McKinney ISD Set to Deal $47 Million on Monday

DALLAS — The McKinney Independent School District in suburban Dallas plans to issue $46.9 million of unlimited-tax building and refunding bonds Monday to build a new elementary school and further fund its large capital improvement plan.

Morgan Keegan & Co. is lead manager for next week’s negotiated sale. Southwest Securities Inc. and Merrill Lynch & Co. are co-managers.

First Southwest Co. is the district’s financial adviser and Fulbright & Jaworski LLP is bond counsel.

Most of the bonds are structured as serials maturing next year through 2034. About $3.9 million of capital appreciation bonds will mature next year.

The district hopes to achieve present-value savings of at least 4% from the refunding, according to First Southwest vice chairman David Medanich.

The new-money component exhausts a $197 million bond package approved in October 2005. The district still has $12.5 million of authorized debt available from a 2000 referendum for renovations to a stadium.

Following the sale, Moody’s Investors Service assigned its Aa3 underlying rating to the bonds and affirmed the rating on the district’s $470.6 million of outstanding debt. Standard & Poor’s assigned a AA rating to the sale, citing the district’s access to the Dallas-Fort Worth metro area, solid assessed-value growth and growing general fund reserves. Analysts said residential and commercial development continue to spur the growth within the district.

The bonds will not be backed by the state’s triple-A rated Permanent School Fund, which has been suspended guarantees until at least September due to the declining value of the fund. Most Texas school districts issuing bonds of late have wrapped the debt with private bond insurance, and McKinney ISD officials plan to wait until just before the sale to decide on insurance.

“In my opinion, the bonds in the double-A level continue to sell very well,” Medanich said. “Insurance is something you always apply for and if it makes sense you go ahead and wrap the debt, but of course we try to wait until the last minute to see if it’s absolutely needed or not.”

Earlier this week, the Port Arthur Independent School District sold $75 million of school building bonds insured by Assured Guaranty Corp. Yields ranged from 3% with a 3.25% coupon in 2017 to 4.95% with a 4.75% in 2039. The Gulf Coast district carries underlying ratings of A3 from Moody’s and A-minus from Fitch Ratings.

The estimated population of McKinney ISD, located about 30 miles north of Dallas, is roughly 135,000, which is more than double the 59,265 of a decade ago. Moody’s analysts said there’s still ample room for more development and the population could reach 400,000 upon build out.

The district’s fiscal 2009 taxable-assessed value of $9.06 billion is 52% higher than the $5.96 billion five years earlier and triple the $3 billion at the start of the decade.

Current enrollment at the district’s 32 campuses is 22,266 and officials expect to add only about 600 students next year as building permits within the district have declined due to the overall economic slowdown, according to analysts. The total student population was about 17,900 just five years ago.

At 125,000, the current population of the city of McKinney is more than double the 2000 Census tally of about 54,400.

Standard & Poor’s noted that the residential growth is primarily attributable to master-planned developments and has resulted in average annual school enrollment growth of nearly 9% during the past several years.

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