WASHINGTON - The Virginia Resources Authority plans to come to market next week with its largest-ever deal - nearly $260 million of taxable and tax-exempt infrastructure revenue bonds.

Pricing is expected Monday for retail investors and Tuesday for institutional investors.

The proceeds will support the VRA's pooled financing program, which provides tailored loans to local governments and their agencies for infrastructure uses varying from roads and buses to public safety equipment and landfills. Next week's issuance will enable the program to lend to 20 borrowers - mostly counties, towns, and cities in the commonwealth - including nine that are new to the program.

The 2009A transaction will be structured in six tranches as senior and subordinate bonds with $107.1 million of new money, $137.8 million of refunding bonds, and a $14.1 million capital reserve fund. Maturities will run serially from 2009 through 2033 on approximately $187.1 million of tax-exempt bonds and between 2014 and 2017 on approximately $72 million of taxable bonds. Term bonds may be allowed.

The transaction includes two tranches of Adjusted Current Earnings bonds. Prior to the federal stimulus legislation, the interest on any tax-exempt bond held by a corporation was subject to being included in "adjusted current earnings" for purposes of the federal alternative minimum tax imposed on corporations. Under the stimulus legislation, certain corporations can exclude interest on bonds sold in 2009 and 2010 for new money projects and to refund a bond issue that was issued after December 31, 2003 and before January 1, 2009 from inclusion in their ACE. The ACE bonds, however, are subject to inclusion for income subject to the corporate AMT because they are being issued to refund bonds sold on or before Dec. 31, 2003.

The VRA six-tranche deal incorporates $43.5 million of senior ACE bonds and $18 million of subordinate ACE bonds.

The issuance will also provide "significant refunding savings" for seven borrowers, said Sheryl D. Bailey, executive director of the authority.

The savings projected for the refundings ranges from 5% to 8.3% and will vary according to borrower. As of Friday, the net present-value savings was $3.19 million, or 6.82% of the refunded principal.

The VRA will give first priority to Virginia residents on the retail side, Bailey said.

"We have had significant results in our retail effort," she said. "We are now in the 40% to 45% retail zone of our pricing in the last two transactions, very much as a result of the extensive and strategic marketing we do."

The authority markets its bonds through statewide radio and print advertising and an Internet road show. It also fine-tunes its marketing by keeping track of the ZIP codes on retail orders.

The negotiated sale will take place one month before the limit on the authority's moral obligation capacity from the commonwealth increases to $1.5 billion from $900 million, in response to growing demand from municipalities. Lawmakers increased the debt ceiling early this year.

Moody's Investors Service and Standard & Poor's assigned triple-A ratings to the senior bonds, according to bond documents. Moody's assigned a Aa2 rating to the subordinate 2009A bonds, which Standard & Poor's assigned a AA rating.

The authority's pooled financing credit boasts a natural triple-A rating on senior debt, benefiting from Virginia's intercept mechanism that allows state aid to be diverted to the authority's debt service within 24 hours, Bailey said. The VRA has never called on that intercept, she said, but it provides its bonds added security.

The authority's flexibility in lending has attracted an increasing number of borrowers, according to Bailey. The pooled financing program has more than $1.1 billion outstanding and 73 borrowers.

"We custom tailor each loan to the needs of each community," she said. "We don't make each loan fit a predetermined profile."

Because the VRA wraps each loan around the needs of each community, Bailey said, large triple-A rated and double-A rated communities use the pool structure, though small communities borrow from the authority, as well.

"It has broad attraction to a lot of local governments," she said.

Morgan Keegan & Co. will be senior manager on next week's sale, with Citi as the co-senior manager. Fidelity Capital Markets, Merrill Lynch & Co., and Siebert Brandford Shank & Co. round out the underwriting team.

Bond counsel for the deal is McGuireWoods LLP. Underwriters' counsel is Troutman Sanders LLP.

Davenport & Co. and Strategic Solutions Center LLC are co-financial advisers.

The VRA last issued pooled financing bonds in November. That $219 million deal, which was double the size of the authority's previous issuances, priced to yield 1.14% in 2009, 4.59% in 2022, and 5.33% in 2038.

The authority has supported more than $3.75 billion of investment and funded more than 800 projects since it began as a water and sewer authority in the mid-1980s. It has since expanded to include public safety, energy, parks and recreation, airports, transportation, land conservation, and local government buildings among its project areas.

In addition to the pooled financing program, the authority's bond funding arsenal includes revolving loans for wastewater and drinking water, airports, broadband, and flood prevention.

The authority's purview will extend to include site acquisition and development for economic and community development, along with administrative and operations systems, on July 1, when its increased commonwealth moral obligation debt limit also will take effect.

Shelly Sigo contributed to this story.

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