BRADENTON, Fla. - Orlando, Fla., today begins pricing what may be the first direct-subsidy Build America Bond deal using a tax-increment financing structure.

Of all the BAB transactions to date, none have been reported as tax-increment deals, according to Thomson Reuters.

The $71.3 million offering by the city and its Community Redevelopment Agency is to finance the initial work on a long-awaited $425 million performing arts center. Because of the economy and its impact on other funding sources for future financings, officials are considering a phased-in approach to the center's actual construction.

The deal is selling in three parts as $18.6 million of 2009A tax-exempt new-money bonds, $6.2 million of 2009B refunding bonds to make indenture changes, and $46.5 million of BABs. Proceeds will be used for land acquisition, design, and site preparation.

Senior manager Citi and Siebert Brandford Shank & Co. begins retail pricing this afternoon followed by institutional pricing tomorrow, and closing Sept. 3.

Public Resources Advisory Group Inc. is the financial adviser to the city and the CRA. Bryant Miller Olive PA is bond counsel. Disclosure counsel is GrayRobinson PA and underwriters' counsel is Ruden, McClosky, Smith, Schuster & Russell PA.

The transaction is structured to produce level debt service. The Series A bonds will mature serially from 2011 to 2024; the Series B bonds mature from 2011 to 2016; and the Series C BABs will be sold in terms maturing in 2029 and 2037.

The refunding bonds match the existing maturities of the CRA's 2002 and 2004 TIF bonds, which are being refunded and defeased for an estimated present-value savings loss of $375,000, or negative 5%, to update the indenture, said city Treasurer Christopher McCullion.

"We wanted to release the CRA from the lien on tax-increment revenues from the old resolution, which was done in the early '90s and outdated because it does not give us the ability to do direct subsidy payments, variable-rate debt, or bond anticipation notes," McCullion said. "So we took this opportunity to revise and update the indenture so we have more flexibility in the future particularly as we look for different ways to finance the performing arts center."

The TIF bonds are rated A-plus by Fitch Ratings, A2 by Moody's Investors Service, and A by Standard & Poor's and are uninsured

"The premium for bond insurance that was requested made the economics of bond insurance not a workable option for this deal," McCullion said. "I think a lot had to do with the fact that this is a single-A credit."

The use of bond insurance is still under consideration for Orlando's $69 million capital improvement special revenue bond deal selling next week, which also includes a BAB component, McCullion said on Monday.

The city will use the proceeds to build a 2,000-space parking garage for a $480 million multi-use events center whose main occupants will be the Orlando Magic professional basketball team and the Arena Football League's Orlando Predators, for which debt was sold early last year. City officials said Monday the events center is erected "on time, and under budget."

Next week's deal will also price with retail sales on Tuesday and institutional sales Wednesday with Merrill Lynch & Co., Loop Capital Markets LLC, and Wachovia Securities as the underwriters. Bryant Miller Olive will serve as bond counsel as well as co-disclosure counsel with KnoxSeaton.

The capital improvement bonds will be sold as $11.2 million of 2009A new-money tax-exempt bonds, $16.5 million of 2009B refunding bonds, and $41 million of 2009C BABs.

Unlike the TIF refunding, next week's capital improvement refunding will be for debt-service savings within existing maturities. Present-value savings of $1.4 million, or 7.5%, are currently predicted.

Ratings of AA, Aa3, and AA-minus have been assigned to the capital improvement bonds by Fitch, Moody's, and Standard & Poor's.

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