Auction-rate conversions postponed due to market conditions; other issuers opt for conversions

By Cristal Cody and Sheri Kasprzak

New York, March 20 - Several issuers are seeking to convert their existing auction-rate securities, but some have felt like they are jumping out of the frying pan into the fire. In trying to avoid the turmoil in the auction rate market, some have found conditions to be less than stellar in other parts of the fixed-income market this past week.

Among them is the Jacksonville Health Facilities Authority in Florida, which had been scheduled to convert $175.65 million in auction-rate bonds for the Baptist Medical Center.

The bonds had been set to convert Thursday, but will now likely be converted next week, according to Mike Lukaszewski, the medical center's chief financial officer.

"It wasn't a very good market for tax-exempt bonds this week," he said.

"We are shooting to take these bonds back out into the market next Wednesday. If the market conditions are satisfactory, we'll convert them to [a] fixed rate."

The medical center plans to convert $35 million series 2007B hospital revenue bonds; and $50 million series 2007C, $50 million series 2007D and $25.65 million series 2007E hospital revenue refunding bonds.

"We're also preserving our potential right to keep these bonds in an auction mode, and it's possible that we will purchase them ourselves in the auction mode," Lukaszewski said. "It's all dependent upon the interest rates in the fixed income market. We don't want to keep them, but we need to make a wise decision on the timing and not buy into a market where rates will be higher two weeks from now."

More conversions planned

Other issuers are still coming forth with more conversion, led by the state of Wisconsin, which plans to convert $744.85 million in series 2003B taxable auction-rate certificates.

The bonds affected by the conversion include series 2003B1-, 2003B-2, 2003B-3, 2003B-4, 2003B-5, 2003B-7 and 2003B-8.

The bonds are set to convert at par on April 1.

The bonds were sold in December 2003 for the state's general fund.

Also opting to convert is Georgetown University, which plans to convert $57.875 million auction rate revenue bonds on April 1, according to a conversion notice.

The series 2007B bonds will be converted from an auction rate mode to a seven-day auction rate period, according to a notice released Thursday.

Rockland County, N.Y., prices $80 million

In light pricing action Thursday, Rockland County in New York priced $80 million revenue anticipation notes with a 1.7101% true interest cost on Thursday, the issuer told Prospect News.

The series 2008 notes (MIG 1) priced with a 2% coupon, said Arlene Karger, county deputy commissioner of finance.

"We were lucky we got into it on the day after the Fed dropped the rates down a little more in the market, so I think that was partly responsible," she said.

The notes are due March 19, 2009.

Sovereign Securities was the winning bidder in the competitive sale.

Proceeds will be used to bridge the timing differences between cash receipts of sales taxes and state and federal aid disbursements.

Albuquerque bonds price

In other pricing news, the Albuquerque Bernalillo County Water Utility Authority in New Mexico priced $55.6 million revenue bonds with a 5.051% true interest cost, the issuer said Thursday.

The series 2008 joint water and sewer system improvement bonds (Aa2/AAA/AA+) priced Wednesday with 4.83% to 5.07% coupons to yield 5.08%, said Mark Sanchez, executive director.

The bonds have maturities from 2026 to 2030 and a term bond due 2033.

The true interest cost was actually lower than the authority anticipated by about 20 basis points, Sanchez said.

"The market's crazy right now. It is what it is - timing's everything," he said.

"Municipals are trading higher than Treasuries, which is not typical. Given all the circumstances, we got the best we could get out of this market."

RBC Capital Markets managed the negotiated sale.

Proceeds will be used to make system improvements and fund the San Juan Chama drinking water project.

Roanoke County bonds were to price

The Economic Development Authority of Roanoke County, Va., was expected to price $58.6 million in lease revenue bonds on Thursday.

The bonds (A1) are insured by Assured Guaranty.

Davenport & Co. is the underwriter of the negotiated sale.

Proceeds will be pooled with $11.2 million of county funds to construct a recreation facility, library, public works garage and fire station and purchase police radio equipment.

New Jersey Health Care Facilities Finance Authority also was expected to price $85 million revenue bonds on Thursday.

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

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.

The Northern Municipal Power Agency in Minnesota also was expected to price $94.545 million electric system revenue bonds on Thursday after delaying the sale by a day.

Series 2008A bonds of $72.85 million have serial maturities from 2009 through 2021. Series 2008B taxable bonds of $21.695 million mature 2009 through 2017.

The bonds had been expected to price Wednesday, but the agency delayed the sale a day to line up a purchaser, Dan Eitrheim, senior vice president of the Dougherty & Co., the agency's financial advisor, previously told Prospect News.

The bonds (Aaa/AAA/) are insured by Assured Guaranty Corp.

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

Proceeds will be used to finance the refunding of the agency's outstanding series 2002A-1, 2002A-2 and 2002B revenue bonds, terminate series 2002 swap transactions and satisfy the debt service reserve account requirement. The series 2002 bonds will be redeemed on April 18.

The sales could not be confirmed by press time.

Elsewhere in pricing news, the Michigan Strategic Fund was scheduled to sell $67.7 million in variable-rate limited-obligation refunding revenue bonds (Aaa//).

Calls for terms were not immediately returned.

The bonds had been set to sell on a negotiated basis through lead manager KeyBanc Capital Markets on Thursday.

The interest rate resets weekly.

Proceeds will refund existing bonds.

Utah Transit Authority bonds planned

Looking ahead to future sales, the Utah Transit Authority expects to price $700 million sales tax revenue bonds on March 26, a source said Thursday.

The series 2008A bonds (Aa3/AAA/AA) have serial maturities from 2018 through 2028 and term bonds due 2033 and 2038, according to a preliminary official statement.

UBS Investment Bank is the senior manager.

Proceeds will be used to finance the acquisition and construction of system improvements.

Also coming up, Indianapolis intends to price $166.445 million revenue refunding bonds, according to preliminary official statements released Thursday.

The city plans to price $112.45 million second lien multi-mode revenue refunding bonds (-/A+/-) for its Gas Utility Distribution System. The city will sell $56.255 million series 2008A bonds and $56.195 million series 2008B bonds.

The series 2008A bonds mature Aug. 15, 2030 and have a put on Aug. 15, 2013. The series 2008B bonds mature Aug. 15, 2027.

The city also plans to bring $53.995 million thermal energy system first lien multi-mode revenue refunding bonds (/A-/).

The pricing will include $26.995 million series 2008A bonds and $27 million fixed rate series 2008B bonds.

The series 2008A bonds mature Oct. 1, 2025 and have a put on Oct. 1, 2013. The series 2008B bonds mature Oct. 1, 2023.

Morgan Stanley is the senior manager of the sales.

Proceeds will be used to refund the city's series 2001B multi-mode bonds in April.

Orlando aviation authority plans sale

In upcoming pricings, the Greater Orlando Aviation Authority said it will price $268.435 million in airport facilities refunding revenue bonds on March 25.

The bonds (Aa3/AA-/A+) include $243.435 million in series 2008A AMT bonds and $25 million in series 2008B taxable bonds.

UBS Investment Bank is the lead manager.

The 2008A and 2008B bonds both have serial maturities from 2008 to 2018.

Proceeds from the sale will be used to refund the authority's series 1998A, 1998B and 1998C variable-rate subordinated refunding revenue bonds.

Chicago Transit aims for March 25

Elsewhere, the Chicago Transit Authority is gearing up to sell $250 million in capital grand receipts revenue bonds (A2/A/) on March 25, a source at the authority's finance department said.

"The date is tentative, but that's what we're aiming for," the source said.

The offering includes $150 million in series 2008 grant anticipation bonds and $100 million in 2008A grant anticipation bonds.

The 2008 bonds are due 2010 to 2026 and the 2008A bonds are due 2022 to 2026.

The bonds will be sold on a competitive basis.

Proceeds from the sale will be used for the authority's capital program, including the purchase of buses, replacement and refurbishment of rail cars, track replacements, rail station reconstruction and other improvements.

Another offering set to price is an $83.075 million deal from Pennsylvania State University. Those bonds are set to price on April 1, according to a release Thursday from Moody's Investors Service.

The university will price $75.16 million public higher education revenue series 2008A bonds and $7.915 million series 2008B revenue bonds.

Moody's assigned an Aa2 rating to the series 2008A and B bonds.

Lehman Brothers is the underwriter.

Proceeds will be used to refund the series 1997B fixed rate bonds for interest savings, reimburse the university for capital expenses and finance capital projects, including the Dickinson School of Law and the Cancer Institute at the Milton S. Hershey Medical Center.

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