against the Electric Power Board. The litigation challenges the use of the board's electric network for cable purposes. The lawsuit was discussed in the offering statement.

"Since it was so close to the pricing, we felt like we needed to work on that disclosure and circulate that to the financial community before we do the pricing," Eaves said.

The series 2008A bonds (AA/AA) mature 2013 to 2028 with a term bond due 2033.

"We're not sure how long the delay will be. Next week, there is a lot of stuff [in Tennessee] that is going to be pricing, so we may choose to move in another week or so," Eaves said.

"We want to have a retail offer period also, so we want as much interest as we can get and time it without having to compete with a bunch of issues going on at the same time."

The Metropolitan Government of Nashville and Davidson County is expected to price $310 million general obligation bonds on March 4.

Goldman, Sachs & Co. is the lead manager of the Chattanooga bonds.

Proceeds will finance a fiber optic broadband network and various capital improvements for the electric system.

University of Michigan's variable-rate bonds

Even though some issuers are avoiding variable-rate deals like the plague, the Board of Regents of the University of Michigan priced $224.145 million in general revenue bonds with a variable rate.

The bonds, which priced Monday, include $105.81 million in series 2008A bonds and $118.335 million in series 2008B bonds. The A bonds, which are due April 1, 2038, and the B bonds are due April 1, 2028.

The series A bonds reset at the daily rate and the B bonds reset at the weekly rate.

The proceeds will be used for capital projects and outstanding debt.

UBS Securities was the underwriter.

Dormitory Authority prices deal

Moving to Tuesday's pricings, the authority priced $276.445 million in state personal income tax revenue bonds (AAA/AA-) in a negotiated offering. The deal included $112.44 million in series 2008A economic development and housing bonds, $94.464 million in series 2008B federally taxable economic development and housing bonds and $69.54 million in series 2008A healthcare bonds.

The bonds were sold on a negotiated basis. The series A bonds were sold through lead manager Loop Capital Markets and the B bonds were sold through lead manager M.R. Beal & Co.

The exact terms were not immediately available.

Proceeds will be used for capital expenses on programs and grants to healthcare institutions under the HEAL NY program.

Georgia's Municipal Electric Authority also priced bonds Tuesday.

The authority priced $246.445 million in bonds (A2), including $106.82 million in series 2008A project one subordinated taxable bonds, $57.475 million in series 2008A general resolution projects subordinated taxable bonds, $39.575 million in series 2008B project one subordinated tax-exempt bonds and $42.575 million in series 2008B general resolutions projects subordinated tax-exempt bonds.

The terms could not be determined by press time Tuesday. The 2008A project one subordinated taxable bonds are due from 2008 to 2019, the 2008A general resolution bonds from 2008 to 2020, the tax-exempt and 2008B general resolution bonds from 2009 to 2023.

Proceeds will be used to refund tax-exempt commercial paper notes.

New York Thruway plans offering

Looking ahead, the New York State Thruway Authority confirmed with Prospect News that it will price $724.01 million in series 2008A second general highway and trust fund bonds on March 4.

The bonds (AA/AA-) have a serial structure from 2009 to 2028 and will be sold on a negotiated basis through lead manager Goldman, Sachs & Co.

Proceeds will be used to refund outstanding general trust fund bonds and reimburse the state for expenses made by the Department of Transportation.

Orlando tops Wednesday's pricings

Wednesday is expected to be another active day for pricings and Orlando leads the pack with $297.99 million in bonds.

The Florida city expects to sell $181.76 million series 2008A bonds, $42.36 million series 2008B bonds and $73.87 million series 2008C bonds. The bonds (Aa3/AA+/AA-) are backed by the city's 6th cent hotel contract payments with Orange County.

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.

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

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

Proceeds will be used to construct a $480 million community event center in Orlando, which is part of a larger project that includes improvements to the Citrus Bowl football stadium.

Friendswood Independent School District in Galveston County, Texas, also is expected to price $99.465 million unlimited tax schoolhouse bonds on Wednesday, a source said.

The series 2008 bonds (A1/A+) have serial maturities from 2013 through 2037.

UBS Investment Bank is the lead manager of the negotiated sale. Co-managers are RBC Capital Markets, Southwest Securities, Edward Jones, Wachovia Bank and Coastal Securities.

Proceeds will be used for school equipment, property acquisition and construction projects.

Delaware college bonds

Further ahead, Delaware County Community College plans to price $60 million bonds on March 5, the issuer said Tuesday.

The series 2008 college revenue bonds (A2) will be issued through the Pennsylvania State Public School Building Authority.

Wachovia Securities was chosen as the underwriter through a competitive bid process in October, said John Glavin, vice president for administration and treasurer of the college.

The college has set average rates it wants on the bonds when they price.

"The yields on the short end are 3% and the long end are 5%, with an average coupon of 4.3%," Glavin said. "That's a rough schedule of what they will be."

The bonds are expected to be insured by FSA.

Proceeds will be used to construct and equip a science, technology, math and engineering complex on the college campus in the Township of Marple in Delaware County.

Also that week, the Public Utility District No. 1 of Chelan County, Wash., plans to price $92.88 million consolidated system variable rate revenue bonds on March 6, the issuer reported.

The refunding series 2008B bonds (Aa2/AA/AA) will price with a weekly interest rate determined by remarketing agent Lehman Brothers.

The bonds are due July 1, 2032.

Proceeds will be held in trust for the $93.75 million outstanding principal amount of series 2007A revenue bonds.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.