DALLAS - With $756 million of debt waiting to be issued, Denver is hoping conditions might improve enough today to get one of three deals out the door.

Credit markets remain virtually frozen, waiting on Washington to decide how large of a bailout, if any, to provide for Wall Street's bad mortgage-backed security bets.

"We are living in the moment," said Denver debt administrator Margaret Danuser. "We're trying to remain as flexible as possible."

The best prospect appears to be a $255 million current refunding of certificates of participation in a deal led by JPMorgan, with Wachovia Securities and Harvestons Securities Inc. as co-managers. Piper Jaffray & Co. is financial adviser.

Despite the turmoil in the market, Denver will try to price the COPs today, Danuser said.

The original COPs were fixed rate and converted in the first refunding to floating rate. The second refunding will vary the rates on a daily basis.

The certificates will bear interest at a weekly variable rate and will refund a previous Series 2003C variable-rate COP transaction that included Lehman Brothers Special Financing Inc. as a counterparty on a swap to a synthetic fixed rate. The bonds were insured by Ambac Assurance Corp., which has since lost its triple-A rating. The Series 2003C refunded a previous Series 2000B issue. The COPs leased the Wellington E. Webb Municipal Office Building.

The new Series 2008A1-A3 certificates will use JPMorgan Chase Bank and the Royal Bank of Canada as swap counterparties. Denver is waiting to hear from Lehman on the size of termination payment the city owes.

Ambac will continue insuring city payments for the JPMorgan Chase swaps on the $92.9 million Series A1 and $78.6 million Series A2, but will not insure city payments to the Royal Bank of Canada for the $88.5 million Series A3. Standard & Poor's has conferred its AA-plus rating, with Aa2 from Moody's Investors Service and AA from Fitch Ratings.

The interest rate ceiling on the COPs will be 12%.

The fact that the certificates retain interest rate swaps should not deter investors looking for large blocks of $100,000, according to Heroux.

"I don't think that as far as investor appeal it will hurt it or help it," he said. "They will be looking through the credit to the potential liquidity provider."

Bond counsel on the COPs is Peck, Shaffer & Williams LLP and Trimble Nulan & Evans PC.

The Webb office building, named for the previous mayor, is a 12-story, 704,000-square-foot structure near the main city and county government building. The city building was completed in 2002 and provides office space for 1,900 municipal employees in 35 city agencies, along with ground floor retail space.

Meanwhile, Denver is also waiting to refinance $208 million of auction-rate securities for the Denver International Airport. The city has been trying since July to replace the ARS with variable-rate debt obligations but has not found an appropriate opportunity.

Officials are hoping conditions might permit a refinancing in mid-October.

An auction failure last week reset the rates on $52 million of the ARS from the previous 2% to a new rate of 12%, according to Danuser. However, the debt administrator said other resets have been much more moderate.

"They have been behaving fairly well, so we decided to wait," she said.

Plans for the refinancing, originally scheduled July 24, called for a short-term liquidity facility by Dexia Credit Local through its New York branch and long-term bond insurance from Financial Security Assurance Inc.

Fitch analysts said last week that they have withdrawn their previous rating and will issue a new one as the deal becomes more likely.

A more conventional refunding postponed until at least next month will take out $293 million of 2000 airport revenue bonds insured by MBIA Insurance Corp.

Danuser said Denver will have to wait until next month for the current refunding of the 2000B and C bonds because the refunding can only come at the beginning of a month and the October window of opportunity is closing. The bonds have been resetting at rates as high as 10%, and Danuser would like to get them back down to a more typical 1.5% to 2.5%.

The new bonds are not exempt from the alternative minimum tax and include a $92.6 million Series C1, a $100 million Series C2, and $100 million Series C3.

Letters of credit from Belgium's KBC Bank NV and the German bank Landesbank Baden-Württemberg replace the MBIA insurance.

The bond issues coincide with a $987 million airport capital program through 2013, a series of refunding deals in the wake of the auction-rate securities collapse, and one of the most financially challenging years in the history of aviation.

Denver International Airport's largest carrier, United Airlines, is struggling with record fuel prices as it continues to recover from its 2002 bankruptcy while seeking a merger partner. The home-grown discount carrier Frontier Airlines, DIA's second-largest carrier, is currently in bankruptcy and competing with the newly arrived Southwest Airlines, the nation's most profitable carrier.

Frontier recently assumed its lease and is current on all payments due to the airport. Southwest Airlines grew its market share at DIA, where it opened up shop in January 2006, to about 5.3% of total enplanements in 2007.

The airport served a record 25 million enplaned passengers in 2007, with January to June 2008 year-to-date results up 4.4% over the previous year.

Fitch analysts, who confer an A-plus on the DIA bonds, said they expect the strong enplanement growth rate to ease "as the competitive environment stabilizes and as fares align with demand and the growth in regional economy." The airport's feasibility consultant forecasts an average annual growth rate of 1.7% through 2013, growing more in step with the economy.

Earlier this month, Standard & Poor's raised its general obligation rating on Denver to AAA, based on the city's "consistently healthy financial performance, including historical maintenance of very strong fund balances and prudent management of city budgets."

At the same time, the agency raised the rating on various city lease-secured obligations to AA-plus from AA.

"We expect that the city will continue to hold a good fund balance position in the future," said analyst David Hitchcock.

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