Texas airport keeps Bear Stearns for debt sale

By Joan Gralla

NEW YORK (Reuters) - The Dallas-Fort Worth International Airport on Monday said it will still use Bear Stearns to bring a debt sale to market because JPMorgan Chase, which has agreed to buy Bear, promised it would buy any unsold bonds.

Many issuers around the nation, including California, have sought similar assurances. They feared Bear Stearns, which last week faced the possibility of bankruptcy, might not have enough capital to serve as an underwriter.

The Dallas-Fort Worth International Airport plans to transform auction rate debt into fixed rate debt on Wednesday with a $337 million bond sale.

Bear Stearns last year ranked fifth among underwriters in the $2.6 trillion municipal bond market, and uncertainty about its future has opened the door for its rivals.

For example, New Jersey's Hackensack University Medical Center switched to Merrill Lynch from Bear Stearns as the top underwriter for a $240 million bond sale to take place on Wednesday.

Michael Phemister, the Dallas-Fort Worth International Airport's vice president of treasury management, said Bear Stearns was chosen in February because its price was lower than other underwriters. And unlike some of its rivals, the bank promised to commit its capital.

"They were all considerably more expensive. The other issue was some of the underwriters were not willing to take bonds, they said they would do it only as 'best efforts,'" he said. Some underwriters also wanted the airport to pay higher fees for any bonds they could not sell and had to buy.

Phemister described the banks' unwillingness to risk their own capital as "highly unusual." Issuers prize underwriters that are willing to spend their own cash if a deal runs into trouble because markets can unexpectedly turn rocky.