California arranges $3.2 billion economic recovery bonds; Austin, San Francisco Airport delayed

By Cristal Cody and Sheri Kasprzak

New York, Jan. 30 - California led municipals news in a big way Wednesday, announcing plans for a $3.2 billion economic recovery bond package to help finance the state's accumulated state budget deficit.

The bonds are set to price Feb. 7.

The $1.3 billion series A fixed-rate bonds and $1.9 billion series 2008B floating-rate bonds have preliminary maturities up to 15 years, a source reported Wednesday.

Lehman Brothers and Citigroup Global Markets are the senior managers with 29 additional underwriters as co-managers.

Also, California's previously issued series 2004 economic recovery bonds, which have a $7.15 billion outstanding principal amount, are secured on parity with the 2008A and B bonds.

Austin to wait and see before pricing $173.375 million bonds

The $173.375 million Austin, Texas, public improvement refunding bonds may not price this week, the issuer told Prospect News on Wednesday.

The city is waiting on a better market before it sells the series 2008 limited tax general obligation refunding bonds (Aa1), said Art Alfaro, Austin's treasurer.

"We decided to pull that deal after all the activity in the market yesterday," he said. "It was all over the place and was so volatile. We decided to see what the Fed does today and the market moved away from us."

The Federal Reserve made its second cut to interest rates in nine days, lowering it Wednesday a half percent to 3%.

"At this point, we're still realizing enough savings to meet the city's threshold," Alfaro said. "We're going to wait and see if the markets improve more."

The bonds may be sold at any time through July 10 as long as they reach a threshold of at least 4.25% of savings without having to renew city council approval, Alfaro said.

Lehman Brothers is managing the negotiated sale.

Proceeds will be used to refund a portion of outstanding debt for net present value savings.

San Francisco postpones bond sale

The San Francisco Airport has also decided to hold off on its planned offering of $261 million in AMT and non-AMT bonds.

Kevin Cohn with the airport told Prospect News in an interview Wednesday that troubles with the bond insurance sector have caused them to wait a while.

"We're waiting because there's too much uncertainty right now with bond insurance issues swirling in the market," Cohn said. "It wasn't a transaction where we absolutely had to refund the bonds right away. They aren't callable until May 1."

The news comes on the same day that Fitch downgraded bond insurer FGIC Corp. to AA from AAA.

Fitch cited FGIC's move into the structured products sector and the subsequent subprime mortgage disaster that destroyed the credit quality of those products.

Many in the market were speculating that insurers MBIA, Inc. and Ambac Financial Group, Inc. would receive cuts from the rating agencies as well.

The San Francisco Airport bonds (A1/A) will now be priced on March 26. They had been expected to price on Wednesday.

The bonds will price in a serial structure from 2012 to 2022 with Citigroup Global Markets as the lead manager.

Proceeds will be used to refund a recent series of bonds, but Cohn could not immediately identify the bonds to be refunded.

Also set to price Wednesday were $250 million in consolidated transportation bonds from the Maryland Department of Transportation. Calls to the issuer and advisor for terms were not immediately return Wednesday.

Merrill Lynch reportedly won the competitive bid.

Proceeds from the offering will be used to fund a portion of capital projects for state highways and transit system, including buses and light rail.

The bonds were to price in a serial structure from 2011 to 2023.

Irving School District to price $86.9 million bonds

Moving to upcoming offerings, Irving Independent School District in Texas expects to price $86.9 million unlimited tax school building bonds on Thursday.

The bonds have a serial structure from 2009 to 2038 and received an Aa3/Aaa rating on Wednesday from Moody's Investor's Service.

Proceeds will be used to build facilities and purchase buses and school sites.

Morgan Keegan & Co., First Southwest Co., Merrill Lynch & Co. and Southwest Securities are managing the negotiated deal, according to a preliminary official statement.

Brushy Creek Regional Utility Authority bonds to price

In other upcoming deals, Brushy Creek Regional Utility Authority out of Texas plans to price $88.75 million in City of Leander contract revenue bonds series 2008A.

Moody's rated the bonds Baa2 Wednesday, but the offering could not be confirmed with the issuer by press time Wednesday.

The pricing date could not be confirmed Wednesday.

Proceeds, according to Moody's, will be used for the city's share of phase one costs of regional water treatment and transmission project to deliver potable water to member cities and capitalized interest.

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