Tennergy, Massachusetts Will Fill Almost Half of $8.7B Slate

About $8.7 billion of deals will be priced in the municipal primary market this week, with two deals which account for almost $4 billion of issuance at the forefront. Tennergy Corp. has the week’s largest scheduled deal, with $2.6 billion of gas supply revenue bonds, followed next by a $1.3 billion Massachusetts general obligation offering. The two deals represent about 45% of the $8.7 billion expected to be priced this week, which is down about 43% from last week’s approximate $5 billion.The Jackson, Tenn.-based energy corporation will come to market with the largest-ever prepaid natural gas deal Wednesday, to be priced by JPMorgan, which also ran the book’s on Tennergy’s two previous prepay gas deals. The bonds are scheduled to mature from 2008 through 2027.The deal will contain fixed-rate debt and may include variable-rate bonds. If variable-rate debt is sold, JPMorgan Chase Bank NA will provide an interest rate swap, while JP Morgan Chase & Co. will guarantee payments due under the prepaid agreement and the receivables purchase agreement.Tennergy will use proceeds from the sale to prepay the gas supplier for deliveries of natural gas on a monthly basis for 20 years. Tennergy then will sell the gas to the municipalities pursuant to agreements with the contract price based on an index price minus a discount.Since the revenue received from the municipalities is subject to variation and the bond obligations are fixed, Tennergy will enter into a commodity swap with BP Corp. NA as the counterparty.Moody’s Investors Service rates the bonds Aa2. Standard & Poor’s rates them AA-minus.Tennergy last came to market with gas revenue bonds in February 2006. JPMorgan priced that $746 million variable-rate deal in two series. Series A, worth $400 million, matures in 2016. Likewise, the $346 million series B matures in 2016.Meanwhile, Merrill Lynch & Co. will price $1.3 billion of GOs for Massachusetts this week. The bonds are scheduled to mature serially from 2008 through 2027, with term bonds in 2032 and 2037. Moody’s rates the commonwealth Aa2, and both Standard & Poor’s and Fitch Ratings give it a AA.Mintz, Levin, Cohn, Ferris, Glovsky and Popeo PC is bond counsel.The commonwealth last sold GO debt in May. Lehman Brothers priced that $218 million deal, which matures from 2008 through 2016. Yields range from 3.60% with a 4% coupon in 2008 to 3.96% with a 5% coupon in 2016. Bonds maturing in 2007 were decided via sealed bid, and a portion of bonds maturing in 2016 are insured by Financial Security Assurance Inc.Among 5% coupon paper in the deal, bonds maturing in 2010 were tightest to that day’s Municipal Market Data triple-A yield curve, with yields 11 basis points over the curve. Bonds maturing in 2014 were widest to the scale, with yields 16 basis points over.Massachusetts last came to market with a GO offering in excess of $1 billion earlier in May, with a $1.05 billion new-money and refunding offering priced by Lehman Brothers in four series. Series 1 — $98.6 million of new-money bonds — matures from 2008 through 2017, with yields ranging from 3.59% with a 4% coupon in 2008 to 3.89% with a 5% coupon in 2017. Series 2 — $400 million of new-money bonds — matures in 2037, and was not reoffered. Series 3 — $107.3 million of refunding bonds — matures from 2007 through 2017, with yields ranging from 3.65% with a 4% coupon in 2007 to 3.89% with a 4% coupon in 2017. And series 4 — $445.8 million of refunding bonds priced to the London Interbank Offered Rate — mature in 2018, 2020, and 2025.Among 5% coupon paper in the deal, bonds maturing in 2011 were tightest to that day’s MMD triple-A yield curve, with yields six basis points over the curve. Bonds maturing in 2016 and 2017 were widest to the scale, with yields 15 basis points over.In the week’s largest competitive offering, triple-A rated Georgia will sell $600 million of GOs in two series. The larger Series E, worth $541.7 million, will mature from serially 2008 through 2027, and will be callable at par in 2017. The smaller Series B, worth $58 million, matures from 2008 through 2012, and is not callable.“We hope for a favorable sale,” Lee McElhannon, the state’s director of bond finance. “Maryland sold [last] week and they came at a true interest cost of 4.14%, and they have a little different amortization schedule than us. We hope there are no surprises in the market.”Proceeds from the sale will be used for various projects. “We’ve got a lot that is going to go for local district educational buildings, primary and secondary, and we’ve got a lot that will go to the Board of Regents for college facilities around the state,” McElhannon said. “Those are the two biggest blocks. Behind that would be various transportation projects and a lot of other smaller amounts going to other agencies.”Atlanta-based King & Spalding LLP is bond counsel Public Resources Advisory Group is financial adviser.Also, the New Jersey Economic Development Authority may come to market with $423.5 million of motor vehicle surcharge revenue bonds. The issue is on the day-to-day calendar. The bonds will be issued in four series, including $269.2 million of tax-exempt revenue refunding bonds, $12.7 million of tax-exempt capital appreciation bonds, $42.4 million of federally taxable capital appreciation bonds, and $99.1 million of federally taxable current interest bonds. Bonds will be both serials and term bonds. Morgan Stanley and UBS Securities LLC will price the deal as co-senior managers. McManimon & Scotland LLC will be bond counsel.XL Capital Assurance Inc. and Ambac Assurance Corp. will insure various portions of the deal. The underlying credit on these motor vehicle surcharge revenue bonds is rated Baa1 by Moody’s and A by Standard & Poor’s.