Billions in new issue sales expected week of May 26; ratings agency doubles timeframe for assigning ratings

By Cristal Cody and Sheri Kasprzak

New York, May 23 - Despite some new-issue munis being set back because of ratings agencies being deluged by issuers converting or refinancing auction-rate bonds, the market expects to see billions of dollars in new offerings during the week of May 26.

Among the issuers with sizeable sales planned for the week are the North Texas Tollway Authority, the New York City Municipal Water Finance Agency, the Phoenix Civic Improvement Corp. and the City of Detroit.

Auction-rate debt changes market

Moving back to ratings agencies, one agency confirmed the timeframe has doubled to 30 days to assign short-term ratings to new municipal bonds because of the overwhelming number of issuers converting or refinancing auction-rate securities.

"The muni market is undergoing rapid change just because of all the auction-rate debt that was outstanding," a ratings executive said in an interview Friday. "That market sort of died so all the public issuers wanted to refinance that auction-rate debt at the same time because they're paying maximum auction rates."

The surge has increased the agency's turnaround time from about two weeks to four weeks.

"It's going to take close to four weeks for us to turn around and give you a rating," the executive said. "We got a flood of requests to change their debt into letters of credit or ratings with standby purchase agreements from various banks. Unfortunately, they all came in together and this created a backlog for us in responding to these requests."

Moody's Investors Service also has a backlog in new ratings.

"We have experienced a surge of transactions on top of an otherwise healthy pace of business in this market segment and that, combined with the increased complexity of the structures, is resulting in longer lead times," Lisa Washburn, managing director at Moody's, said in a comment to Prospect News.

The holdup came to light after Rand Corp. pushed back the sale date of its $93.565 million revenue bonds to June 2 because of a delay in receiving the short-term ratings.

The series 2008B bonds (Aaa/AAA/) had been expected to price on Thursday.

Piedmont prices 1.7%

Looking to pricing news from Friday, Piedmont Municipal Power Agency in South Carolina priced $227.9 million electric revenue bonds with 1.7% initial interest rates, the issuer said Friday.

The $107.9 million series 2008B bonds, $90 million series 2008C bonds and $30 million series 2008D bonds have a weekly interest rate, said Steven Ruark, finance director and treasurer of the agency's board.

The bonds (Aaa/AAA/AAA) are due Jan. 1, 2034 and are insured by Assured Guaranty Corp.

Goldman, Sachs & Co. was the senior manager of the negotiated sale.

Proceeds will be used to refund certain maturities from series 2004B2, 2004B3, 2004B4, 2004B5, 2004B6, 1997A, 1997B, 1997C and 1996D variable-rate bonds.

"We had the old bond rate trading much higher than Sifma, so we wanted to take this out and get [bonds reinsured by] Assured Guaranty Corp.," Ruark said. "This took out everything except for one issue that was tied to a swap that we're going to leave outstanding."

North Texas Tollway bonds

Heading up the week's pricing action is a $1 billion sale of series 2008F second-tier revenue refunding bonds from the North Texas Tollway Authority. The authority plans to price the bonds on Thursday, according to a preliminary official statement.

The bonds (Aa3/BBB+/) will be sold through negotiation with Lehman Brothers as the senior manager.

The proceeds from the bonds, which are due from 2030 to 2038, will be used to refund outstanding bonds.

Sacramento utility bonds to price

Also coming up, the Sacramento Municipal Utility District expects to price $503.555 million electric revenue refunding bonds on Thursday, the issuer said Friday.

The series 2008U bonds (A1/A/A) will be offered first in a retail order period on Wednesday, district treasurer Noreen Roche-Carter said.

The bonds have serial maturities from 2014 through 2027.

Goldman, Sachs & Co. is the senior manager of the negotiated sale.

Proceeds will be used to finance or refinance improvements and additions to the district's electric system and to refund all or a portion of the district's outstanding $406.85 million auction-rate bonds.

New York water agency's $500 million

Moving to other large sales in the week, the New York City Municipal Water Finance Agency will price $500 million in series 2008DD water and sewer system second general resolution revenue bonds, said a calendar of upcoming deals.

The bonds (Aa3/AA/AA) will be sold on a negotiated basis with Siebert Brandford Shank & Co. as the lead manager.

The bonds are term bonds, and the proceeds will be used to pay commercial paper notes and to make a deposit to the agency's construction fund.

Phoenix airport bonds to price

Elsewhere, the Phoenix Civic Improvement Corp. of Arizona intends to sell $425 million in bonds on Thursday, according to a calendar.

The bonds (Aa3/AA-/) will be sold on a negotiated basis with Citigroup Global Markets as the lead manager.

The bonds have both serial and term maturities.

Proceeds will be used for improvements to Phoenix's Sky Harbor International Airport, including the construction of an automated train.

Detroit's $188.705 million G.O.s

In other sales, the City of Detroit is scheduled to price $188.705 million in general obligation bonds on Thursday, according to a preliminary official statement.

The bonds (/BBB/BBB-) will be sold on a negotiated basis with SBK-Brooks Investment and Merrill Lynch as the senior managers.

The sale includes $57.105 million in series 2008A bonds, $60.06 million in series 2008B bonds, $46.54 million in series 2008A-1 bonds and $25 million in series 2008A-2 bonds.

The 2008A bonds are due 2013 to 2028, the 2008B bonds are due 2009 to 2018, the 2008A-1 bonds are due 2014 to 2017 and the 2008A-2 bonds are due 2010 to 2014.

Proceeds will be used for a construction fund and for refunding outstanding bonds.

Connecticut's $400 million G.O.s

Looking a little farther ahead, Connecticut intends to price $400 million G.O. bonds, according to a preliminary official statement.

The series 2008A bonds (Aa3/AA/AA) have serial maturities from 2009 through 2028.

Citigroup Global Markets is the senior manager of the negotiated sale. Co-managers are Banc of America Securities LLC; Lehman Brothers; Loop Capital Markets LLC; Belle Haven Investments; Estrada Hinojosa & Co.; Merrill Lynch & Co.; M.R. Beal & Co.; Prager, Sealy & Co.; Raymond James & Associates; Rice Financial Products Co.; Sterne, Agee & Leach and Webster Bank.

Proceeds will be used for various projects, including school construction and community conservation.

Saint Luke's bonds to price

The Northampton County General Purpose Authority in Pennsylvania plans to price $175 million revenue bonds for Saint Luke's Hospital, according to a preliminary official statement.

The series 2008A bonds (Baa1//) will be sold in a negotiated sale managed by Merrill Lynch & Co. and Wachovia Bank, NA.

Proceeds will be used for the construction of a new medical campus, renovations and projects at the hospital's Allentown and Bethlehem facilities and the costs to acquire the Union Station Plaza health and wellness center and 280 acres in Bethlehem Township in Northampton County.

Texas Higher Education bonds

The Texas Higher Education Coordinating Board plans to price $102.435 million G.O. bonds (Aa1/AA/) in a competitive sale, according to a notice.

The $74.39 million series 2008A college student loan bonds and $28.045 million series 2008B college student loan refunding bonds will price on a day between May 28 and June 10, according to the notice.

Bidders will be given notice at least 12 hours prior to the sale.

The series 2008A bonds have serial maturities from 2012 through 2032. The series 2008B bonds have maturities from 2014 through 2018.

First Southwest Co. is the state board's financial adviser.

Proceeds will be used to fund an ongoing student loan program that provides low interest loans to eligible students and to refund the outstanding $26.82 million in Aug. 1, 2009 maturities from the state's series 1997, series 1999, series 2000 and series 2002 student loan bonds.

California Infrastructure to sell bonds

The California Infrastructure and Economic Development Bank plans to price $198.18 million revenue bonds, according to a preliminary official statement.

The series 2008A bonds will price for the California Independent System Operator Corp.

Banc of America Securities LLC is the senior manager of the negotiated sale.

Proceeds will be used to finance computer hardware and software systems and other equipment used to provide control services at electric transmission facilities and to refund the bank's outstanding series 2000, series 2004 and series 2007 revenue bonds on July 1.

Stanford Hospital bonds

Also coming up, Stanford Hospital and Clinics plans to price $104.1 million refunding revenue bonds, according to a preliminary official statement.

The series 2008A2 bonds (/AAA/) are due Nov. 15, 2040.

The bonds will price through the California Health Facilities Financing Authority with an initial weekly interest rate.

Stanford Hospital also plans to price $324.4 million variable-rate refunding revenue bonds, as reported during the week of May 19.

The sale includes $70.5 million series 2008A1, $85.7 million series 2008A3, $84.1 million series 2008B1 and $84.1 million series 2008B2 bonds.

The series 2008A1 and 2008A2 bonds are due Nov. 15, 2040, and the series 2008B1 and 2008B2 bonds are due Nov. 15, 2045.

The series 2008A1 and 2008A2 bonds initially will price with a long-term interest rate, and the series 2008B1 and B2 bonds will price with a weekly interest rate.

Morgan Stanley is the senior manager of the negotiated sales.

Jewish Hospital to price bonds

Jewish Hospital & St. Mary's HealthCare Inc. in Kentucky plans to price $333 million revenue and refunding revenue bonds on June 9, according to a release from Moody's Investors Service.

The series 2008 fixed-rate bonds (A3//) will price through the Louisville & Jefferson County Metropolitan Government.

UBS Securities LLC is the senior manager of the negotiated sale.

Proceeds will be used to refund the series 2002 and series 2004 bonds, to provide $30 million in project funds and to provide $22.4 million to terminate the swap agreement hedging the series 2002 bonds.

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