Puerto Rico Aqueduct expected to price $1.525 billion bonds; Texas Transportation plans $1.1 billion

By Cristal Cody and Sheri Kasprzak

New York, Jan. 16 - Buzz around a potential $1.525 billion offering of revenue bonds from the Puerto Rico Aqueduct & Sewer Authority led municipals news Wednesday.

Fitch released a statement that it had rated the planned bond offering BBB-, but sources reached at the Government Development Bank of Puerto Rico could not confirm the deal by press time Wednesday.

The bonds, Fitch said, include $1.227 billion in series A senior lien revenue bonds and $20.6 million in series B senior lien revenue bonds, as well as $155.7 million in series A revenue refunding bonds and $121.2 million in revenue refunding bonds. Both the senior lien and refunding bonds are guaranteed by the Commonwealth of Puerto Rico.

Fitch's release said the bonds will be sold on a negotiated basis "as late as mid-February." The series A bonds, Fitch said, will be sold globally via negotiation while the remainder will be sold locally in Puerto Rico.

Texas $1.1 billion bonds include term bond

The Puerto Rico bonds aren't the only exceptionally large offering in the works.

The Texas Transportation Commission plans to price $1.1 billion in general obligation mobility fund bonds on Jan. 23.

UBS Investment Bank is the lead underwriter on the series 2008 bonds, which have serial maturities from 2009 through 2033. The issue also includes one term bond that matures in 2037.

"It's just a different structure rather than the annual," Jose Hernandez, debt management director for the Texas Department of Transportation, said in an interview Wednesday.

"The term bond is used to attract an investor interested in a large block of bonds. Instead of maturing in 2034, 2035 [and] 2036, it's all lumped together."

Moody's Investors Service assigned a rating of Aa1 on Tuesday to the tax-exempt bonds. The ratings outlook is stable.

The bonds are being issued to help pay for transportation projects, including constructing and expanding state highways.

Investors are looking for a 5% coupon, "but we'll make adjustments depending on what's the investor's appetite," Hernandez said.

Bon Secours prices variable rate bonds

Looking to pricings, Bon Secours Health System of Virginia confirmed it priced $243.28 million bonds in five tranches.

"Our bonds were issued as variable rate demands, so there is no total interest cost," Katherine Arbuckle, Bon Secours' chief financial officer, said in an interview.

"They price at the market every week, so the interest will vary."

Proceeds will be used to reimburse the system for $152 million in capital expenses in South Carolina and Virginia and refund $81 million in series 2003 bonds used to construct St. Francis Hospital in Chesterfield, Va.

Citigroup Global Markets is the sole underwriter for the bonds, which priced Tuesday.

The 2008A bonds included $69.925 million principal amount, the series 2008B-1 bonds included $40.345 million and the series 2008B-2 bonds included $40.35 million. The series 2008C-1 bonds made up $46.44 million of the total and the series 2008C-2 bonds included $46.22 million of the total.

The bonds are seven-day floaters maturing from 2031 to 2042, said Chris Payne with Ponder & Co., the medical group's financial advisor.

"Because of the variable rate, there is no coupon or yield calculations," he said. "The interest rate will change every seven days."

Alaska Housing bonds

Elsewhere, the Alaska Housing Finance Corp. confirmed its plans to price $80.88 million in home mortgage revenue bonds Wednesday.

The offering is expected to price Jan. 29 for retail and Jan. 30 for institutional investors, said Mike Strand, finance officer with the corporation, in an interview with Prospect News.

The series 2008A bonds include $15.695 million in a serial structure from Dec. 1, 2009 through Dec. 1, 2018 and term bonds due Dec. 1, 2028; Dec. 1, 2028; Dec. 1, 2033; and Dec. 1, 2038. Strand said the preliminary bond yield is set at just over 5% for the whole 30-year deal.

"That means the coupons, for the early serials, are really spread out over the yield curve," Strand noted.

The bonds are redeemable at par any time before maturity, according to a preliminary official statement released Wednesday.

Proceeds from the offering will be used to purchase qualified mortgage loans for first-time home buyers in Alaska, Strand said.

Citigroup Global Markets is the lead manager with Bear, Stearns & Co. Inc.; Goldman, Sachs & Co.; JPMorgan; Merrill Lynch; Siebert Brandford Shank & Co., LLC; and Wachovia Securities as the co-managers.

According to the preliminary official statement, Standard & Poor's is expected to give the bonds its AA rating, Moody's Investors Service is expected to give the bonds a Aa2 rating and Fitch is expected to give the bonds a AA+ rating.

Indiana University bonds rated Aa1

In ratings news, Indiana University's planned $268 million in student fee and consolidated revenue bonds received a Aa1 rating from Moody's Wednesday.

The outlook is stable, Moody's said in a release Wednesday.

The university will price series 2008A consolidated revenue bonds of $181 million on Feb. 14.

It also plans to price $87 million in student fee bonds, series S, on Feb. 15.

JPMorgan Chase & Co. is the underwriter on the student fee bonds, and Lehman Brothers is the underwriter on the consolidated revenue bonds.

Proceeds from the student fee bonds will be used to refund outstanding tax-exempt commercial paper and finance the costs of new projects, including a cyber-infrastructure building, a new science building on the Bloomington campus and a new medical education center on the Fort Wayne campus.

The proceeds from the consolidated revenue bonds will be used to refund the remaining outstanding tax-exempt commercial paper and finance other projects, such as a garage and athletic facilities on the Bloomington campus, renovations to the University Place Hotel at the Indianapolis campus, and student housing at the Southeast and South Bend campuses.

Wisconsin gains Aa1 rating for $135 million bonds

Wisconsin's $135 million clean water bonds received an Aa1 rating from Moody's Investors Service.

The outlook is stable, Moody's said Wednesday.

The state plans to price the 2008 series 1 clean water revenue bonds of $100 million and the 2008 series 2 clean water revenue refunding bonds of $35 million on Jan. 23.

The series 1 proceeds will be used for loans to municipalities for improvements to wastewater treatment facilities, while the series 2 proceeds will be used to refund outstanding bonds for an estimated net present values savings of at least 3%, according to Moody's.

Additional information could not be confirmed by press time.

Southern California Public Power Authority's bonds

Also coming up are three Natural Gas Project A 2008 taxable revenue bonds from the Southern California Public Power Authority totaling $140.11 million.

The offering includes $80.36 million in bonds for Anaheim, $43.275 million in bonds for Burbank and $16.475 million in bonds for Colton.

The bonds had previously been announced by Prospect News, but the principal amounts have changed and the pricing date could not be confirmed by press time Wednesday.

The Anaheim bonds were originally announced as an $81.61 million offering, the Burbank bonds as a $43.56 million deal and the Burbank bonds as a $16.325 million offering.

Proceeds from the Anaheim bonds (Aa3) will be used to refinance the city's share of the natural gas project acquisition and development costs through the redemption of the authority's draw-down revenue bonds, which were issued as a short-term financing for the project, according to a recent statement from Moody's Investors Service.

Profits from the Burbank bonds (A1) will be used to refinance Burbank's share of the natural gas project acquisition and development cost by way of redeeming the authority's draw-down revenue bonds issued as a short-term financing for the project.

The Colton bonds (A2) will be used to refinance Colton's share of the cost of acquisition and development of the natural gas project, also through the redemption of the authority's revenue bonds issued as a short-term financing for the project, according to the Moody's statement.

Howard Hughes Medical Institute's $85 million bonds

In other news, Moody's Investors Service assigned a rating Wednesday of Aaa/VMIG1 to Howard Hughes Medical Institute's $85 million series 2008A multi-modal revenue bonds.

The outlook is stable, Moody's reported in a release.

The Maryland Economic Development Corp. will issue the bonds Feb. 21. The financial advisor is Shattuck Hammond Partners in New York.

The Chevy Chase, Md.-based medical research organization plans to use the proceeds to renovate and expand the administrative headquarters. The Institute focuses on biomedical research issues and employs more 300.

Moody's also affirmed its Aaa/VMIG1 ratings to the institute's outstanding series 1990 and 2003 bonds.

Additional information from the institute and the financial advisor was not available before press time.

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