From The Bond Buyer - New York, NY (November 20, 1998)

by Rober Whalen

Maturity-by-maturity bidding was offered over the Internet in New York for the first time when the Albany County Airport Authority sold two series of revenue bonds through the MuniAuction Inc. bidding system.

From The Bond Buyer - New York, NY (November 20, 1998)

by Rober Whalen

Maturity-by-maturity bidding was offered over the Internet in New York for the first time when the Albany County Airport Authority sold two series of revenue bonds through the MuniAuction Inc. bidding system.

But for the second time in three MuniAuction sales, there were insufficient maturity bids submitted to calculate an overall true interest cost, and both series were captured by traditionally crafted all-or-none bids.

The syndicate led by Fleet Securities Inc. picked up the $17.8 million portion of the deal with a 4.955% true interest cost bid, while the other all-or-none syndicate -- led by Roosevelt & Cross Inc. -- submitted a bid that carried a 4.966% TIC. Prager, McCarthy & Sealy was the sole maturity-by-maturity bidder, unsuccessfully chasing seven of the 10 maturities.

The syndicates swapped roles on the $11.8 million alternative minimum tax piece, with Roosevelt & Cross winning the bonds with a 4.423% TIC bid. Pryor, McClendon, Counts & Co. was the only maturity bidder, sending in bids for two maturities.

During Tennessee's $67 million issue earlier this month, maturity bidders also failed to fill the room and the deal was won by a strong bid from Merrill Lynch & Co.

MuniAuction president Myles Harrington said that he wasn't concerned by the way things played out because his bottom line was met -- ending the day with a satisfied client.

According to J. Dwight Hadley, the airport authority's chief financial officer, the deal went "extremely well" and he wasn't disappointed there were not sufficient maturity-by-maturity bids.

"I think if it had been a larger issue there may have been more bids by maturity. Being two relatively small issues, I didn't really expect too many [maturity bids]," Hadley said. Selling the deal through the Internet- based system cost the authority $12,500, he added.

"We're happy with the prices we got. There are traditional accounts in New York, and we expected the Roosevelts and the Fleets to be there," said Guy Nagahama, a vice president with the authority's financial adviser, First Albany Corp. "As far as the maturity-by-maturities, we opened it up as an option and got some people expressing some interest that they otherwise would not have been able to. All in all, they're pretty happy with their deal."

From The Bond Buyer - Portland, OR (September 11, 1998)

by Michael B. Marois

Portland, Ore., has decided to take a second swipe at electronic bidding over the Internet -- this time employing a feature that will allow participants to see if they have the low bid, and if not, to adjust their offer prior to the deadline.

From The Bond Buyer - Portland, OR (September 11, 1998)

by Michael B. Marois

Portland, Ore., has decided to take a second swipe at electronic bidding over the Internet -- this time employing a feature that will allow participants to see if they have the low bid, and if not, to adjust their offer prior to the deadline.

The city will sell $160 million of sewer revenue bonds over MuniAuction Inc.'s Web site on Sept. 24. Portland will use the proceeds to fund its $700 million sewer system capital improvement program.

Portland's first experience with cyberspace sales came in April, when it sold $29 million of debt via MuniAuction.

Key Facts

Issuer: Portland, Ore.
Issue: $160 million of sewer system revenue bonds
Purpose: sewer system capital improvement program
Pledge: Net revenues from the city's sewer and storm water drainage utility system
Structure: Serials from 2000 out to 2018; bidder can mold term bonds out of two consecutive serials
Call features: 10 years at par
Sale date: Sept. 24
Sale type: Competitive on MuniAuction; all-or-none and maturity-by-maturity bids accepted
Insurance: At bidder's option
Ratings: As yet unrated; previous deals rated A1 by Moody's Investors Service and A-plus by Standard & Poor's
Financial adviser: City has its own in-house FA department
Bond counsel: Stoel Rives

(Source: Preliminary official statement).

"When we did our previous sale in April, it was pretty much just like submitting a bid over the Internet without having any sort of auction element to it," said Eric Johansen, the city's acting debt manager. "You put your bid in and you wouldn't know how you stood until the end of the period."

Tuesday's deal will be conducted as an open auction, in which participants will be able to hear other bids and try to top them.

"What we are hoping is that the auction element will encourage tighter bids as we get later into the bidding process," Johansen said. "You will be able to put a bid in and find out whether or not you are the leading bid, and if so [you] may choose to hold that bid, and if you find out you are not the leading bid, you may choose to tighten it up a bit."

Johansen said the city decided not to allow bidders to see other offers on its first Internet deal because the finance department was not sure how the market would accept the practice. However, the option has since been used with success by other cities, including MuniAuction's hometown of Pittsburgh.

As in April, Portland will let underwriters bid either for individual maturities of the issue or submit a single price for the entire deal. Officials say allowing dealers to bid for only a piece of the issue allowed regional underwriters all across the country to bid on Portland bonds, Johansen said. That choice encourages competition and saves the city money.

"The reason we are going with the maturity-by-maturity and all-or-none options is to try to maximize the number of firms that participate in our bond sales, with the long-term goal of trying to bring down the overall borrowing costs by creating higher levels of competition," Johansen said.

In the April deal, the city received 71 maturity-by-maturity bids. Portland took three bids for the traditional all-or-none option. Salomon Smith Barney Inc. won the entire deal with its all-or-none true interest cost of 4.9526%, while the aggregate of maturity bids had the cover with a TIC of 4.9574%.

However, from the city's perspective it doesn't really matter which option wins in Tuesday's sale, since the objective is to shave costs, according to Johansen.

"I don't think we care," he said. "We want the lowest borrowing costs, and once the bonds are sold and you are through the closing, it doesn't make any difference to us. We are just looking to see which of the two options will produce the lowest borrowing costs for us."

Moody's Investor Service currently rates the city's sewer revenue bonds A1, and Standard & Poor's rates them A-plus. As of Wednesday, neither agency had issued a rating report on the upcoming sale, but Johansen expects the ratings to be affirmed. The city's $57 million of outstanding general obligation debt is rated Aaa by Moody's.

Tuesday's deal is tentatively structured to include serial bonds with maturities from 2000 out to 2018. All-or-none bidders may designate two or more consecutive maturities as term bonds.

The maturity sizes range from $4.2 million in the first maturity to $8.6 million in 2017. The city put $51.4 million in the last maturity of 2018 as a way of equalizing debt service over a long period of time.

"When we structure our new issues, we wrap the new debt service around the existing debt service, so when you look at all the sewer revenue debt for the city of Portland, it's equal in annual payments approximately for the next 20 years after we sell these bonds," Johansen explained.

Buyers said the deal should draw a lot of attention because of the size of the deal, the superb credit quality of Portland, and because the Oregon market has seen little decent paper in the last couple of weeks.

"In today's environment, the long bonds will be in about the five percentish range," said Scott Baines, a trader with Black & Co. in Portland. "We haven't had a lot of high-grade size supply over the last month or so, so I think the issue will be well-received."

From The Bond Buyer - Sarasota County, FL (July 29, 1998)

by Robert Whalen

Conventional wisdom has it that hospital deals hit the municipal market through negotiation.

So much for convention.

From The Bond Buyer - Sarasota County, FL (July 29, 1998)

by Robert Whalen

Conventional wisdom has it that hospital deals hit the municipal market through negotiation.

So much for convention.

Just a couple of weeks ago, Dale Beachey, chief financial officer of the Sarasota County, Fla., Public Hospital District, not only opted to issue debt competitively for the first time ever, but also did it via the Internet.

Beachey said the deal -- fairly straightforward and insured with a healthy underlying credit -- lent itself nicely to the competitive bidding process. What's more, he said he wanted to bolster participation by using the maturity-by-maturity option so far offered only by cybersale pioneer MuniAuction Inc.

Interestingly, the deal was captured by an all-or-none bid from A.G. Edwards & Sons Inc. with a true interest cost of 4.7297%, besting the aggregate maturity-by-maturity TIC of 4.7975%.

"In this particular situation we thought it fit well, and I believe we were correct," Beachey said. "We got a very favorable rate and I think it reflects the kind of demand there is for bonds in Florida. A competitive deal indeed makes sense."

Perhaps that's easier said with 20-20 hindsight, but the numbers over the past five years indicate that the negotiated route has become increasingly popular. In 1993, of the 1,130 health care issues, only 70 were sold competitively, according to Securities Data Co. And that 6% mark has dropped consistently, sinking to 3% -- or 29 out of 924 deals -- last year.

According to George Friedlander, a strategist and managing director at Salomon Smith Barney Inc. -- which led the pack last year, underwriting $4.3 billion of health care debt -- there is a good reason for that trend.

"Hospital credits tend to be fairly complex in terms of analyzing their ability to pay," Friedlander said. "Complex credits require more premarketing to institutional investors ... and that premarketing is done way more easily on a negotiated basis."

Friedlander said that aside from the complexity of the credit, structuring issues -- such as coupons, maturity structure, and call protection -- also pose challenges. While hospital deals are not the most troublesome to sell, they are on the "far end of the spectrum," he added.

But Bob Davis, a senior vice president at Ponder & Co., the hospital district's financial adviser, said that trend may change.

"To the extent that you have an insured transaction and a solid underlying credit, it would be my view that the competitive sale of bonds is absolutely an avenue that is open to you even though you are a health care issuer," he said.

Helping to lead the hospital district down that avenue was the relatively new technology of Internet bidding, he said.

"The technology was certainly one of the considerations," Davis said. "It's the ability to do the all-or-none or maturity-by-maturity [bidding] -- which would give smaller, regional firms that ability to bid on the bonds."

Davis said market participation had been his sole concern about the transaction, but that was set aside the day before the sale when prospective bidders registered with MuniAuction.

"The participation by regional firms and many firms that would not otherwise be involved in a traditional competitive bid had the effect of making it a real auction, thus allowing Sarasota to realize great savings," said Anne Donahoe, a vice president at Ponder, which handled more health care deals than any other financial adviser last year.

Donahoe had been keeping a watchful eye on MuniAuction since the first Internet-bid deal last November and played a key role in choosing the auction format, she said.

She took a look at the electronic bidding system offered through Bloomberg LP's proprietary network, but ruled it out because it lacked the maturity- by-maturity option.

"We started looking at MuniAuction back when they did their first deal, and met with them in December," Donahoe said. "Since that time [we've] tracked very carefully the results of each subsequent deal. For this transaction, this was a perfect fit for what our client wanted to accomplish."

Following internal analysis, Davis said he was very pleased with the deal's pricing.

"We can perform just as well in the market doing a competitively bid transaction," he said. "Just as well or better."

And Donahoe said that hospital bonds -- with high credit ratings, either on their own or through insurance -- are becoming "commodities".

"There's a large universe of buyers out there for those kinds of credits, and what we felt was that going this route would open up the transaction," she said. "I would expect it to become a trend, especially if hospitals that do it have the kind of results that Sarasota had."

In the right scenario, a competitive deal can be a "very viable" alternative for hospitals, Beachey agreed. However, he said it is best to stick with a negotiated underwriter sometimes. The district is currently working on a complicated refunding-interest rate swap deal to be priced in the next few weeks by Goldman, Sachs & Co.