Texas Transportation Commission prices $1.1 billion; Fed rate cut aids Montgomery County hospital bonds

By Cristal Cody and Sheri Kasprzak

New York, Jan. 23 - Wednesday proved to be an explosive day for municipal pricings, led by a sizable $1.1 billion offering from the Texas Transportation Commission.

The general obligation mobility fund bonds were priced in a serial structure from 2009 through 2033 and included a $351.795 million term bond due 2037.

UBS Investment Bank is the lead manager for the negotiated offering.

The proceeds will be used for transportation projects, including the expansion and construction of state highways.

Montgomery County bonds affected by rate cut

Kettering Health Network Obligated Group's $187.815 million variable-rate hospital facilities revenue refunding and improvement bonds set a 3% initial interest rate that changes each week, according to a source with the hospital.

The $93.575 million series 2008A bonds and $94.24 million series 2008B bonds are municipal insured floaters and will bear interest in a weekly mode beginning Feb. 1.

The bonds (Aaa/AAA) had a 3% initial interest rate set when they priced Thursday, but this week the level will fall since rates are lower, said Ed Mann, treasurer for Kettering Health Network.

"Each week it sets to the latest variable rate," he said. "So now the Fed has dropped the basis points, next week when the bonds reset, some of that savings will come into the index and the rates will drop on these."

The bonds mature Dec. 31, 2008, to Dec. 31, 2047.

Merrill Lynch & Co. is the remarketing agent managing the bonds.

Proceeds will be used to refinance prior debt, reimburse capital spent and fund new projects, such as the heart hospital tower on the group's health campus in Kettering, Ohio, Mann said.

Mecklenburg County prices bonds

In other pricing news, Mecklenburg County in North Carolina priced $160.5 million in public improvement bonds with $12 million in a 2008A tranche and $148.5 million in a 2008B tranche.

The 2008A bonds were priced in a serial structure from 2009 through 2028 with coupons from 3.50% to 4.10%. The yields ranged from 2.20% to 4.15%, said Gordon Johnson from the Local Government Commission in Raleigh.

The 2008B bonds also priced in a serial structure from 2009 through 2028 with coupons from 4% to 5% and yields ranging from 2.19% to 4.12%.

Sarah Heasley, the county's deputy director of finance, said the net interest cost for the 2008B bonds came in at 3.79%, though she did not have the NIC for the 2008A bonds.

Proceeds from the 2008A bonds will be used for parks and recreation, Johnson said, while the proceeds from the 2008B bonds will be used for schools, law enforcement and land.

Washington Drama's $120 million bonds

Elsewhere, the Washington Drama Society issued $120 million in variable-rate demand revenue bonds through the District of Columbia's revenue bond program.

The Aaa rated bonds are due July 1, 2047 and were priced at the weekly rate, which resets every seven days on Wednesdays.

Shattuck Hammond Partners was the lead manager.

Proceeds will be used for the construction, renovation and expansion of theater buildings and rehearsal space in Washington, D.C.

Also coming out of the District of Columbia area was a $100 million issue of bond anticipation notes from the Washington Suburban Sanitary District.

Lehman Brothers is lead manager for $70 million of the issue and Loop Capital for $30 million.

The initial coupon of the bonds (AAA/F1+) was set at 2.40% Wednesday, according to Tom Trabor with the commission's finance department.

The notes have a mandatory redemption in June 2023, Trabor said.

Proceeds will be used for the commission's 30-year infrastructure program.

Private universities' bonds

Two private institutes of higher learning were in the market with bonds pricing Wednesday, led by a $387.21 million issue of corporate bonds from Harvard University.

The series 2008A President and Fellows of Harvard College taxable bonds (Aaa) priced as fixed-rate bullet securities, with $144.55 million maturing in 2013 and $242.655 million maturing in 2038.

The five-year tranche priced with a 3.7% coupon to yield 3.731% and the 30-year piece priced with a 5.625% coupon to yield 5.631%, a sales source reported.

Morgan Stanley was the lead manager with Lehman Brothers and Loop Capital Markets as the co-managers.

Proceeds will be used for capital projects previously financed with outstanding commercial paper.

In other higher-education bonds, the Troy Industrial Development Authority in New York priced $90 million in civic facility revenue bonds for Rensselaer Polytechnic Institute at the weekly rate.

The bonds (Aaa/AA+) priced in a 2008A tranche for $50 million and a 2008B tranche for $40 million.

Both have serial structures from 2014 through 2037, according to an official statement filed Wednesday.

Both tranches priced at the weekly rate, which is good for seven days from Thursday through the following Wednesday. The bonds begin accruing interest from Jan. 30.

The bondholders may tender their bonds at any time at par, upon a seven-day notice.

Morgan Stanley was the lead manager for the 2008A bonds and Banc of America Securities was the lead for the 2008B bonds.

Proceeds from the bonds, according to the official statement, will be used for the acquisition of land on the private university's campus, as well as the construction of football, soccer and lacrosse facilities, as well as intramural and club sports facilities. Proceeds will also be used for the construction of a media and performing arts center and the acquisition of machinery and equipment.

Indiana University to price $181 million bonds Thursday

Elsewhere in bonds related to colleges, Indiana University plans to price $181 million consolidated revenue bonds, series 2008A, on Thursday, according to a sales source.

The university also expects to price $87 million in student fee bonds, series S, on Feb. 7, the source reported.

The university had initially expected to issue both bonds in February.

Lehman Brothers is underwriting the series 2008A bonds, while JPMorgan Chase & Co. is managing the series S 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.

Moody's Investors Service assigned an Aa1 long-term rating to Indiana University's total $268 million in student fee and consolidated revenue bonds.

Wisconsin holds off on $135 million bond pricing

Wisconsin had planned to price $135 million clean water fixed-rate bonds Wednesday, but state officials decided to hold off until next week for a chance at better terms.

The bonds (Aa1) are expected to be priced in two tranches: the 2008 series 1 clean water revenue bonds of $100 million and the 2008 series 2 clean water revenue refunding bonds of $35 million.

Series 1 bonds have preliminary serial maturities from 2009 to 2028, and series 2 bonds mature 2016 to 2019.

Proceeds will be used for loans to municipalities for wastewater treatment facility improvements and the refunding of outstanding bonds.

The state's bonds received an Aa1 rating from Moody's Investors Service.

The state is considering pricing the bonds on Tuesday, said Larry Dallia, deputy capital finance director for the state.

"It's a negotiated deal, so we'll see how the markets are on the 29th," he said. "It's not a great time to sell, so we'll see how next week looks."

The lead underwriter on the issues is Morgan Stanley.

King County plans $237.27 million

Looking ahead, Washington's King County expects to price $237.27 million limited tax general obligation refunding bonds on Monday, a source reported.

The series 2008 bonds will be payable from sewer revenues, according to the preliminary official statement. The bonds have serial maturities from 2009 to 2034.

The lead underwriter is Goldman, Sachs & Co., with Citi, Lehman Brothers, Siebert Brandford Shank & Co. and Wachovia Bank listed as co-managers.

Proceeds will be used to refund the county's 1998 series B outstanding general obligation bonds.

Anchorage plans offering

In other upcoming offerings, Anchorage in Alaska is planning to price $95 million in general obligation tax anticipation notes early next month.

The bonds are expected to price Feb. 7, according to a preliminary official statement released Wednesday.

The bonds are due Dec. 30, 2008 and are intended to provide the city with income for general expenses until it can collect ad valorem taxes and other revenues.

Standard & Poor's has rated the bonds SP1+.

First Southwest Co. is the financial advisor.

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