State-appointed receiver William Lynch

Harrisburg's bond sale to fund a 40-year lease of its parking assets, one of two centerpieces to the financial recovery plan in Pennsylvania's capital city, will begin with an Internet road show next week, according to bankers behind the sale.

Pricing should occur the following week, representatives of Guggenheim Securities told the Pennsylvania Economic Development Financing Authority board before it unanimously approved the $287 million transaction on Wednesday.

In a companion sale that state-appointed receiver William Lynch also considers pivotal to keeping 49,000-population Harrisburg out of bankruptcy, the Lancaster County Solid Waste Management Authority plans to sell $132 million of tax-exempt revenue bonds Monday and Tuesday to buy the incinerator Bond financing overruns for the trash facility account for about $360 million of Harrisburg's $600 million of debt.

Lancaster is hinging its scheduling on the timetable of the parking sale. Lynch's team wants to price both sets of bonds simultaneously, and before the teetering city encounters another expected cash-flow crunch later this month or in January.

The parking system revenue bonds will consist of $116.9 million of Series A 2013 senior parking revenue bonds, $99 million of Series B junior guaranteed parking revenue bonds and $71 million of Series C junior insured/guaranteed parking revenue bonds. The state board will lease parking garages, spaces and street meters to Harrisburg First, a consortium consisting of Guggenheim Securities, Piper Jaffray & Co., Standard Parking Corp. and Trimont Real Estate Advisors. Standard and Trimont affiliate PK Harris will run the garages.

"This is a very big piece of the puzzle," Lynch told the PEDFA board.

Standard & Poor's rates the B and C bonds AA with stable outlooks, and assigns an underlying investment-grade BBB rating to the A tranche, which bond insurer Assured Guaranty Municipal Corp. has expressed interest in insuring. Dauphin County has backed the B tranche with a general obligation guarantee, while the C series has what Goldfield called a "double-barrel guarantee" from the county and Assured.

AGM and the county are major creditors for the incinerator bonds. The city, which guaranteed those bonds in a series of transactions, defaulted on them in 2009.

"AGM reported orally to us that it would like to guarantee the A Series," said Steven Goldfield, an attorney with Public Resources Advisory Group and the financial advisor to Lynch's receivership team. Goldfield added, however, that AGM had yet to submit a commitment letter.

S&P said in a report that it based the rating on Dauphin County's GO pledge. It rates the GO bonds AA. The B and C bonds are junior-lien bonds, payable from parking revenues after operating expenses and Series A debt service.

"We believe that the proposed [parking and incinerator] transactions will reduce the county's liquidity risk and provide budgetary relief in the near term; however, longer term contingent liability risk remains if parking revenues are insufficient to make debt service payments or if flow control legislation is not extended," S&P wrote. "It is our view that the county will continue to take the actions necessary to reduce these risks."

Moody's Investors Service issued a provisional A1 rating to two of the three series, pending a review of final documents.

"We do have good ratings," said Ramiro Albarran, a managing director for Guggenheim, which is senior manager on the parking sale. Piper Jaffray & Co. is co-senior manager, while the underwriting syndicate includes Bank of America Merrill Lynch, Citigroup, Morgan Stanley and PNC Capital Markets LLC.

"We have a deep, deep bench in terms of getting out into the marketplace," said Albarran.

Albarran and Jay Murphy, who runs the Guggenheim underwriting desk, say the complexity of the transaction — which PEDFA board members cited last week in delaying their approval vote — calls for a lengthy road show. The Internet session will start on Monday or Tuesday and will include an investor call and real-time graphics, with follow-up questions the rest of the week.

"To really maximize the distribution and lower the interest rate, it's going to take an understanding of the transaction and how this came about, where Harrisburg is headed and why this transaction is important and doable," said Murphy.

Next week, competing issues in the market will probably total about $10 billion, said Murphy. "The education process next week and then really launching into pricing the following week will put us in position to take advantage of time, get people up to speed and enter the market when there's less competition."

According to Goldberg, the receivership team spent long days and nights over the Thansgiving weekend finalizing the documents.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.