DALLAS - Arlington, Tex., has little room to maneuver as it seeks to refinance $164 million of variable-rate debt sold for the new Dallas Cowboys stadium scheduled to open next year.

Since July, the city between Dallas and Fort Worth has been waiting for suitable market conditions to refinance the variable-rate debt after downgrades of bond insurer MBIA Insurance Corp. The refinancing is backed by the new insurer Berkshire Hathaway Assurance Corp. to earn triple-A ratings.

The city had tentatively planned to try to go to market this week, but with the muni market virtually frozen by turmoil and uncertainty, chances of pricing appear remote.

Marlin Mosby, Arlington's financial adviser from Public Financial Management, said there is still a slim chance that the deal might price this week. All that remains to be done is issuance of a new preliminary official statement, he said.

"If we were to release it today, Thursday or Friday pricing would be possible, but Monday or Tuesday would be more likely," Mosby said. "There is a backlog of deals building up, but we've got to get investor confidence back."

One trader said he doubted a deal containing interest rate swaps and bond insurance will be issued this week.

"Something this esoteric is going to have a real hard time accessing the market," he said.

Mosby said he thought the city might have a shot at the market Friday, but spreads suddenly widened, undermining the swaps within the deal.

Since then, the federal government has proposed a $700 billion bailout of the credit industry and two top players in the muni market, Goldman, Sachs & Co. and Morgan Stanley, have agreed to abandon the investment banking model for the more tightly regulated and less leveraged commercial banking model by becoming bank holding companies.

With few details on how the bailout would work, Congress is being urged to pass the measure this week to rescue the nation's credit industry.

In response, issuers have held back until they see better odds for issuing debt.

Yesterday's negotiated bond calendar had not a single issuer, and Wake County, N.C., postponed a $354 million general obligation pricing.

"You don't know what you're dealing with," said Ross Moring, senior vice president at Estrada Hinojosa & Co. "No one has a conviction on either side."

Noe Hinojosa, co-founder of the firm, said he met yesterday with an issuer that was contemplating a competitive deal, which he advised against.

"The market today calls for deals to be negotiated because you need the extra time and flexibility," he said.

For Arlington, the collapsing investment banking business and the inability to refinance the stadium bonds could complicate the campaign for $141 million of general obligation bonds.

Citizens For Arlington began its campaign last week for the bond package to be decided by city voters at the November election.

Jeff Williams, chairman of the pro-bond citizen's group, said the proposal is "a no-frills referendum" with most of the proceeds dedicated to basic services.

The proposed bond package includes $103.7 million proposition for roadwork; $15.5 million for improvements to more than a dozen parks and recreation centers, land acquisition for new parks, and reconstruction of an existing clubhouse at a city golf course; and $9 million for upgrades at several fire stations.

The Arlington City Council voted in January to postpone the bond election from the original schedule of May until the presidential election in November to provide more time for a review of projects in the proposal.

Arlington has issued roughly $300 million of bonds for the $1.1 billion football stadium that will be the most expensive facility in the National Football League. About half of the bonds are fixed rate. The Cowboys and owner Jerry Jones are financing the remainder of the costs.

The 2005 variable-rate bonds carried swaps to create a synthetic fixed rate that the city expected would save about $20 million over the 30-year maturity. With MBIA's downgrade, officials began working on a refinancing deal in July.

Lead underwriter on the pending deal is JPMorgan with Banc of America Securities LLC as co-manager. Others in the syndicate include Estrada Hinojosa, Merrill Lynch & Co., Piper Jaffray & Co., Siebert Brandford Shank & Co., First Southwest Co., Morgan Keegan & Co., RBC Capital Markets, and Southwest Securities Inc.

Vinson & Elkins LLP serves as bond counsel.

The refinancing will likely cost the city $23 million to $28 million, including the cost of new bond insurance and fees paid to terminate the existing financing agreement.

The variable-rate deal had saved the city money - about $3 million until 2008. But with rates rising to 7% last spring and nearly 8% in July, about $1 million of that was lost. Since then, the rate has fallen to 5.63%.

Rating analysts last week issued new reports, confirming the A ratings from Standard & Poor's and Fitch Ratings, with an A2 from Moody's Investors Service.

Arlington's GP debt carries underlying ratings of AA from Standard & Poor's and Fitch and Aa2 from Moody's.

All three series of the refunding bonds are special obligations of the city backed by a first lien on pledged special taxes and pledged accounts. The pledged taxes consist of a 0.5% sales and use tax, a 5-cent tax on short-term motor vehicle rentals, and a 2-cent hotel occupancy tax. The Series 2005C bonds are secured further by annual rental payments and a portion of annual stadium naming rights fees.

Adding to concerns is the weakening economy, analysts said.

"As is occurring presently, the city experienced weakness in sales tax revenues during the 2001-2003 recession," Fitch noted. "The 2001-2003 recession, combined with an apparent shift in retail activity from Arlington stores to newer shopping venues elsewhere in the area, produced declines in sales tax receipts of 7% and 6% in fiscal 2002 and 2003, respectively. City officials are hopeful that the anticipated opening of additional retail stores, combined with stadium-related retail activity, will restore sales tax revenue growth to levels more consistent with historical patterns."

Arlington's 2007 population of nearly 376,500 is up 13% from the 2000 Census tally of some 333,000.

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