WASHINGTON - District of Columbia officials hailed Thursday's negotiated sale of $400 million of tax revenue anticipation notes at an interest rate of 1.09%.

The rate was far better than the 3.13% that the district got for $300 million of Trans it sold last fall, and was a slight improvement over the 1.15% rate that the Indianapolis Public Improvement Bond Bank received for $127 million of Trans that also sold Thursday.

The district usually taps the muni market with short-term notes each fall. While it typically sells them competitively, district officials opted for a negotiated sale because of the uncertainty and the volatility in the marketplace.

"We are very pleased that, despite recent market disruptions, the notes priced at a very favorable interest rate and there was a very strong demand," chief financial officer Natwar Gandhi said in a statement.

Though the district gave priority to retail investors during the pricing period, the vast majority of the bonds were carved up among the syndicate firms that underwrote the transaction. Just $5 million of bonds were purchased by retail investors, though city Treasurer Lasana Mack said the transaction was six times oversubscribed.

"There's definitely a lot of demand for D.C. paper," Mack said.

Loop Capital Markets LLC and Morgan Stanley were co-senior managers on the deal. Citi, Goldman, Sachs & Co., JPMorgan, Merrill Lynch & Co., M.R. Beal & Co., Raymond James & Co., Siebert Brandford Shank & Co., and Wachovia Securities rounded out the syndicate.

Phoenix Capital Partners and Public Resources Advisory Group were co-financial advisers on the deal.

Venable LLP was bond counsel. Edwards Angell Palmer & Dodge LLP and Lewis & Munday were co-underwriters' counsel. Hawkins Delafield & Wood LLP was disclosure counsel.

The notes were rated MIG-1 by Moody's Investors Service, SP-1-plus by Standard & Poor's, and F1-plus by Fitch Ratings. They mature on Sept. 30, 2009, the last day of the district's fiscal year.

Mack said the district is still planning to come to market with about $650 million of income tax bonds in the first few months of 2009. After seeing skyrocketing interest rates and an unfriendly muni market earlier this fall, the treasurer postponed the income tax bond deal, which had been scheduled to come to market this month or next.

The income tax bonds, which were authorized in legislation approved by the District Council in July, are a new debt tool that Mack expects will provide debt service savings and higher bond ratings for the city. The bill allows the district to issue income tax bonds as an alternative to general obligation debt.

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