Auction-rate crisis drives issuers to refund deals; American Municipal Power to price $451 million BANs

By Cristal Cody and Sheri Kasprzak

New York, March 14 - The auction-rate has sparked some conversions and redemptions recently, but it has also caused some issuers to head to market with new bonds that will refund existing auction-rate securities.

Clark County Airport Enterprise in Nevada is gearing up to price $645.855 million in airport system subordinate lien revenue bonds (Aa3/AA-/) on Tuesday. The funds from the sale will be used to refund the airport's 2005B, 2005C-1A, 2005C-1B, 2005C-2, 2005C-3, 2001C, 2005D1-3, 2005E-1, 2005E-2 and 2005E-3 bonds, all of which are auction-rate securities.

"We have a lot of auction-rate bonds, so we felt it was necessary to eliminate as much of that debt as we could," a source at the issuer said.

The bonds will be sold on a negotiated basis with Citigroup Global Markets as the lead manager.

The offering is part of a larger deal totaling $1.2 billion. The whole sale is part of the airport's plan to refund its auction-rate debt. All of the bonds will be sold in tranches over the next few weeks.

The state of Wisconsin will price $366.4 million in series 2008A taxable general fund appropriation refunding bonds on Tuesday as part of plans to refund the state's 2003B general fund annual appropriation bonds (/A+/), which are auction rate.

The offering also includes $598.8 million in series 2008B taxable floating-rate bonds, which will be priced at some point the week of March 17, but the exact pricing date was not available.

Citigroup Global Markets is the lead manager for the negotiated deal.

The 2008A bonds are due from 2009 to 2013 with a term bond due 2025.

Rhode Island, Alabama to price bonds

The Rhode Island Health and Educational Building Corp. plans to price $93.865 million refunding bonds on March 27, the issuer told Prospect News.

The Rhode Island School of Design series 2008A bonds of $61.995 million and series 2008B bonds of $31.87 million initially will price with a weekly interest rate mode, said Bob Donovan, executive director of Rhode Island Health and Education Building Corp.

UBS Investment Bank is the underwriter and remarketing agent.

The higher education facility revenue refunding bonds (Aaa/VMIG 1) isn't the only transaction to replace auction-rate bonds that the issuer is studying, Donovan said.

"We approved four other ones last night at our meeting," he said in an interview Friday.

About $100 million in four bond series will be refunded or converted, he said.

"Our borrowers all are looking at refunding out of them or converting to other variable-rate debt if possible," Donovan said. "Clearly, as in all the other states, people are getting out of the auction-rate securities."

Coming up next week, the East Alabama Health Care Authority plans to price $77.34 million health care facilities bonds on March 19, the issuer said Friday.

Series 2008 B-1 bonds initially will be issued in the fixed rate mode, and series 2008 B-2 bonds will be issued as a term rate.

The Frazier Lanier Co. and Merrill Lynch & Co. are the underwriters.

Series 2008 B bonds will be priced to refund the authority's series' 2008 A-3 bonds. The $25 million series A-3 bonds priced Tuesday to refund the authority's 2006 bonds, said Sam Price, chief financial officer of the East Alabama Health Care Authority.

The authority also priced a $73.325 million bridge loan Thursday to refinance the series 2003-A auction rate bonds.

"Everything's pandemonium," Price said of auction rates. "Once we price next week, then I'll be completely out of them, so I'll be thankful."

Conversions continue

New-issue offerings aren't the only way issuers are trying to escape their auction-rate bonds. Some issuers are opting to convert.

The California Infrastructure and Economic Development Bank plans to switch $453.55 million in refunding revenue bonds to a weekly rate from auction rate.

So far, the bank converted $225 million in Pacific Gas and Electric Co. refunding revenue series 2005D, E, F and G bonds on Tuesday, Wednesday and Friday, said a notice released to Prospect News.

The bank will convert $74.275 million in series 2005A bonds on March 25, $74.275 million in series 2005B bonds on April 1 and $80 million in series 2005C bonds on April 8.

The 2005 bonds are due in 2026.

The Indiana Finance Authority intends to convert $400 million bonds from the PARS mode to a variable-rate mode in late March and April.

The series 2005 A lease appropriation bonds for the stadium project were sold as series A-1, A-2, A-3, A-4 and A-5 Periodic Auction Reset Securities.

The $90 million series A-4 bonds will convert on March 28, according to a notice released Thursday.

The $100 million series A-5 bonds and $70 million series A-3 bonds will convert on March 31.

Series A-1 bonds of $70 million will convert on April 1, and series A-2 bonds of $70 million will convert on April 2.

A group of underwriters are serving as co-brokers on the series, including Goldman, Sachs & Co., City Securities Corp., Citigroup Global Markets, Wachovia Securities, Merrill Lynch, Pierce, Fenner & Smith Inc. and JPMorgan Securities.

American Municipal Power bonds planned

Moving to upcoming offerings, American Municipal Power-Ohio Inc. plans to price $450 million revenue bond anticipation notes on April 1, according to a release Friday from Moody's Investors Service.

The series 2008 Prairie State Project notes (MIG 1) have a one-year maturity of no later than April 1, 2009.

The company is expected to price up to $250 million insured long-term revenue bonds to fund a portion of the outstanding BANs as early as May, Moody's said.

The power company will use the notes to refund $204 million of commercial paper notes, which were used to finance a 23.26% ownership interest in the Prairie State Project. The proceeds also will fund a $248 million Prairie State obligation through March 15, 2009.

The Prairie State Project includes the Prairie State Energy Campus, a coal-fired generating facility in southern Illinois.

New York tobacco bonds price Tuesday

New York's Tobacco Settlement Financing Corp. is gearing up to price $441.07 million in asset-backed revenue bonds on Tuesday, a preliminary official statement said.

The offering includes $216.59 million in series 2008A state contingency contract-secured bonds and $224.48 million in series 2008B state contingency contract-secured bonds.

The bonds (/AA-/A+) will be sold on a negotiated basis through lead managers Citigroup Global Markets and Bear, Stearns & Co. The co-managers are Banc of America Securities; Goldman, Sachs & Co.; Merrill Lynch & Co.; M.R. Beal & Co.; RBC Capital Markets; Roosevelt & Cross Inc.; Ramirez & Co.; and UBS Investment Bank.

The series 2008A bonds are due from 2010 to 2012 and the series 2008B bonds are due from 2009 to 2012.

Proceeds will be used to refund the corporation's series 2003A-2 asset-backed revenue bonds and its series 2003B-2 through 2003B-5 asset-backed revenue bonds.

Also coming up this week is $110 million in Everglades restoration revenue refunding bonds from Florida.

The first date the Department of Environmental Protection series 2008A bonds may be sold is March 24, Florida's bond office said in a sale notice.

The state prices bonds on an 18-hour notice.

© 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.