Armed with BABs, Texas Brings Big Volume to Market

DALLAS — Bolstered by taxable Build America Bonds, Texas issuers are planning for what may be their highest volume week so far this year.

Of the $2.5 billion of bonds on the calendar, the largest issue will come from the Texas Transportation Commission, which is scheduled to sell $1.1 billion of BABs on Wednesday.

A team of 10 underwriters led by Merrill Lynch & Co. will market the bonds, with RBC Capital Markets as financial adviser.

The bonds got a welcome endorsement from Standard & Poor’s, which last week boosted Texas’ general obligation bond rating to AA-plus from AA, putting the agency in line with the AA-plus from Fitch Ratings and Aa1 from Moody’s Investors Service.

Weighing in with nearly $1 billion of bonds between them are the cities of Dallas and Houston.

Houston’s $595 million general obligation issue includes a $75 million BAB component and another $420 million of tax-exempt bonds. The issue will be used to refund commercial paper and other bonds and certificates of obligation.

Loop Capital Markets will lead the underwriting team that includes nine co-managers.

The city earned ratings of AA from Standard & Poor’s and Aa3 from Moody’s, with no Fitch rating. The outlooks are positive.

Dallas has a $496 million convention center hotel bond issue expected to price Monday if market conditions permit. The largest portion of the issue will be $459 million of BABs that will carry a moral pledge from the city.

The bonds will carry ratings of A-plus from Standard & Poor’s, A2 from Moody’s Investors Service and no rating from Fitch.

An underwriting team led by Citi will include Goldman, Sachs & Co. and Siebert Brandford Shank & Co. as co-seniors. Co-managers are Jackson Securities, RBC, and Southwest Securities Inc. Estrada Hinojosa & Co. and First Southwest Co. are co-financial advisers.

Triple-A-rated Collin County, an affluent suburb north of Dallas, is also issuing about $74 million of BABs in two issues. The first issue is $46 million of Series A and B refunding and improvement bonds. The second is $28 million of road and refunding bonds, also in two series. Both deals are led by Citi as senior manager, with First Southwest Co. as financial adviser.

Hays County, a suburb of Austin, has three issues pricing through negotiation with Piper Jaffray as senior manager and Specialized Public Finance Co. as financial adviser. The largest issue, for $51 million, will be pass-through toll revenue and limited tax bonds. The county will also issue $10 million of regular road bonds and $8 million of certificates of obligation.

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