DALLAS — Standard & Poor’s upgraded two Houston-area utility districts in the market with bank-qualified bond issues.
Some Texas municipal utility districts that were previously unrated or had low ratings have recently applied for ratings as investors seek bonds with underlying ratings even on the smallest offerings.
A managing director at Standard & Poor’s in Dallas said “we’ve rated 28 [new sales] since Sept. 1, which to me seems like a pretty good increase.”
Earlier this week, analysts raised the underlying general obligation credit of Harris County Municipal Utility District No. 64 to BBB from BBB-minus due to continued development and increasing reserves. The district’s fiscal 2007 general-fund balance rose slightly from a year earlier to $463,000, which is an adequate 65% of operating expenditures, according to analysts.
The Mayde Creek Municipal Water District received a bump up to BBB-plus from BBB earlier this month. Analysts cited the district’s “built-out status of development, which greatly limits future capital needs, and moderating, but high, debt burden.”
Last week, the Mayde Creek district, which is 23 miles northwest of downtown Houston, sold about $2.1 million of unlimited-tax park bonds in two terms through a competitive issue. The net-interest cost to the district was 5.8824%. Vining–Sparks was the winning bidder. The bonds, which weren’t reoffered, mature in 2025 and 2026 and were insured by triple-A rated Assured Guaranty Corp.
Harris County MUD No. 64 plans to offer about $3.5 million of waterworks and sewer system combination tax and revenue bonds today in a competitive sale.
The bonds are structured as serials reaching final maturity in 2030. Insurance will be at the bidder’s option. First Southwest Co. is the financial adviser to the district and Smith, Murdaugh, Little & Bonham LLP is bond counsel.
Anthea Moran, vice president at First Southwest, said the upgrade certainly bodes well for the district and the sale.
“There are fewer bidders in the competitive market now than we’ve had in the past and many want an underlying rating,” she said. “Most appear content with the triple-B. So this should open us up to a few more bids.”
The district, which is about 25 miles west of downtown, will use proceeds for further utility construction at the Lakecrest development, acquisition of a 19-acre commercial tract, and expansion of a water-treatment plant.
Galveston County Municipal Utility District No. 6 issued nearly $2 million of bonds late last week, and that sale resulted in a net interest cost of 5.76225%. The serial bonds mature next year through 2014 with three term bonds maturing in 2020, 2022, and 2024. The bonds were insured by Assured Guaranty and none of the bonds were reoffered.
Gene Shepherd, managing director at RBC Capital Markets and financial adviser to the Galveston district, said “there were some short maturities in there … and we were very happy to receive three bids” on the sale.
Earlier this week, Fort Bend County Levee Improvement District No. 15 sold $6.2 million of GO bonds. The net interest cost to the district was 7.3792%.
