DALLAS – A Dallas suburb has raised $186 million for a major retail development in a complex deal that combines unrated debt with the first bonds insured by Berkshire Hathaway Assurance in more than three years.
The Colony, a bedroom community in the northern suburbs of Dallas, priced five series of bonds through negotiation Wednesday and Thursday with Piper Jaffray and Jefferies. The deal included $106.9 million insured by Berkshire and about $80 million of unrated debt, all taxable.
“The deal was very challenging and it went very well,” said Mark Curran, managing director at Piper Jaffray. “We think we came up with a very winning combination for the project and I’m very pleased with that.”
Berkshire’s return to the bond insurance market comes on a deal that has deep connections to its parent Berkshire Hathaway, Inc., and founder Warren Buffett.
Omaha-based Nebraska Furniture Mart, a subsidiary of Berkshire Hathaway, will be the centerpiece of a $1.5 billion retail and mixed-use development that promoters say will be the largest of its kind in North America.
Nebraska Furniture Mart, which expects to generate $600 million in annual sales at the site, broke ground in September. The site adjoins the North Texas Tollway Authority’s State Highway 121. The store will be the first in Texas and the third and largest store for Nebraska Furniture Mart.
The insured bonds sold at par with yields ranging from 2.594% in 2020 to 4.381% in 2033. Bonds maturing in 2038 priced with a 4.631% yield and bonds maturing in 2047 priced with a 4.881% yield.
Unrated bonds with maturities ranging from 2018 to 2042 priced at par with yields ranging from 5% to 7.625%.
Another $29.6 million of bonds were issued through the Colony Community Development Corporation with yields ranging from 4.5% at par in 2016 to 8% with a 7.25% coupon in 2042.
“The deal was received very well,” said Boyd London, managing director at First Southwest, the financial advisor on the deal. “This is a very complicated transaction, so there was a lot of education that took place,” he added
Curran said the structure was designed “for the maximum amount of flexibility, in terms of being able to call the bonds early, as well as securing lowest yield.”
This week’s deal is considered the initial financing for the project, with further issues expected as the project develops.
Berkshire Hathaway Assurance representatives could not be reached for comment on any future deals it plans to insure.
Berkshire Hathaway Assurance, created by Berkshire Hathaway, Inc. in 2007 to insure municipal bonds, last wrapped a municipal bond deal in November 2009. That year, the insurer wrapped seven issues before disappearing from the market. The year before, it wrapped 22 issues, totaling $3.3 billion in par value, according to Thomson Reuters data.
BHA’s initial triple-A ratings have been downgraded to Aa1 by Moody’s Investors Service and AA-plus by Standard & Poor’s.
