SAN FRANCISCO — California’s Bay Area Toll Authority will sell $800 million of taxable and tax-exempt debt this week to help fund massive modernization projects that include replacement of the eastern span of the San Francisco-Oakland Bay Bridge.

BATA will sell $400 million of subordinate-lien revenue Build America Bonds and $400 million of subordinate revenue tax-exempt paper backed by bridge tolls with terms up to 40 years and fixed rates.

Citi will lead the sale of the taxable BABs, with Bank of America Merrill Lynch handling the tax-exempt side, which will price for retail investors Wednesday. Both series will sell to institutional buyers Thursday, according to Randy Rentschler, a spokesman for the authority.

“It is the first big deal that we have seen in a while, so I think there will be definite demand, especially on the tax-exempt side, because the Build America Bonds have cut into what is available,” said Alexander Anderson, a portfolio manager with Envision Capital Management in Los Angeles.

“It is also a name we haven’t seen offer bonds for a while. I am sure portfolios will want to diversify with different names.”

The BABs include a mandatory call provision in the event a change in the law prevents BATA from getting the 35% subsidy from the government, according to Moody’s Investors Service.

The authority currently has $5.6 billion in senior bonds and $1.5 billion in subordinate-lien toll bridge revenue bond debt outstanding, of which about 81% is fixed rate, 16% is synthetic fixed rate, and 3% is other debt, according to Standard & Poor’s.

The rating agency said BATA plans to issue an additional $900 million in subordinate-lien bonds from 2011 to 2013 to finance its capital plan.

The bond money will be used to help fund a large and complex capital program that includes the $6.3 billion replacement of the Bay Bridge and the seismic retrofit of the Antioch and Dumbarton Bridges.

“It is a big mix,” Rentschler said. “The big project in that big mix is the rebuilding of the eastern span of the Bay Bridge.”

The authority’s seismic retrofit program has an approved budget of $8.6 billion, which is expected to cost $8.8 billion when finished, according to Standard & Poor’s. As of June, $6.5 billion had been spent.

Moody’s said construction of the eastern span is moving forward with about 75% of construction contracts awarded and underway and 70% of the revised budget spent. It said the seismic-retrofit project is now 80% complete and the Bay Bridge project remains on schedule for completion in 2013.

Moody’s and Standard & Poor’s  rate both series A-plus. BATA’s long-term senior-lien debt is rated Aa3 by Moody’s and AA by Standard & Poor’s.

Both rating agencies said the authority’s ability to raise tolls and stable demand are key credit positives.

BATA’s board approved a toll increase in January that raised most passenger car tolls by 25% to $5 from $4 and will substantially raise tolls on commercial vehicles.

The July toll increase is expected to produce $160 million of additional revenue per year, according to Moody’s. However, analysts said risks could arise from the large, complex capital programs if there were cost overruns.

Toll traffic and base toll revenues fell 0.8% in fiscal 2010 following declines the three previous fiscal years, and the potential exists for additional traffic diversion as construction projects continue, Moody’s said.

The rating agency also noted the significant seismic risks in the area and BATA’s lack of earthquake or business-interruption insurance.

In 1989, a major earthquake struck the Bay Area and caused the collapse of part of the Bay Bridge.

Public Financial Management is the financial adviser on the BATA deal and Orrick, Herrington & Sutcliffe LLP is bond counsel.

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