ATLANTA - The Tennessee Housing Development Agency will be in the market this week to begin the sale of $60 million of homeownership bonds.

Morgan Keegan & Co. is the book-runner. UBS Securities LLC and Merrill Lynch & Co. are in the syndicate. Kutak Rock LLP is the bond counsel. CSG Advisors Inc. is the financial adviser. The bonds will be offered to retail Friday and Monday and to institutions on Tuesday.

Donald Peterson, a managing director with Morgan Keegan, said officials decided to issue the bonds to retail investors over a two-day period beginning on Friday because of the offering of bonds where the interest is not subject to the alternative minimum tax.

The deal consists of $54 million of Series 2008-1B bonds that are not subject to the alternative minimum tax. That series includes roughly $13 million of serial bonds and three term bonds totaling about $42 million. The term bonds mature in 2024, 2029, and 2034. The $5 million of Series 2008-1A that are subject to the AMT consist of one term bond maturing in 2039.

The deal is a combination of new-money and refunding bonds.

It has been rated Aa2 by Moody's Investors Service andAA by Standard & Poor's.There is no rating from Fitch Ratings.

"Proceeds from the bonds will be used to, among other things, finance first lien single family program loans for single-family owner-occupied housing in Tennessee," Peterson said.

The agency "is utilizing the large amount of stored up non-AMT authority to help reduce interest cost on bonds and thereby enable it to offer a lower mortgage rate" than if it had brought an all AMT structure.

According to Peterson, this is the first single family issue for the THDA since 2005 under its 1985 resolution that has had non-AMT bonds.

Trent Ridley, the chief financial officer for the THDA, acknowledged that the agency has not done deals up until now, and that housing finance agencies in general have not issued as they wait for the market to normalize.

"We're coping by remaining flexible, monitoring the market, speaking with the financial adviser, doing smaller deals, pre-marketing through underwriters and attending investor conferences," Ridley said. "I think there has been an overall slowing because of the tightening of credit requirements. We are still pretty strong. We had a good January, and February was the third highest on record for us. So, we're doing okay."

He also said that deals had been in the $100 million to $150 million range, but given what's happening in the market, the agency planned to issue lower amounts.

"We have the option of using our own funds to originate until the market gets better," he said.


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