WASHINGTON - The Metropolitan Washington Airports Authority will bring $400 million of bonds to market in the next two weeks after postponing deals last fall due to the turmoil in the marketplace in the aftermath of the collapse of Lehman Brothers.

The MWAA will sell in a negotiated deal $235 million of fixed-rate airport system revenue bonds, Series 2009B, today, tomorrow, and Wednesday. The proceeds will finance interest rate swap termination fees, capital improvements, and refund some of the agency's commercial paper.

The authority is also planning to bring $165 million of Series 2009A variable-rate bonds to market on March 31 to pay down outstanding commercial paper.

The bonds are exempt from the alternative-minimum tax as the federal stimulus package passed in February exempted all private-activity bonds issued in the next two years from the AMT. The authority since 1998 has issued more than $4.4 billion of debt, only 3.75% of which was not subject to the AMT, according to the MWAA.

Agency officials have been eager to sell the debt after they had to pull a $175 million airport revenue bond deal in early October. The deal stayed on the shelf while the market continued to struggle and bonds subject to the AMT were shunned by investors.

Now that the bonds will be exempt from the tax, MWAA chief financial officer Lynn Hampton said she hopes that individual investors in the District of Columbia and Virginia will be eager to buy the bonds, as they will be exempt from federal and state income taxes as well. Individual investors and bond funds traditionally have not participated much in AMT offerings, so the Series 2009 bonds will provide new opportunities to regional investors, the agency officials said.

"In terms of the market, you don't know from one day to the next how it's going to be," Hampton said. "We're doing a very heavy marketing program, we've got a number of investor calls ... with the marketing work we're doing, we feel pretty good about it."

Last fall the market for AMT bonds was basically "nonexistent," Hampton said.

"What we did was, because we couldn't sell last fall, and we had commercial paper on the shelf, we took down some of the commercial paper" to pay for ongoing projects, she said. "The majority of this bond issue is paying off the commercial paper and putting some capitalized interest in the bank."

The underwriting syndicate will be led by Siebert Brandford Shank & Co. as senior manager with Morgan Stanley as co-senior.

The $235 million Series B bonds are expected to be offered to retail investors today and tomorrow, and will then be available to all investors Wednesday. The bonds will mature serially between 2010 and 2029.

Other members of the fixed-rate bonds syndicate include co-managers Banc of America, Barclays Capital, Citi, JPMorgan, Loop Capital Markets LLC, Merrill Lynch & Co., and Morgan Keegan & Co.

Hampton said because the MWAA always sells in the negotiated market, she has not seen a large spike in the cost of underwriters as more issuers have gone the negotiated route.

With the cost of underwriting, she said "you pay one time," but "interest rates you pay for the life of the bonds ... You want to make sure the salesman is compensated fairly so that you get the best interest rate."

Co-financial advisers are Depfa First Albany Securities LLC and P.G. Corbin & Co.

Co-bond counsel on the deal are Hogan & Hartson LLP and Lewis, Munday, Harrell, & Chambliss, both of Washington, D.C. Underwriters' counsel are Orrick, Herrington & Sutcliffe LLP and McKenzie & Associates.

The $165 million of variable-rate Series 2009A bonds will have a standby bond purchase agreement and the proceeds will be used to refinance outstanding commercial paper notes.

The 2009B fixed-rate bonds will refinance all of the outstanding Series 1 commercial paper notes and provide about $30 million for swap termination payments in addition to paying capitalized interest on the Series 2009B bonds and financing portions of the authority's construction capital program. The bonds are secured by a first lien on net revenues of the airport system, which includes both Dulles International Airport and Ronald Reagan National Airport.

Moody's Investors Service rates the Series 2009B bonds Aa3 with a stable outlook. Standard & Poor's rates the Series 2009B bonds AA-minus. Fitch Ratings gives both deals a AA with a stable outlook.

The MWAA will terminate two swaps that it entered into in 2005. It had entered several forward starting floating-to-fixed interest rate swaps with a total notional amount of $300 million that were scheduled to become effective in 2006 and 2007, according to the preliminary official statement.

The authority deferred the start date of $175 million of the swaps and received $2.77 million from swap counterparties Wachovia Bank NA and Bank of Montreal. The start dates of the swaps were then further extended until July 15, 2009, and the swap rates were revised to a range between 3.91% and 4.05%.

The Series 2009B bonds will finance the termination payment of the swaps at a cost to the MWAA near the Feb. 20, 2008, market value of $28.56 million, the POS said.

The authority also entered into forward-starting swaps in June 2006 that are scheduled to become effective in October 2009 and 2010. The 2009 swaps are with JPMorgan and Bank of America and total $300 million in notional value and the contract swap rate is 4.10%.

Part of the JPMorgan swap will serve as a hedge to the $165 million of variable-rate debt the MWAA intends to be issued later this month. Officials expect the remaining $25 million of the swap will be canceled near its market value when termination occurs, the POS said. In addition, the authority expects to delay the start date on a Bank of America swap until 2011.

The MWAA will uphold a 2010 swap with Wachovia Bank for an initial notional amount of $170 million and a swap rate of 4.11%, the POS said. The swap is expected to hedge future variable-rate debt issued by the authority, officials said.

"The authority's strong credit fundamentals, management sophistication, and size of these transactions relative to its financial resources offset concern with basis risk or termination risk associated with the swaps," Moody's said.

"Moody's notes that MWAA management has historically exhibited a strong ability to manage through industry volatility," the agency said. "Flexible capital planning and conservative financial planning have been part of the underpinnings of the Aa3 credit rating."

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