Major surge in new deals coming, sell-sider says; issuers continue to make bids on auction-rate bonds

By Cristal Cody and Sheri Kasprzak

New York, April 4 - A new crop of upcoming municipals offerings dominated headlines Friday as market conditions improve somewhat.

In terms of the market's health, one sell-sider said Friday afternoon that the municipal yield curve is steadily steepening.

"That's good news, certainly," he added.

"We're seeing a lot of interest and we really think we'll see a surge in issuance over the next several months. It's been tough going for the past few months, but I really do expect things to improve pretty quickly."

The sell-sider also addressed Fitch's suspension of ratings for all XL Capital Assurance-insured bonds that do not have underlying Fitch ratings.

"You know, it's not great news," he said.

"There has been a lot of trouble in the insured market over the past six months, but in terms of how it's going to affect your typical issuer, I don't think it's going to be that bad. New issuers can go around it by either going uninsured or going with a higher-rated insurer. It's bad news for XL, but for the issuers, I don't see it making much of an impact."

Fitch downgraded XL on March 26 to a BB rating.

Meanwhile, auction-rate bids are expected to continue unabated in the coming week, with issuers expected to bid on billions of dollars of their own auction-rate debt, a report on disclosure notices said.

The move by issuers to buy back their auction-rate bonds has already been evident this week, as reported in Prospect News, with several issuers announcing their bid plans.

Auction-rate bids planned

In fact, on Friday, the Medical College of Wisconsin submitted a 1.89% interest rate bid on $66.35 million variable-rate revenue bonds in Friday's auction, according to a notice.

The series 2004B2 bonds priced through the Wisconsin Health and Educational Facilities Authority.

The bids ranged from the low 1.89% bid to a high bid of 12%.

Goldman, Sachs & Co. is the broker dealer.

The next auction will be April 11.

Also, the Citizens Property Insurance Corp. in Jacksonville, Fla., plans to bid on $375 million high risk account senior secured auction-rate bonds at an interest rate no lower than 3.74%, according to a statement Friday.

The rate is equal to the one-month Libor rate plus 100 basis points at the time of the notice.

The company intends to submit bids in the April 9 auctions for the $100 million series 2006-A5 bonds, $100 million series 2006-A6 bonds and $175 million series 2006-A12 bonds.

The series 2006-A5 bonds previously had a low bid of 5.5% and a high bid of 11.43% in the last auction.

The series 2006-A6 bonds had a 3.87% low bid and a 14% high bid in the previous auction.

The series 2006-A12 bonds had a low bid of 5.5% and a high bid of 14.97% in the previous auction.

In other news, Yale University intends to convert $250 million revenue bonds from a daily rate to a fixed rate on May 1.

The $125 million series T1 bonds were issued in 1997. The bonds are due July 1, 2020.

The $125 million series X3 bonds, issued in 2003, are due July 1, 2037.

The bonds (Aaa/AAA/-) priced through the Connecticut Health and Educational Facilities Authority, according to a reoffering memorandum released Thursday.

JPMorgan and Lehman Brothers are the remarketing agents.

Mayo to price $420 million

Moving to upcoming bond sales, the Mayo Clinic expects to price $420 million health care facilities revenue bonds on April 8 and convert $200 million bonds later this month, the issuer said Friday.

The Rochester, Minn., hospital intends to price $330 million series 2008A, B, C, D and E bonds and $90 million series 2008B bonds for Luther Hospital, said Todd Heather, investment operations manager for the Mayo Clinic.

The series 2008B bonds, which will price through the Wisconsin Health and Educational Facilities Authority, are guaranteed by the Mayo Clinic.

The Rochester bonds will price as $100 million series 2008A; $50 million series 2008B; $50 million series 2008C; $60 million series 2008D and $70 million series 2008E.

The series 2008A and B bonds will price with a weekly interest rate; series 2008C bonds will price with a money market municipal rate; and series 2008D and E bonds will price with a term rate.

The bonds mature Nov. 15, 2038.

The Wisconsin bonds mature Nov. 15, 2030 and will price with an initial term rate.

Lehman Brothers will manage the negotiated sale.

Proceeds will be used to improve facilities and acquire equipment at hospital operations and refund $225 million outstanding series 1998A and 1998B health care facilities revenue bonds. The bonds are expected to be redeemed on May 15.

The Mayo Clinic also plans to reoffer $200 million health care facilities revenue bonds. The bonds will be converted from an auction rate to a weekly interest rate.

The $70 million series 2002A revenue bonds, $65 million series 2002B and $65 million series 2002C bonds are due Aug. 15, 2032.

The series 2002A bonds will be converted on April 10, series 2002B bonds will be converted on April 16 and series 2002C bonds will be converted on April 18, Heather said.

Lehman Brothers is the reoffering agent.

Intermountain bonds price April 7 week

In other upcoming sales, the Intermountain Power Agency in Utah intends to price $397 million in series 2008A subordinate power supply revenue bonds the week of April 7, a sell-sider told Prospect News Friday afternoon.

"The exact date isn't set, but we expect the bonds to sell next week," said the sell-sider.

The bonds will be sold on a competitive basis and the proceeds will refund the agency's series 1998A, 2004A, 2006A and 2006B auction-rate bonds.

East Baton Rouge among upcoming issuers

In other upcoming sales, East Baton Rouge Parish, La., expects to price $93.5 million of road and street improvement sales tax revenue refunding bonds on April 16, a sell-side source said Friday.

The series 2008A bonds (A2) will price with variable-rate interest.

Citigroup Global Markets will manage the negotiated sale.

Proceeds will be used to refund the parish's series 2006B revenue bonds.

The Redevelopment Agency of Rialto, Calif., plans to price $52.285 million tax allocation bonds in a competitive sale on April 17, according to a sale notice.

The agency will price $30.005 million series 2008B tax allocation housing set-aside bonds and $22.28 million series 2008C tax allocation bonds.

The bonds (-/A-/BBB+) have serial maturities from Sept. 1, 2008 through Sept. 1, 2037.

Proceeds will be used to finance housing-related redevelopment, fund reserves for the bonds and pay costs of issuance.

Also ahead, the Maine State Housing Authority intends to price $90.55 million in variable-rate mortgage purchase bonds.

The pricing date could not be determined by press time Friday.

The offering includes $39.585 million in series 2008E-1 bonds and $50.965 million in series 2008E-2 bonds.

Both series of bonds are term bonds. The 2008E-1 bonds are due 2030 and 2032 and the 2008E-2 bonds are due 2030 and 2037.

The bonds will initially bear interest at the weekly rate, with a maximum rate of 12%.

The bonds will be sold on a negotiated basis with UBS Investment Bank and Bear, Stearns & Co. as the lead managers.

Proceeds will be used to refund the authority's series 2003E-1 and series 2003E-2 bonds.

Clark University in Massachusetts expects to price $50.3 million variable rate bonds on Monday, a sell-side source said Friday.

The series 2008 bonds (Aaa) will price in a weekly mode through the Massachusetts Development Finance Agency.

UBS Investment Bank will manage the negotiated sale.

Proceeds will be used to refund series 2000, 2002A and 2002B bonds, pay the termination fee on a swap for the series 2002A bonds and fund renovations of the Goddard Library.

Water Infrastructure bonds to price

Elsewhere, the Water Infrastructure Finance Authority of Arizona intends to price $249 million in water revenue bonds the week of April 21, a calendar of upcoming sales said.

The bonds (//AAA) will be sold on a negotiated basis, but the lead manager could not be ascertained by press time Friday.

Proceeds from the deal will be used to reimburse the authority for money loaned to local borrowers for water projects.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.