El Paso Hospital District, Irving Lead Otherwise Light Slate

DALLAS — As a sense of normalcy slowly returns to the Texas municipal market, some Lone Star state issuers hope to get deals sold in a favorable market this week.

The El Paso Hospital District plans to offer $120 million of general obligation bonds to begin construction of a long-awaited children’s hospital and $35 million of refunding bonds as well.

UBS Securities LLC is lead manager for the negotiated sale, which comes to market on the heels of upgrades from both Standard & Poor’s and Fitch Ratings. Both agencies raised the underlying rating of the hospital district to AA-minus from A-plus. Moody’s Investors Service doesn’t rate the credit.

The West Texas border district is using Kaufman Hall & Associates Inc. of St. Louis as a financial adviser for the sale. The underwriting syndicate includes Banc of America Securities LLC, Morgan Keegan & Co., and JPMorgan.

El Paso’s population of about 610,000 is up 11% since 2000 and the city anticipates nearly 60,000 new residents in coming years as Fort Bliss is expanded under the Army’s Base Realignment and Closure program. With its sister city of Juarez across the Rio Grande, El Paso’s metropolitan area is home to more than 2.5 million.

A handful of Texas school districts expect to price new-money and refunding issues this week backed by the state’s triple-A rated Permanent School Fund. A few school districts sold PSF-backed debt last week after delaying the deals due to the turmoil in the market of the last month or so.

“Some deals that were held up for market timing and other factors were able to take advantage of a favorable market [last Wednesday] and get those bonds sold,” one trader in Texas said. “While I can’t say the market has returned to normal, it’s at least returned to a sense of normalcy.”

The Etoile Independent School District plans to offer $2.7 million of unlimited-tax school building bonds in a competitive sale Tuesday. Southwest Securities Inc. is the financial adviser to the small, East Texas district about 20 miles east of Lufkin.

The Sheldon Independent School District is bringing $17.4 million of unlimited-tax school building bonds to the competitive market Tuesday, as well. Coastal Securities Inc. is the financial adviser to the suburban Houston district. Vinson & Elkins LLP is bond counsel.

Standard & Poor’s upgraded the district’s credit to A-plus from A, citing the district’s continued property-tax base growth and strong reserves.

Chief financial officer Abraham George hopes the upgrade will result in better interest rates, but added the market can swing either way when the deal is priced Tuesday.

“It’s certainly nice to get an upgrade and shows the district is fiscally sound,” said Lewis Wilks, managing director at Coastal Securities. “They’ve got good financial ratios and strong tax-base growth the past year, so it’s certainly justified. And when folks made their bids, we hope they sharpen their pencils a bit because now that the credit is an A-plus.”

Analysts said the higher rating reflects the district’s location near the heavily industrialized Houston ship channel, “slowed, but continued, single-family residential expansion” that may provide continued assessed-value growth, and solid financial position.

At $3.16 billion, the 2008 taxable-assessed valuation of the district is nearly double the $1.6 billion for fiscal 2002.

The district serves about 5,800 students in one high school, one middle school, one intermediate school, and three elementary schools. George said the district was experiencing about 8% growth for most of this decade, but that’s cooled to 4% of late, which he attributed to the slowing economy of the country as a whole.

District voters approved a $98.7 million bond referendum in November 2006 and this is the second tranche of that authorization to be issued. Following the sale, the district will have $38.8 million remaining from that bond package. George said issuance of the final tranche depends upon the level of growth the district experiences the next few years.

The Victoria Independent School District will issue $59 million of unlimited-tax school building bonds in a negotiated sale led by Wachovia Bank at some point this week. The underwriting syndicate includes Wells Fargo Brokerage Services LLC, Edward Jones, Estrada Hinojosa & Co., and Banc of America.

First Southwest Co. is the financial adviser to Gulf Coast district. Vinson & Elkins serves as bond counsel.

This is the second and final sale from a $159 million bond package for five new schoools and improvements to existing campuses passed by voters in May.

Moody’s assigned its A1 underlying rating to the sale.

The Dallas suburb of Irving plans to bring three tranches of debt to market this week for various improvements to city services. Officials also hope to refund some water and sewer debt, dependent upon market conditions later in the week.

The city plans to issue about $21.2 million of waterworks and sewer system new-lien revenue refunding and improvement bonds Wednesday through a negotiated sale led by RBC Capital Markets. Morgan Keegan and M.R. Beal & Co. are co-managers. Vinson & Elkins is bond counsel.

The debt comes to market with underlying ratings of Aa2 from Moody’s and AA from Standard & Poor’s.

In the competitive market on Thursday, Irving will offer $32.7 million of general obligation bonds and $4 million of combination tax and revenue certificates of obligation.

This debt will come to market with triple-A ratings from both Moody’s and Standard & Poor’s.

Proceeds will finance upgrades to city parks and streets, improvements to a landfill, expansion of an animal shelter, and a new fire station. Funds from the certificates will be used to demolish a hotel that city officials deemed unsafe for habitation.

Standard & Poor’s said the gilt-edged rating reflects the city’s “deep, diversified economic and employment base, conservative and sophisticated financial management policies that include long-range budget and capital plans, strong general fund reserves,” as well as rapid debt amortization and moderate tax rate, which mitigates a high debt burden.

 

 

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