DALLAS — El Paso has $35.9 million of water and sewer revenue refunding bonds ready to be sold, but the deal will be postponed due to continuing market uncertainty.
“We can’t sell this right now. We’re just going to wait for the market to calm down,” said Steven Adams, senior vice president at First Southwest Co., the city’s financial adviser.
Proceeds from the Series 2008C bonds will be used to take out some commercial paper notes.
“It’s to give [the city] some liquidity to draw down the commerical paper for their ongoing capital improvement plan,” Adams said.
Southwest Securities Inc. is lead manager for the negotiated sale, with Wells Fargo Brokerage Services LLC and Ramirez & Co. as co-managers. Fulbright & Jaworski LLP is bond counsel to the growing West Texas city.
Adams said any decision on securing insurance for the bonds, which are structured as serials with final maturity in 2033, will be determined at pricing.
El Paso refunded $30.5 million of similar debt in January. Yields on the bonds ranged from 2.74% with a 4% coupon in 2009 to 4.41% with a 4.25% coupon in 2028. The bonds maturing from 2014 through 2033 are wrapped with the triple-A rated insurance of Financial Security Assurance Inc.
Fitch Ratings assigned a AA rating with a stable outlook to the coming issue and affirmed the rating on $431.4 million of outstanding parity bonds. Analysts said the rating reflects the system’s “adequate financial flexibility, competitive rate structure, and extensive financial, capital, and water-resource planning.”
Some mitigating risks include the customer base’s below-average income levels and a moderate capital improvement program that requires additional but modest rate increases. Fitch also said it’s monitoring the system’s financial performance that “has shown some weakening in recent years due in large part to recent wet-weather events and large annual pay-as-you-go funding efforts.”
Standard & Poor’s also assigned a AA rating and stable outlook to the sale, citing the city’s deep and stable economy, and the system’s continuous customer-base growth, strong debt-service coverage, and competitive rates despite recent increases.
The water and sewer system’s revenue available for debt service for fiscal 2008 of $65.5 million is up nearly 34% from five years ago. The system provides water to 179,701 customers and sewer services to 170,623 sewer customers within and outside city limits, according to Standard & Poor’s, which also said current water-treatment capacity is sufficient.
Moody’s Investors Service rates the city’s water and sewer debt at Aa3.
El Paso is now home to about 665,000, which is 18% higher than the 2000 Census figure of 563,662. More than 1.2 million people live across the Rio Grande in Ciudad Juarez, Mexico.
El Paso is set to see an huge influx of new residents in the coming years, as Fort Bliss is expected to receive more Army troops as part of the federal government’s Base Realignment and Closure initiative. Some estimates have about 21,000 troops with another 25,000 family members relocating to Fort Bliss over the next five years or so.
