Dismal auction rate market, general worries stall bond sales; revenue bond pricings pick up in March

By Cristal Cody

Springdale, Ark., Feb. 29 - The dismal auction rate market and generally poor conditions kept some bond sales sputtering this week, and issuers continue to report plans to remarket bonds.

The New Hampshire Health and Educational Facilities Authority expects to remarket $84.4 million revenue bonds in two sales on March 26 and March 28 because of auction rate problems, the issuer said in an interview.

The University System of New Hampshire will remarket $24.35 million series 2006A bonds and $60.05 million series 2006B-1 bonds. The bonds have maturities from 2009 through 2036.

"The auction rate market has basically gone away," said Dave Bliss, executive director of the New Hampshire Health and Educational Facilities Authority. "We have numerous failed auctions, not just in the university system, but the entire market has basically walked away."

Series 2006A bonds will be remarketed on March 26 in a term rate period through March 25, 2009. Series 2006B-1 bonds will be reoffered on March 28 in a term rate period through March 27, 2009.

The crisis started with the fallout of bond insurers.

"People who buy these auction-rate securities are looking for cash and anticipating they can get their cash out," Bliss said. "Auction-rates are attractive because they're supposedly liquid. Now it's snowballed, and nobody wants to get into the auction-rates. We rarely had auction-rate failures in the past."

Friendswood Independent School District in Galveston County, Texas, entered the market Thursday to price $99.465 million unlimited tax schoolhouse bonds but postponed the sale, a source said Friday.

The pricing has been delayed until further notice due to the poor market conditions, the source reported.

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

Coming up in April, Children's Healthcare of Atlanta plans to convert $200 million outstanding auction rate securities.

"The market is in a meltdown," said Allan Gasiorek, chief investment officer of Children's Healthcare. "We haven't had any failed auctions, but we're paying an 8% higher interest rate. You can issue variable rate at a 2.95%, so we need to convert them into variable-rate demands. We'll be doing that in about 45 days."

The health care center priced $193 million variable-rate demand bonds and certificates (Aa2/AA/-) with a 2.95% initial interest rate on Thursday. The $72.965 million revenue bonds and $120 million revenue anticipation certificates reset every seven days.

"We were concerned given the turbulence in the market, but so far so good," Gasiorek said. "They were uninsured, so there was no uncertainty."

Hackensack medical bonds expected in March

New Jersey Health Care Facilities Finance Authority doesn't expect to price $85 million revenue bonds until mid-March, a source told Prospect News on Friday.

The series 2008 bonds (A3/A-) are being priced for the Hackensack University Medical Center.

The bonds were authorized in a resolution passed by the university's board on Thursday, the source said. The authorization isn't effective until the governor has a 14-day period to review and veto the sale.

The bonds probably won't close before the end of March, the source said.

Bear, Stearns & Co. is the lead underwriter of the negotiated sale.

Proceeds will be used for the construction of a new cancer center and 975-space parking garage.

Successful pricings

Other issuers were pleased with municipal bond sales this week.

Austin, Texas, priced $50 million taxable electric utility revenue refunding bonds with a 6.219% true interest cost, the city's financial advisor said Friday.

"Other deals that were in the market had to pull out, and we were able to get ours done. Relative to comparable issues, we priced very well," said Chris Allen, senior managing consultant of Public Financial Management, the city's financial advisor.

The bonds (A1) priced Thursday at par with coupons from 3.07% to 6.262%. The issue has serial maturities 2009 through 2013 and term bonds due 2017, 2019 and 2032.

"One reason we did better is the city of Austin is a well-known name in the market," Allen said. "They have great credit, the underlying rating is really good and they're in the market pretty regularly."

Looking ahead, the city plans to refinance a water and sewer fund bond series.

"It's on hold right now because markets have gone away from us," he said.

Orlando terms emerge

Orlando, Fla., priced $223.965 million bonds this week and plans to return to the market on Monday with a $73.87 million issue.

The city priced $190.46 million series 2008A bonds and $33.505 million series 2008B bonds on Thursday with a 5.419% true interest cost, according to a final pricing report released Friday.

The $73.87 million series 2008C third lien subordinate tourist development tax revenue bonds will price on Monday, said Chris McCullion, assistant treasurer for Orlando.

Series 2008A senior tourist development tax revenue bonds have serial maturities from 2010 to 2020, with term bonds due 2023, 2027 and 2038. The bonds priced with coupons from 4% to 5.25% with yields from 3.1% to 5.5%.

Series 2008B second lien subordinate tourist development tax revenue bonds have serials from 2013 to 2023 and term bonds due 2027 and 2038. The bonds priced with coupons from 4% to 5.5% with yields from 3.78% to 5.6%.

The bonds (Aa3/AA+/AA-) are insured under a financial guaranty insurance policy by Assured Guaranty Corp. (Aaa).

Citi is the senior book runner for series 2008A bonds, and Goldman, Sachs & Co. is the book-running manager for series 2008B and 2008C bonds.

University of Akron on calendar

University of Akron, Ohio, was expected to price $110.05 million general receipt bonds on Friday. The series 2008B bonds (A2) were being sold in a negotiated sale managed by Morgan Stanley. The sale could not be confirmed by press time.

Upcoming deals surface

Bond sales will set a faster pace the week of March 10.

Idaho Housing and Finance Association plans to price $178 million grant and revenue anticipation bonds probably on March 11, the issuer said Friday.

The federal highway trust fund series 2008A bonds (Aa3) will be issued on behalf of the Idaho Transportation Department.

The bonds have serial maturities from 2008 through 2026, said John Sager, chief financial officer of the Idaho Housing and Finance Association.

Citigroup is the lead underwriter of the negotiated sale.

Proceeds will provide funding for six highway projects. Series 2008A bonds are the second issue in the state's Garvee program, which will sell nearly $1 billion bonds to cover the road projects.

Maryland Transportation Authority expects to price $685 million transportation facilities projects revenue bonds on March 12, the issuer reported Friday.

The series 2008 bonds (Aa3) will be sold in a competitive sale, with bids accepted over the Internet, said Alison Williams, senior director of treasury and debt management for the Maryland Transportation Authority.

A preliminary official statement will be released in the coming week, she said.

Proceeds will be used to finance projects, including express toll lanes on Interstate 95 north of Baltimore, and the Intercounty Connector project to allow traffic to bypass the Capital Beltway area in Washington, D.C.

Wayne State University in Michigan also intends to price $177 million general revenue bonds on March 12, the issuer said Friday.

The series 2008 bonds received an Aa3 rating Friday from Moody's Investors Service.

The maturities have not been set and the sizing may change before pricing, said Roger Kempa, the university's assistant treasurer.

Goldman, Sachs & Co. is the underwriter of the negotiated sale.

Proceeds will be used to refund previously issued debt and finance the cost of swap termination payments.

Alabama Power to remarket

The Industrial Development Board of Mobile, Ala., plans to reoffer $246.5 million pollution control revenue bonds with a long-term interest rate in mid-March.

The reoffering covers $86.5 million series 2007-A bonds; $80 million series 2007-B bonds; and $80 million series 2007-C bonds. The bonds mature June 1, 2034.

The Alabama Power Co. bonds (A2/A/-) will be offered at a long term interest rate, ending 2012 for series 2007-A; 2013 for series 2007-B; and 2015 for series 2007-C, according to a preliminary reoffering circular released this week.

The initial long-term interest rate period begins March 19 for series 2007-A; March 24 for series 2007-B; and March 20 for series 2007-C.

Morgan Keegan & Co. is the lead remarketing agent.

The bonds initially were sold in June 2007 to finance pollution and environmental improvement facilities.

Houston schools to bring $385.4 million

Houston Independent School District in Harris County, Texas, plans to price $385.4 million limited tax schoolhouse bonds, according to a preliminary official statement.

The pricing date was not available before press time, but the series 2008 bonds are expected for delivery by March 11.

The bonds have serial maturities from 2012 through 2033.

Merrill Lynch & Co. is the lead underwriter of the negotiated sale.

Proceeds will be used to construct, equip and acquire school buildings and sites.

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