Detroit, MultiCare Health to convert auction-rate bonds; Lubbock to sell $86.6 million

By Cristal Cody and Sheri Kasprzak

New York, April 28 - Although pricing action Monday was very light, the rest of the week is shaping up to be rather active.

Volatility in the market, however, may be leading some issuers to price on a negotiated basis. One seller of bonds - the Tennessee Housing Development Agency - told Prospect News Monday that market volatility prompted it to take the negotiated route for its pricing of $55 million in bonds scheduled for Tuesday.

In other news Monday, the City of Detroit announced its plans to convert $384.715 million in sewage disposal system bonds issued in 2001 and 2006.

The bonds being converted include $122.11 million in series 2001C-2 senior lien revenue refunding bonds, $138.255 million in series 2001E second lien revenue bonds and $124.35 million in series 2006A revenue second lien bonds.

All of the bonds will be converted to a fixed-rate mode from a weekly mode.

The exact conversion date has not been set, but is expected in May.

The remarketing agents are UBS Investment Bank, Loop Capital Markets, Fifth Third Securities, M.R. Beal & Co. and Raymond James.

Another large conversion comes from MultiCare Health System of Washington State, which plans to convert $307.5 million of its series 2004A, 2004B, 2004C, 2007A and 2007B revenue bonds, a notice of a conversion said Monday.

The bonds being converted include $50 million in series 2004A bonds, $50 million in series 2004B bonds, $50 million in series 2004C bonds, $78.725 million in series 2007A bonds and $78.725 million in series 2007B bonds.

All of the bonds are being converted to a fixed-rate mode from an auction-rate mode on May 15.

Merrill Lynch is the remarketing agent.

The bonds were sold through the Washington Health Care Facilities Authority.

Lubbock to sell $86.6 million

Looking ahead to this week's bond sales, Lubbock, Texas, expects to price $84.5 million certificates of obligation and $2.1 million general obligation bonds on Tuesday, a source told Prospect News.

"Tomorrow is the day, but who knows with the market the way it is," the source said.

The series 2008 tax and waterworks system surplus revenue certificates and $2.1 million series 2008 general obligation bonds will price in a negotiated sale.

Morgan Stanley is the senior manager.

Proceeds will be used for street improvements, streets for new residential developments and upgrades to the city's airport, sewer and water system and fire stations.

Tennessee Housing goes negotiated

In other upcoming sales, the Tennessee Housing Development Agency said it will price $55 million in homeownership program bonds on Tuesday.

Trent Ribley, the agency's chief financial officer, said in an interview Monday that the bonds will be mostly sold to retail investors and were pricing Friday and Monday. An institutional order period may be available on Tuesday, if needed, Ribley said.

The bonds will be sold on a negotiated basis with Morgan Stanley as the senior manager.

"We look at it on a market basis," said Ribley.

"As we go out, we look at what the current market is doing and the volatility of the market. We felt it was better to be negotiated given these volatile market conditions, but we look at it during every single deal and ask our financial advisor what we should do."

The proceeds will be used for the agency's first-time homebuyer mortgage program, Ribley said.

Also coming up this week, Xavier University in Ohio plans to price $70.855 million in variable-rate higher educational facility revenue bonds this week, said a sell-side source connected to the sale.

The bonds (Aa1/VMIG1//) will be sold on a negotiated basis with Lehman Brothers as the lead manager. Fifth Third Securities is the co-manager.

The bonds will be sold through the Ohio Higher Educational Facilities Commission.

The deal includes $23.475 million in series 2008A bonds and $47.38 million in series 2008B bonds.

The bonds will initially bear interest at the weekly rate, but may be subject to conversion to a fixed-rate or other mode.

Proceeds will be used to refund the university's series 2006 revenue bonds and series 2003 revenue bonds.

Citizens to price $1.5 billion

Moving to upcoming sales, Citizens Property Insurance Corp. expects to price $1.5 billion series 2008A high-risk account senior secured bonds next week, the issuer said Monday.

The Jacksonville, Fla., company is still working on details and plans to hold a finance and investment committee meeting on Wednesday, said spokesman John Kuczwanski.

Citizens plans to sell the bonds (A2//) to move some of the company's liquidity reserves away from the auction-rate market. The company has $3.8 billion outstanding auction-rate securities.

Olathe optimistic on pricing

Also on the horizon, Olathe, Kansas, expects to price $86.5 million bonds and temporary notes on May 6, the issuer said Monday.

The $37 million series 211 general obligation bonds (Aa2//) and $49.5 million series 2008A general obligation temporary notes (MIG 1//) will be sold in competitive sales, said Maureen Rogers, accounting manager.

"We're hoping to get a good range but we're not saying it has to be between this and this," she said.

George K. Baum & Co. is the city's financial advisor.

Proceeds will provide financing for capital improvement projects throughout the city, including street improvements and a railway track project.

"It's between 55 and 60 projects on the notes and 27 projects on the bonds," Rogers said. "A lot of them are street related, geometric improvement to intersections, overpasses and raising railway tracks over the street."

San Diego Water day to day

The San Diego County Water Authority intends to price up to $625 million water revenue certificates of participation, the issuer said Monday.

"We're expecting pricing either this Thursday or next week. It'll be day to day," Eric Sandler, the authority's treasurer, said in an interview.

"We're waiting to see what happens with the Fed meeting on Wednesday and how everyone reacts."

The authority has set an initial sale amount at $579.636 million for the series 2008A certificates.

The certificates (Aa3/AA+/AA) have serial maturities from 2009 through 2028 and term bonds due 2033 and 2038.

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

The proceeds will refund $63.165 million series 1997A water revenue certificates of participation and finance the authority's capital improvement program, which includes the San Vicente dam raise, the All-American Canal lining project and the Aqueduct Protection Program.

In other upcoming sales, Elmhurst Memorial Healthcare plans to price $362.62 million revenue and variable rate bonds.

The $112.615 million series 2008A bonds will price through the Illinois Finance Authority.

Elmhurst also intends to simultaneously price $100 million series 2008B, $75 million series 2008C, $50 million series 2008D and $25 million series 2008E variable rate demand revenue bonds, according to the statement.

Additional pricing information was not immediately available.

Citigroup Global Markets is the senior manager of the negotiated sale of the series 2008A bonds.

Proceeds will be used to refund the original $47 million principal in series 2006 revenue bonds and pay for a portion of the costs of acquiring and equipping health facilities, including a six-story, 259-bed replacement acute care hospital.

Also this week, Antelope Valley-East Kern Water Agency in California plans to price $85 million certificates of participation (Aa3//) Thursday, according to a statement from Moody's Investors Service.

The agency's board of directors is scheduled to meet Tuesday to approve the sale agreements and statement, according to an agenda.

The $40 million series 2008A1 fixed rate certificates and the $45 million series 2008A2 variable rate certificates will price through the California Special District Association Finance Corp.

Proceeds will be used to refund the district's $85 million in 2007 auction-rate certificates.

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