Nassau County, Health Agency Set April Offerings Following NIFA Sale

April is proving to be a busy month for bonds in Nassau County, N.Y.

On Tuesday, the county plans to market $105 million of tax-exempt general obligation bonds while the Nassau Health Care Corp. plans to refinance $220.8 million of tax-exempt bonds.

The deals follow an earlier refinancing by NHCC this month of $26 million of taxable bonds and a $303 million tax-exempt refunding this week by the Nassau County Interim Finance Authority, or NIFA.

The county's bonds will price competitively and comprise a $90 million series of general improvement bonds and a $15 million series of sewer and storm water district bonds. The bonds will be sold as serials with final maturities of 2029 for the general improvement bonds and 2034 for the sewer bonds.

The county returned to the market in 2007 after six-years, during which NIFA took over financing for the county with sales tax-secured bonds following a fiscal crisis in 2000.

NIFA authorization to issue new-money bonds has expired but it can continue to refinance its previously issued bonds and will stay in existence as long as that debt is outstanding.

County debt manager Jeff Nogid said Nassau is still working out its schedule but expects to sell new-money bonds in the fall and $125 million of bonds in June or July to take out bond anticipation notes issued last year.

Fitch Ratings and Standard & Poor's rate the county A-plus. Moody's Investors Service rates it A2.

"Like other places, there are stresses on sales tax, but they did raise their property tax rates," said Fitch analyst Ann Flynn.

The county addressed a $130 million deficit in fiscal 2009 with several measures, including property tax increases and concessions negotiated with unions, Flynn said.

The county's debt burden is high at $6,305 per capita, but a moderate 3.42% of market value due to the strong property values in the affluent county, which lies east of New York City, a Fitch report said.

Nassau has $537 million of GO debt outstanding.

Both deals pricing next week use Public Financial Management Inc. as financial adviser and Orrick, Herrington & Suttcliffe LLP as bond counsel.

The county is also the guarantor for NHCC's debt, which carries underlying ratings identical to the county's. However, the bonds carry higher separate ratings based on their credit enhancement.

NHCC is a public benefit corporation created by the state in 1997 to manage medical services in the county,includingmedical, geriatric and community health centers.

The debt was originally sold as fixed rate in 1999 and was then refinanced as synthetic fixed rate in 2004 with liquidity provided by Dexia Credit Local and insurance from Financial Security Assurance Inc.

Downgrades to those firms' ratings last year increased the corporation's debt service costs, said NHCC chief financial officer Gary Bie. The refinancing will remove Dexia and FSAand save more than $2 million annual, he estimated. NHCC will keep in place the swaps, under which they pay a fixed rate of 3.4% while receiving 62% of Libor plus 23 basis points.

NHCC used three different banks for letters of credit in part to avoid putting all their eggs in one basket, he said.

"I don't think anyone had the capacity to do the whole amount, but we also wanted to diversify our risk considering the tenuous nature of the financial services industry," Bie said.

The tax-exempt tranches will be marketed as variable rate. TD Bank NA is providing an LOC for the 2009B1 and B2 bonds, which will be in subseries of $41 million and $41.9 million respectively and will reset weekly.

The $37.4 million of Series 2009C1 bonds and $35.8 million of Series 2009C2 bonds will use an LOC from Wachovia Bank NA and reset quarterly. JPMorgan is providing an LOC for the $32.7 million of Series 2009D1 bonds, which will reset weekly, and the $32 million of Series 2009D2 bonds, which will reset quarterly.

TD Securities, Merrill Lynch & Co., Wachovia, and JPMorgan will underwrite and remarket the bonds.

NHCC has $296.2 million of debt outstanding.

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