University of Houston, Fast-Growth ISDs Set to Price Deals This Week In Texas

DALLAS — A $186.8 million sale from the University of Houston Board of Regents, a number of issues from fast-growth school districts, and two recently upgraded suburbs lead the way this week in the Texas municipal market.

The negotiated University of Houston deal will be priced Wednesday by RBC Capital Markets. The underwriting syndicate includes Depfa First Albany Securities LLC, Loop Capital Markets LLC, and Ramirez & Co.

First Southwest Co. is financial adviser to the board and Fulbright & Jaworski LLP is bond counsel.

The consolidated revenue and refunding bonds are structured as serials reaching final maturity in 2038.

Houston also plans to offer $80 million of tax and revenue anticipation notes in the competitive market this week. Insurance will be at the bidder’s option.

Estrada Hinojosa & Co. and First Southwest Co. are co-financial advisers to the nations’ fourth-largest city. Allen Boone Humphries Robinson LLP is bond counsel.

Moody’s Investors Service assigned a MIG-1 rating to the notes, which are secured by the ad valorem tax, sales and use tax, franchise charges and fees, and other general revenue collected by the city, according to analysts.

The city uses Trans annually, and Moody’s said the size of the deals has declined consistently the past five years, indicating improved financial margins.

Two prototypical suburbs are bringing multiple tranches of debt to market this week following upgrades from Standard & Poor’s.

Sugar Land plans to offer three tranches in the competitive market Tuesday following an upgrade to AA. The expanding city about 20 miles southwest of Houston will offer $6.9 million of general obligation bonds, about $14.8 million of waterworks and sewer system revenue bonds, and $4.7 million of  combination tax and revenue certificates of obligation.

Analysts raised the rating on the city’s water and sewer debt to AA from AA-minus due to a “continued trend of maintaining good debt-service coverage” and management’s ability to supplement its capital needs with pay-as-you-go financing.

First Southwest is the financial adviser to the city, and Vinson & Elkins LLP is bond counsel.

Formerly a mostly rural area, Sugar Land has experienced rapid growth this decade and the current population of nearly 86,000 is up 35% since 2000.

Meanwhile in North Texas, suburban Garland plans to offer $129.3 million in three tranches at some point this week through a negotiated sale led by Banc of America Securities LLC.

The city will offer about $77.3 million of general obligation bonds, $41.8 million of water and sewer system revenue bonds, and $10.2 million of  electric-utility system revenue bonds.

First Southwest is the financial adviser to the city, and Fulbright & Jaworski is bond counsel.

Standard & Poor’s analysts upgraded the city’s water and sewer debt to AA from AA-minus, citing a “strong history of adjusting rates to maintain strong net margins of all obligations supported by the system.” The higher rating also applies to about $135 million of debt outstanding.

The GO debt was upgraded to AA-plus from AA due to “strong financial management practices that have continued to allow financial performance to be sustained at a high level over time.”

Adjacent to Dallas to the northeast, Garland has all but reached complete build out over the past 50 years and has a population of about 216,000.

Standard & Poor’s analyst Ted Chapman said the city has some pockets for possible residential growth, but the main driver of the economy of late has been growing commercial and retail development.

Analysts also said the city’s “good, but not strong, wealth and income indicators” preclude a bump up to a triple-A rating.

Fitch Ratings assigned a AA rating to the water and sewer system bonds.

A few rapidly expanding school districts from across Texas are planning to bring bonds to market this week with most of the debt enhanced by the state’s triple-A rated Permanent School Fund.

The Conroe Independent School District plans to offer about $97.1 million of school building and refunding bonds in a negotiated sale led by Merrill Lynch & Co.

The district, wants to build at least seven new campuses to accommodate an enrollment that’s projected to add about 21,500 students over the next eight years.

Conroe ISD, which is about 30 miles north of downtown Houston, has a current enrollment of nearly 46,500 in 50 schools and is adding almost 1,500 students a year.

Moody’s assigned a Aa3 underlying rating to the sale.

The Mansfield Independent School District expects to price $80 million of unlimited school building bonds at some point this week to continue construction of new schools to house an enrollment that’s adding about 1,700 new students annually.

The negotiated sale will be led by Morgan Keegan & Co. with RBC Capital Markets and Southwest Securities as co-managers.

About 20 miles southeast of Fort Worth, the district serves about 30,000 students at 35 campuses, and officials anticipate a total enrollment of nearly 40,000 by 2013.

The Little Elm Independent School District will issue $8.6 million of debt in two series this week following upgrades from both Standard & Poor’s and Fitch.

The district plans to price $7.5 million of unlimited tax school building bonds Series 2008-A and about $1.1 million of refunding bonds Series 2008-B via negotiated sales led by Raymond James & Associates Inc.

Enrollment in the small North Texas district has more than tripled the past decade to 5,364 this year from less than 1,500 students for the 1998-99 school year. Estimates show the enrollment continuing to rise by about 3.5% annually the next five years to about 6,400 students in 2013.

The taxable-assessed valuation of the 39-square-mile district has risen 155% the past five years to $1.47 billion from $574.9 million in 2002.

Both Standard & Poor’s and Fitch raised the underlying rating on the district’s credit to A from A-minus.

Analysts cited strong finances, despite the challenges associated with rapid growth, and increased operating reserves in the upgrade.

Fitch said some credit concerns for the predominately residential district include a “limited ability to issue additional debt without significant tax-base growth,” high debt levels, and slow principal amortization, adding the “continuance of solid reserves will be integral to maintain the credit rating.

 

 

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER