San Francisco Airport, Cal State, and N.Y. Tobacco Top Slate

After being postponed for nearly two months, the San Francisco Airport Commission is expected to make an appearance in the primary market this week with a $573.3 million sale of revenue bonds against a backdrop of continued conversions of auction-rate securities.

With many issuers across the country seeking conversions of outstanding auction-rate debt to fixed-rate mode, an estimated $4.87 billion in new volume is expected to come to market this week, down from last week's revised $6.27 billion, according to The Bond Buyer.

The activity pales in comparison to last week, when two mammoth deals dominated the primary market. The New York Triborough Bridge & Tunnel Authority sold $1.1 billion of double-A-rated general revenue bonds that offered a final maturity in 2038 that carried a 5 1/4% coupon priced to yield 5%. In addition, the California Department of Water Resources sold $1 billion of power supply revenue bonds in a deal that was priced with a 5% coupon in the 2022 final maturity which was priced to yield 4.64%, uninsured.

This week, much of the activity will take place in the negotiated market, where an estimated $4.46 billion is coming to market, compared with a revised $3.46 billion last week. By comparison, the competitive market appears fairly light, with only $408 million in new deals expected, compared with a revised $2.80 billion last week. Much of this week's competitive volume will be dominated by bank-qualified deals and those above $10 million and under $100 million.

The San Francisco Airport deal includes a partial refunding and a partial conversion of a portion of the commission's auction-rate debt to fixed-rate debt.

Citi is expected to price the deal tomorrow after originally postponing it back in January due to overall market volatility and weakness stemming from selling pressure and lackluster buying.

The structure includes bonds maturing from 2009 to 2012, and will include bonds subject to the alternative minimum tax as well as non-AMT bonds.

While the deal is expected to carry insurance from both Assured Guaranty Corp. and Financial Security Assurance, the bonds have underlying ratings of A1 from Moody's Investors Service and A from Standard & Poor's. Fitch Ratings does not rate the new issue.

Elsewhere in the California market, a $408 million sale from the California State University Trustees is slated for pricing on Wednesday in a negotiated deal being senior-managed by Lehman Brothers at the helm of a 10-bank syndicate.

The deal, which is a new-money sale, is structured with serial bonds maturing from 2008 to 2028 and term bonds in 2033 and 2039. As of Friday at press time, underwriters were uncertain whether the deal would be insured or not.

In anticipation of the new sale, Standard & Poor's last week revised its outlook to positive from stable on the university's system-wide revenue bonds, which it rates A-plus, saying it expects the university to sustain its financial performance despite state funding cuts.

The university system - the largest in the country, with 23 campuses and 433,000 students - has a diversified revenue stream, solid student demand, strong financial management, and an agreement with the state that gives it "relative certainty" of annual state funding levels.

The Series 2008 deal also has a Aa3 underlying rating from Moody's, which recently affirmed the rating prior to the new deal.

A total of $378 million of the new-money proceeds will finance university construction, dormitories, and parking facilities, while $30 million will refund auxiliary unit debt.

The New York State Tobacco Settlement Financing Corp., meanwhile, will bring the largest deal in the Empire State this week when it sells $441 million of asset-backed revenue debt in what is the first installment of a planned $2 billion conversion of $4 billion of outstanding auction-rate debt to fixed-rate mode.

The bonds are special obligations secured and payable solely by a state contingency contract subject to appropriation by the state legislature.

Citi will price the deal tomorrow after a retail order period today with bonds maturing from 2009 to 2012. The bonds are rated AA-minus by Standard & Poor's and A-plus by Fitch Ratings. Moody's does not rate the new issue.

Elsewhere in the Northeast, the District of Columbia will issue $245 million of fixed-rate hospital revenue bonds on behalf of Children's National Medical Center that includes the conversion of about $150 million of FSA-insured auction-rate bonds from sub-series 2005 1, 2, and 3.

Insured by FSA and Assured, the new deal will be priced on Wednesday by UBS SecuritiesLLC and is structured with serial bonds maturing from 2014 to 2023, and term bonds maturing in 2028, 2036, and 2045. The bonds are backed by a gross revenue pledge and mortgage pledge and proceeds will finance construction and renovations at the Washington, D.C.-based hospital, including a new patient tower, the pediatric intensive care unit, surgical services, and the hospital's main infrastructure.

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