The Nassau County Sewer and Storm Water Finance Authority plans to convert $47 million of auction-rate bonds to fixed rate as part of a larger issue in April that will take out commercial paper and restructure other debt. The deal will be a current refunding totalling about $135 million with maturities of less than 20 years.

"We had maybe a fortuitous timing," said Jeffrey Nogid, debt manager for Nassau County, N.Y., which runs the authority. "We were in the market to do a deal anyway."

The authority was getting close to reaching its $85 million limit on its commercial paper program and was getting ready to price a deal prior to the spate of auction-rate failures that hit hardest last week, he said.

"In light of the market's preference for liquidity, it doesn't look like the auction-rate product provides that for the investor," Nogid said. He added that it appears "there's going to be a major change in preference in structure. You might as well get in there early."

The auction-rate bonds were issued in 2004 at a par of $54.2 million and are the authority's only auction-rate debt. The bonds were insured by MBIA Insurance Corp.

The authority is evaluating its options for credit enhancement on the refunding, said Nancy Winkler, managing direct at Public Financial Management Inc., the county's financial adviser.

Orrick Herrington & Sutcliffe LLP is bond counsel on the deal. The underwriter has not yet been named.

The authority's auctions, which reset every 35 days, haven't failed. The bonds reset on Feb. 12 at 4.5%, 90 basis points higher than the 3.6% reset in January. The next auction will be March 17.

The authority, which was created in 2003, has $72.2 million of outstanding debt.

The deal isn't going to market immediately because it still requires certain board approvals and the bond documents need to be written, Nogid said.

The authority's outstanding debt carried underlying ratings of A-minus from Standard & Poor's and A2 from Moody's Investors Service.

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