Chicago will lead the way in the new-issue market this week, as Lehman Brothers will price an $876 million offering that was originally slated to hit the market last year.

Lehman will price the bonds for O’Hare International Airport tomorrow in several series. The city initially planned to sell the bonds in November, but decided to hold it due to a rise in interest rates over the fall that would have cut the savings of the refunding piece.

The City Council approved the airport sale last spring, but Chicago held off on issuing the debt until the Federal Aviation Administration’s approval of its application to finance various projects with passenger facility charges it collects on the price of a ticket. The city also needed permission to use $270 million to help cover cost overruns it has incurred due to delays in land acquisition and demolition because of ongoing litigation.

About $765 million of the deal will be third-lien general airport revenue bonds, while $109 million of the deal will be PFC-backed revenue bonds.

The underlying credit on the bonds, which will be insured by Financial Security Assurance Inc., is rated A1 by Moody’s Investors Service, A-minus by Standard & Poor’s, and A by Fitch Ratings.

Chicago last sold O’Hare third-lien revenue bonds in November 2006. UBS Securities LLC priced that $156 million deal in four series. The bonds are insured by MBIA Insurance Corp.

Bonds from the $37.8 million Series A refunding mature in 2008 and 2009, yielding 3.56% and 3.58%, respectively, both with 5% coupons. There was also a second 2008 maturity yielding the same, but with a 5.5% coupon. Bonds from the $30.3 million Series B refunding, subject to the alternative-minimum tax, mature in 2026, 2031, and 2037, yielding 4.13% with a 5% coupon, 4.55% at par, and 4.60% at par, respectively. Bonds from the $43.5 Series D new-money issuance subject to the AMT also mature in 2026, 2031, and 2037, yielding 4.13% with a 5% coupon, 4.55% at par, and 4.60% at par, respectively. And, the deal also contains Series C, a $44.5 million taxable refunding component, maturing in 2011.

Among 5% coupon paper in the deal, bonds maturing in 2008 were tightest to that day’s Municipal Market Data triple-A yield curve, with yields 11 basis points over the curve. Bonds maturing in 2026 were widest to the scale, with yields 30 basis points over.

In other activity, triple-A rated Fairfax County, Va., tomorrow will competitively sell $237.9 million of public improvement bonds. The bonds are slated to mature from 2009 through 2028, and will be callable at par in 2018.

Leonard Wales, the county’s debt manager, said Fairfax is trying to net $250 million for its construction fund from the sale.

“We have a five-year capital improvement program and the specific projects are being funded under those categories,” Wales said. “These are bonds that were approved at referendums that were held prior to the sale. We sell on a cash need basis, so we are not selling for an entire project at once. We are only selling when I need the funds to complete the cash flow from the contracts.”

The proceeds will be used for school improvements, parks and park facilities, a public library, transportation, and public safety facilities. The largest chunk, $144.3 million, will go to school improvements.

Public Financial Management Inc. is financial adviser. Sidley Austin LLP is bond counsel.

JPMorgan tomorrow will price $378.4 million of sewer system revenue bonds. The bonds are scheduled to mature serially from 2023 through 2032.

Moody’s rates the bonds Aa2 and both Standard & Poor’s and Fitch rate them AA. The bonds will come to market without insurance, which city auditor Hugh Dorian said he is “happy to say we need.”

“Of course I’ll be a lot smarter when the preliminary pricing is done, but it sounds like to me we are being well-received,” Dorian said. “We are a good credit, and I think folks are looking for good credits these days.”

Proceeds from the sale will be used for sewer projects, which will expand treatment capabilities by almost 50%.

Brickler & Eckler LLP is bond counsel. Prism Financial Advisory Services Inc. is financial adviser.

In Texas, First Southwest Co. will price $164.5 million of unlimited-tax school building bonds for the Denton Independent School District.

Meanwhile, UBS Wednesday will price $141.1 million of schoolhouse and refunding bonds for the Lamar Independent School District. The bonds mature from 2009 through 2038, and are backed by the Permanent School Fund guarantee program. Moody’s rates the underlying credit Aa3 and Standard & Poor’s gives it an A-plus.

Nassau County, N.Y., will competitively sell $125 million of bonds tomorrow in two series. The larger series, worth $105 million, will consist of general improvement bonds. The smaller series, worth $20 million, will be made up of sewer and storm water resources district bonds. The bonds are rated A2 by Moody’s, A by Standard & Poor’s, and A-plus by Fitch. PFM is financial adviser.

Finally, the Tennessee School Bond Authority will competitively sell $118 million of higher educational facilities bonds tomorrow. The bonds are slated to mature from 2008 through 2037, and are rated Aa2 by Moody’s and AA by Fitch.


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