Connecticut, Philadelphia rid themselves of auction-rate debt; Connecticut's $2 billion in G.O.s price

By Cristal Cody and Sheri Kasprzak

New York, April 16 - As issuers continues to convert and refund their auction-rate bonds, two issuers on Wednesday completely eliminated their auction-rate securities with the sale of new issue bonds.

Connecticut sold $2 billion in pension fund general obligation bonds and $50 million in Libor index notes, the state's assistant treasurer said in an interview.

Also on Wednesday, Philadelphia priced $195 million in G.O. refunding bonds, which will be used to rid the city of all of its auction-rate bonds.

Sarah Sanders, Connecticut's assistant treasurer, said the $50 million in notes sold will refund all of the state's outstanding auction-rate debt and Philadelphia's debt manager Rebecca Rhynhart said its $195 million in G.O.s will eliminate the city's auction-rate securities too.

The sale, Rhynhart said, was "done at a level we all felt good about. This gets rid of all the city of Philadelphia's auction-rate debt so we're happy about that."

In other auction-rate news, the Stanford Hospital and Clinics of California announced in a notice that it plans to make a 1.8% annual interest rate bid on $85.7 million in bonds at its next auction on Friday.

The series 2006A3 revenue bonds priced through the California Health Facilities Financing Authority.

Morgan Stanley & Co. is the broker-dealer.

The bonds had a low bid of 5% and a high bid of 11.44% in the last auction held March 14.

Connecticut's bonds price

Moving back to Connecticut's sale of $2 billion in pension fund G.O.s and $50 million in Libor index notes, Sanders said the pricing details would not be available until Thursday at the earliest.

Though the pricing terms were being worked out Wednesday afternoon, Sanders said the state does not have any particular expectations for a coupon.

"It's a complex transaction," she added.

"Once we set a coupon, we have to verify it with our financial advisor and make sure everything works."

Still, the demand for the bonds has been "enormous," Sanders noted, given the global-scale, AAA rating.

"We've seen a significant amount of demand for this bond," she added.

The pension obligation bonds will fund the state's unfunded liability for its large pension plans, Sanders added.

"We've been working on this for two years," she said.

The $50 million in Libor index notes expected to price Wednesday will refinance the state's only auction-rate securities, Sanders said.

Philadelphia grabs 4.94% TIC

Back to the Philadelphia bonds priced Wednesday, the city picked up a 4.94% true interest cost, the issuer told Prospect News.

The final amount was lowered from an original sale amount of $203.8 million.

"As we get closer to pricing, the bonds can be structured with more discount or premium bonds so it changes the par amounts," said Rhynhart, debt manager for the city.

The series 2008A serial bonds (Aaa/AAA/AAA) priced with 4% to 5.25% coupons to yield 1.75% to 4.66%, she said.

The bonds have serial maturities from Dec. 15, 2008 through Dec. 15, 2027 and a $55 million term bond due 2032.

The term bond priced with a 5.25% coupon to yield 4.82%.

The bonds are insured by Financial Security Assurance.

Morgan Stanley was the senior underwriter of the negotiated sale.

Proceeds will be used to refund the city's series 2003B auction rate bonds to convert the liability to fixed rate.

The city also is considering additional bond sales this year, including $180 million general obligation bonds, an annual tax anticipation notes sale and a pension obligation bond series.

Florida sells $99.685 million

In other pricing action Wednesday, Florida priced $99.685 million Everglades restoration revenue refunding bonds with a 4.2693% true interest cost, the issuer said in an interview.

The Department of Environmental Protection series 2008A bonds (A1/AA-/A+) priced with 3% to 5% coupons to yield 2.15% to 4.59%, said Carol Bagley, bond development supervisor with the state's bond finance division.

The bonds have maturities from July 1, 2008 through July 1, 2025.

UBS Investment Bank won the bidding in the competitive sale out of six bids, she said.

Florida prefers to price bonds in competitive sales with an 18-hour notice.

"Overall it does give you the best rate," Bagley said.

"The investment communities and the Street's familiar with our regular bond program so there's really no reason to negotiate it. So we do competitive bids and then we take the best bid."

Proceeds from the bonds will be used to refinance the outstanding series 2006A and B multi-modal Everglades restoration revenue bonds and to fund a reserve account.

In other news, Children's Healthcare of Atlanta released details of the sale of $200 million refunding revenue anticipation certificates and bonds, which priced with a 1.85% initial weekly interest rate, the issuer said Wednesday.

"We came in about 3 basis points under Sifma," said Alan Gasiorek, chief investment officer for the medical center. "Yesterday was tax day and generally we have upward pressure on bond rates because people are liquidating to meet tax recommendations. Usually there is a spike in Sifma around that time, so we did very well in the market that had a little bit of head wind."

The sale included $110 million series 2008B and $40 million series 2008C refunding revenue anticipation certificates and $50 million series 2008B refunding revenue bonds due July 1, 2039.

The certificates priced Monday through the DeKalb Private Hospital Authority and the bonds priced through the Development Authority of Fulton County.

"This was a refinancing to get ourselves out of the auction-rate securities, which has been a difficult market," he said.

Citigroup Global Markets managed the negotiated sale.

Proceeds will be used to refund the hospital's series 2005A and 2005B revenue anticipation certificates and series 2005B revenue bonds.

Maine Bond Bank prices deal

The Maine Municipal Bond Bank priced $51.47 million bonds (Aa1/AAA/AAA) with more than half sold through retail orders, the issuer said Wednesday.

The $5.485 million series 2008A bonds and $43.59 million series 2008B bonds also priced institutionally Tuesday with 3% to 4.75% coupons to yield 2% to 4.75%, said Robert O. Lenna, executive director.

"We placed all of the bonds with a few pieces here and there," he said. "We have a very good response out toward the 2011 through 2018 range. The market's a little uneven these days, but we were pleased with the prices that we got and the structuring matched up quite well with the market."

The series 2008A bonds have serial maturities from Nov. 1, 2008 through Nov. 1, 2019, and the series 2008B bonds have maturities from Nov. 1, 2009, through Nov. 1, 2028 with term bonds due 2031 and 2038.

The bank has experienced great success with the retail market for years, he said.

"Maine has a pretty steep income tax, so we have a pretty broad interest in Maine tax-exempt paper and that certainly helps whet interest in the Maine retail market," Lenna said.

"Brokers are familiar that the Maine Bond Bank will be coming out twice a year, once in the spring and once in the fall, so they can talk to their clients and be ready to move in when the deal actually comes."

UBS Investment Bank was the senior manager of the bond sale.

Proceeds will be used to purchase $50.409 million municipal bonds from 15 towns, cities, schools and water and sewer districts.

JEA to sell $260 million

Moving to upcoming sales, JEA electric utility in Florida expects to price $260 million variable rate electric revenue bonds most likely on April 30, the issuer said Wednesday.

"If we price on April 30, then we would close the following day," said Hugh Seaton, manager of capital projects financing.

The $130 million series three 2008D1 and $130 million series three D2 bonds (Aa2/VMIG 1//) will be refunded without insurance and are the final part of the utility's debt restructuring plan to refund all of its auction-rate securities and insured variable-rate demand obligations, Seaton said.

"Because it's refunding a variable, it's not really market conditions but just getting all the documents all done," he said on the timing.

"These are insured bonds whose ratings have dropped, so we're refunding them as uninsured."

Elsewhere, the Pennsylvania State Turnpike Commission expects to price $253.5 million turnpike subordinate revenue bonds on Thursday, Nikolaus Grieshaber, director of treasury management, told Prospect News.

The series 2008 bonds (A2//) are being issued to make a payment to the Pennsylvania Department of Transportation to fund certain grants to mass transit agencies and to fund various road and bridge capital projects.

Banner Health bonds pricing

Looking a little farther ahead, Banner Health plans to price $221.39 million revenue bonds on April 22, a source said Wednesday.

The series 2008A bonds (/AA-/AA-) will price through the Arizona Health Facilities Authority.

Merrill Lynch & Co. is the senior manager of the negotiated sale.

Proceeds will be used to refinance the outstanding principal of a $224.225 million bridge loan from JPMorgan Chase Bank.

Also coming later this April, the Nationwide Children's Hospital said it will sell $90 million in series 2008A and 2008B healthcare revenue bonds on April 23 and April 30, the issuer confirmed Wednesday.

The bonds (Aa2//) are being sold through the Franklin County Hospital Commission of Ohio.

The sale includes $45 million in series 2008A bonds and $45 million in variable-rate demand revenue bonds. The 2008A bonds price on April 23 and the 2008B bonds will price on April 30.

"The commission approved the deal back in March," noted a source at the issuer.

The bonds will be used to refund the hospital's outstanding auction-rate securities, the source said.

The bonds will be sold on a negotiated basis through lead managers NatCity Investments and J.P. Morgan Securities.

California water system bonds

Later this month, the California Department of Water Resources is set to price $633.155 million Central Valley Project water system revenue bonds, according to a preliminary official statement. The pricing date could not be verified by press time Wednesday.

The series AE bonds (Aa2/AAA/) have serial maturities from Dec. 1, 2008 through Dec. 1, 2029.

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

Proceeds will be used to refund the department's series 1997S, series 1998U and series 2004AB outstanding revenue bonds, retire outstanding series 1 water revenue commercial paper notes and refund the series 2007A bond anticipation bonds.

Finally, the Massachusetts Bay Transportation Authority intends to price $53.385 million senior sales tax bonds, according to a preliminary official statement released Tuesday.

The series 2008B bonds (Aa2/AAA/) have serial maturities from 2011 through 2028 and a term bond 2033.

Lehman Brothers will manage the negotiated sale.

Proceeds will be used to refund outstanding bonds, repay outstanding bond anticipation notes and fund a portion of the senior debt service reserve fund for the bonds.

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