Bond insurer's stock sale gives issuers hope; California gears up to price $3.2 billion recovery bonds

By Cristal Cody and Sheri Kasprzak

New York, Feb. 6 - Troubles with bond insurers have given issuers pause about conducting their offerings, but a capital infusion plan announced late in the session Wednesday by MBIA Inc. may have assuaged issuer fears somewhat, a market insider said Wednesday.

"There have been some issuers that have held out; they're putting their deals off until things become a little more clear with bond insurers," said the source.

"MBIA's news today may make some difference. Issuers might feel a little more confident, just from the action of trying to boost their capital position. There could still be some skittish issuers out there who very well may put off their offerings a bit longer until the market stabilizes."

On Wednesday, MBIA announced plans to sell $750 million in stock to retain its AAA rating. The offering includes 50.3 million shares at about $14.91 each and the deal is backstopped by Warburg Pincus.

Last week, Fitch threatened to drop FSA's rating to A from AAA, but thanks to capital infusions, affirmed the AAA recently.

Even though insurance woes may have given issuers cause to reflect on the timing of their deals last week, issuers don't seem to be shy about pricing their offerings this week.

Pipeline full on Thursday

Several deals are in the pipeline for Thursday, including a $3.2 billion economic recovery bond package from California. The negotiated deal is being sold through lead managers Lehman Brothers and Citigroup Global Markets.

The 15-year bonds, which include $1.3 billion in series 2008A fixed-rate bonds and $1.9 billion in series 2008B floating-rate bonds; are being sold to finance the state's accumulating state budget deficit.

The Illinois State Toll Highway Authority also has a sizable deal in the works Thursday. The authority plans to sell $766.2 million in senior refunding revenue bonds (Aa3) on a negotiated basis through lead manager Goldman, Sachs & Co. Those bonds will refund the authority's series 2006 bonds.

Also, the New York State Thruway Authority plans to price $239.14 million in local highway and bridge service contract bonds Thursday. Morgan Stanley is the lead manager for the negotiated deal.

The bonds will be priced in a serial structure from 2008 to 2015 with a term bond due 2017. Proceeds will be used to refund maturities from outstanding highway and bridge service contract bonds, which were used to fund grants to reimburse municipalities and other sponsors for capital expenses to highway, bridge and multi-modal projects in the state.

JEA bonds price

In other news Wednesday, JEA Water and Sewer Enterprise in Florida priced $150 million variable-rate bonds Wednesday with a 1.3% initial interest rate.

The 2008 series A-1 and A-2 water and sewer revenue bonds, of $75 million each, have variable rates that change weekly, Helen Kehrt, director of JEA's treasury services, said in an interview.

"We're really pleased with the rate," Kehrt said. "We've had low rates before, but they had been going up, and now they're going back down again. With the low interest rates, it helps our customers and saves money on our debt service."

The series A-1 bonds are structured with maturities from 2009 through 2036, and the series A-2 bonds mature from 2010 through 2042.

Morgan Stanley is handling the negotiated pricing of the bonds (Aa3/AA-/AA).

Proceeds will be used to finance extensions and improvements to the water and sewer system in Jacksonville, Fla., and surrounding counties.

Gainesville revenue bonds

Gainesville Regional Utilities in Florida priced $195 million revenue bonds Wednesday, a source with the issuer said.

The utility priced $105 million in series 2008 A utilities system revenue bonds (Aa2) and $90 million in series B variable-rate utilities system revenue bonds (Aa2/VMIG 1).

Proceeds will be used to fund projects such as a new energy facility and a biosolids program.

The final terms of the pricing were not available by press time.

Denver prices $174.135 million G.O.s

Also set to price Wednesday was a $174.135 million offering of general obligation justice system facility bonds series 2008 from Denver.

The final coupons and yields on the bonds will not be available until Thursday, said Margaret Danuser, debt administrator for the city, in an interview Wednesday with Prospect News.

The bonds (Aa1) were sold in a negotiated sale led by Piper Jaffray and co-managed by JPMorgan, Morgan Stanley and Harvestons Securities, Danuser said.

Proceeds from the offering will be used for jail and courthouse improvements.

Also set to price Wednesday was $75 million in series A short-term commercial notes (P-1) on a negotiated basis through Lehman Brothers.

Proceeds for the offering will be used as a bridge financing of capital projects and general capital needs.

The full terms of the deal could not be determined by press time Thursday.

New York bond sale

New York expects to price $550 million general obligation bonds series I on Tuesday and $100 million multi-modal bonds on Feb. 28, a representative of the issuer said Wednesday.

The city plans to price $475 million tax-exempt bonds subseries I-1 with serial maturities from 2010 through 2028, and $75 million taxable bonds subseries I-2 structured with maturities from 2018 to 2020.

Series I bonds will be offered for sale to individual investors on Thursday.

Proceeds will be used for capital purposes.

Loop Capital Markets LLC is the lead manager on the negotiated deal, which includes 24 underwriters as co-managers.

New York also plans to price $100 million tax-exempt multi-modal general obligation bonds as adjustable-rate bonds later in February, said Ray Orlando, director of media and investor relations for the mayor's management and budget office.

Bank of America will be the remarketing agent for the multi-modal bonds, he said.

Union County plans $105 million deal

In other upcoming deals, Union County in New Jersey plans to price $105 million in bonds, including $83.726 million in series 2008 general improvement bonds and $15.699 million in series 2008 county vocational-technical school bonds and $5.575 million in series 2008 county college bonds.

The bonds will be sold on a competitive basis.

The general improvement bonds will be sold in a serial structure from 2009 to 2028.

The vocational-technical school bonds will be sold in a serial structure from 2009 to 2022.

The county college bonds also have a serial structure from 2009 to 2018.

The bonds are set to price Feb. 15, according to a preliminary official statement.

Proceeds from the general improvement bonds will be used for several county projects, including bridge improvements, roads and bridge construction, drainage and sewer projects, parks and recreation improvements, renovations to jail equipment and sidewalk construction.

The proceeds from the vocational-technical school bonds will be used for improvements on two halls at county vocational-technical schools; for computers, equipment and machinery; and for other assorted improvements.

The county college bonds will be used for improvements, equipment and machinery.

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