Issuers continue to find escape from auction-rate bonds; new issue offerings line up

By Cristal Cody and Sheri Kasprzak

New York, April 8 - Market insiders continued to talk Tuesday about the current auction-rate crisis, with speculation that the flow of conversions will continue unabated.

"I expect a significant volume of conversions for insured bonds either in auction-rate or variable-rate mode to be coming this week," one sell-side source told Prospect News on Tuesday.

"There will be a heavy volume of conversions and it's part of the wave to overcome the overall [auction] market."

An issuer who spoke on condition of anonymity Tuesday said municipal borrowers would be wise to deal with their auction-rate securities.

"It really makes you look better to investors," he said.

"We're squaring up things. We're planning to refund some of ours with [an upcoming bond sale] and we may be planning a conversion as well. We want to be a responsible issuer."

Some issuers are bidding on their own offerings, as demonstrated by Centra Health Inc. of Virginia, which said Tuesday it will submit interest rate bids of 2.5% on $179.125 million in auction-rate revenue bonds this week in an effort to lower its expenses.

The health care group was expected to bid in Tuesday's auctions on $52.7 million series 2004A bonds due Jan. 1, 2028 and $15 million series 2004E bonds due Jan. 1, 2035.

Centra Health also plans to submit bids in the upcoming auctions on Thursday on the $39.5 million series 2004B, $39.125 million series 2004C, $17.8 million series 2004D and $15 million series 2004F bonds.

The bonds are due Jan. 1, 2035.

The seven-day auction bonds are insured by MBIA Insurance Corp.

The bonds priced through the Industrial Development Authority of Lynchburg, Va.

BB&T Capital Markets is the broker dealer.

Halifax Hospital Medical Center in Florida intends to submit bids in auctions on its $70 million series 2006B2 bonds until it owns all of the outstanding bonds.

The medical center will bid in the upcoming auction on Friday at a designated interest rate of 2.39%, according to a notice.

The bonds are due June 1, 2046.

Citigroup Global Markets is the broker dealer.

The bonds had a low bid of 2.71% and a high bid of 9% in the April 3 auction.

Puerto Rico puts hold order on bonds

In other auction-rate news, the Government Development Bank of Puerto Rico placed a hold order on $62 million of its series 2004B public improvement refunding bonds, a notice said.

The bank bid on $1.175 million of its 2004B bonds on Monday with a 2.75% bid. The high bid was 6% with a 5.475% median bid.

Elsewhere, Sarasota County Public Hospital District of Florida successfully converted $82.95 million in series 2007B variable-rate hospital revenue bonds, a notice of conversion said.

The bonds, which are due 2037, were converted to a weekly rate from an auction-rate mode on March 26.

Clark University prices $50.255 million

Heading up Tuesday's pricing action, Clark University in Massachusetts priced $50.255 million variable-rate demand revenue bonds with a 1.7% initial rate, a sell-side source said Tuesday.

The series 2008 bonds (Aaa/AAA/) priced Monday in a weekly mode through the Massachusetts Development Finance Agency.

The bonds are due Oct. 1, 2038.

UBS Investment Bank managed 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.

The sale had significant investor interest, the sell-side source said.

The Mayo Clinic priced $420 million health care facilities revenue bonds on Tuesday, a source with the issuer told Prospect News.

The Rochester, Minn., hospital priced $330 million series 2008A, B, C, D and E bonds and $90 million series 2008B bonds for Luther Hospital.

The series 2008B bonds priced through the Wisconsin Health and Educational Facilities Authority.

The final pricing terms were not available by press time.

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 is managing the negotiated sale.

Norfolk bonds expect to price

Norfolk, Va., was expected to price $58.515 million water revenue bonds in a competitive sale on April 8.

The series 2008 bonds (A1/AA+/AA) have serial maturities from 2009 through 2038.

Proceeds will be used to finance improvements to the city's water system.

In other pricing news, the State of Michigan priced $233.47 million in general obligation bonds on Tuesday, a source at the Department of Treasury confirmed.

The full terms of the offering were not available by press time, the source said.

The bonds (//AA-) were sold on a negotiated basis through lead managers Bear, Stearns & Co. and JPMorgan.

The offering included $200.56 million in series 2008A environmental program and refunding bonds, $19.355 million in series 2008B environmental program and refunding bonds, $12.145 million in series 2008C environmental program G.O. refunding bonds and $1.41 million in series 2008D environmental program G.O. refunding bonds.

The proceeds will be used for environmental projects throughout the state.

New Jersey plans $312 million COPs

The remainder of the week is gearing up to be exceptionally active.

The state of New Jersey plans to sell $312 million in certificates of participation on Wednesday, a calendar of offerings confirmed.

The bonds (A1/AA-/A+) will be sold through senior manager UBS Securities.

Proceeds will be used for new transit equipment, including 27 locomotives, related parts and 37 multi-level railcars, which will be leased to NJ Transit.

Also coming up this week is an $84 million offering of debt securities from the Indiana Health and Educational Facilities Authority, a source at the issuer confirmed with Prospect News. The bonds (Aa3//AA) will be sold for the Sisters of St. Francis Health Services

The bonds will be sold on a negotiated basis through lead manager Merrill Lynch.

Proceeds from the sale will be used to refund the authority's outstanding series 2006D and 2006E auction-rate bonds.

Later this week, the Boston Housing Authority will price $77.19 million in series 2008 capital program revenue bonds.

The authority will price the bonds (/AA/) on Thursday, a calendar of offerings confirmed.

The bonds will be sold on a negotiated basis through lead manager Lehman Brothers.

As previously reported by Prospect News, the bonds are due 2012 to 2028 and the proceeds will be used to renovate and repair public housing projects and pay for capitalized interest.

On Friday, the JEA utility company in Florida plans to price $125 million St. John's River Power Park System revenue bonds on April 10, the issuer said Tuesday.

JPMorgan is the senior underwriter for the sale of the series 2008 two, issue three, bonds (A2//), said Hugh Seaton, manager of capital projects financing for JEA.

Proceeds will be used for 2008 capital plant improvements at the St. Johns River Power Park, a coal-fired electric generation facility.

Pricings set for April

Later this month, Orange Regional Medical Center expects to price $264.28 million revenue bonds. The bonds are expected to price April 21 through the Dormitory Authority of the State of New York, a source reported Tuesday.

The bonds have maturities from 2011 to 2015 and term bonds due 2021, 2029 and 2037.

Merrill Lynch & Co. is the senior manager.

Proceeds will be used to construct a 374-bed replacement hospital in the Town of Wallkill, N.Y.

The Memorial Sloan-Kettering Cancer Center plans to price $450 million revenue bonds on April 14, according to information released to Prospect News.

The $162.575 million series 2008A1 and $287.425 million series 2008A2 bonds will price through the Dormitory Authority of the state of New York.

Goldman, Sachs & Co. will be the senior manager for the negotiated sale of the bonds (Aa2/AA/AA).

Proceeds will be used to refund the cancer center's series 2002A revenue bonds.

Inova Health to price $344.85 million

In other upcoming sales, the Inova Health System Foundation plans to price $344.85 million health care revenue refunding bonds, according to a preliminary official statement released Tuesday.

The bonds will price through the Industrial Development Authority of Fairfax County, Va.

The series 2008 bonds initially will price with a fixed term rate for a long-term interest rate period beginning April 17, 2008 and ending April 19, 2009.

The bonds have an initial mandatory tender date of April 20, 2009.

The sale includes $34.975 million series 2008A1 bonds; $34.975 million series 2008A2 bonds; $34.85 million series 2008B1 bonds; $$34.85 million series 2008B2 bonds; $51.3 million series 2008C1 bonds; $51.3 million series 2008C2 bonds; $51.3 million series 2008C3 bonds and $51.3 million series 2008C4 bonds.

The series 2008A1 and A2 bonds mature May 15, 2035. The series 2008B1 and B2 bonds mature May 15, 2026.

The remainder of the bonds matures April 15, 2035.

Citigroup Global Markets will manage the negotiated sale.

Proceeds will be used to refund the health system's series 2005B, D and E bonds.

Elsewhere, the Culinary Institute of America is scheduled to price $57 million variable-rate bonds on April 21, according to a sales calendar.

The bonds will price through the Dormitory Authority of the State of New York.

No additional information was available.

Babson College in Massachusetts also intends to price $66 million revenue bonds (A3//) on April 15, according to a release from Moody's Investors Service.

The $36.475 million series 2008A bonds and $29.84 million series 2008B bonds will price through the Massachusetts Development Finance Agency.

Lehman Brothers will manage the negotiated sale.

Proceeds will be used to refund series 2001A and series 2002A auction-rate bonds.

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