$150M Conroe ISD Deal Provides New Money, Savings

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DALLAS - Conroe, Texas, Independent School District saw strong demand for $150 million of bonds that included new money and refunding, officials said.

"The deal was oversubscribed in several maturities," said Darrin Rice, executive director for finance at the suburban district north of Houston.

The deal included two series. The $129.2 million Series A bonds priced through negotiation through First Southwest Co., and the $21.1 million Series B pricing was led by Raymond James and Associates. Both deals priced Oct. 6 with a market response that Rice described as "very positive."

Ryan O'Hara, managing director at BOSC Inc., is the district's financial advisor.

Aside from $40 million of new money for school construction, the bulk of the deal was refunding.

On the Series A bonds, the district achieved net present value savings of $10.4 million or nearly 10.7%, Rice said. Series B provided savings of $3.38 million or more than 15%.

Series A bonds drew yields of 3.05% on 5% coupons maturing in 2039. Series B earned a yield of 2.81% on 5% coupons maturing in 2030.

The Series A bonds were backed by the Texas Permanent School Fund for triple-A ratings, while the Series B bonds were not.

The district caries underlying ratings of Aa2 from Moody's Investors Service and AA from Standard & Poor's. Outlooks are stable.

With this deal, the rapidly growing district has about $1 billion of outstanding debt, according to Moody's.

"Strong economic indicators continues to drive taxable value growth," Moody's lead analyst Adebola Kushimo noted in her Sept. 30 ratings report. "In fiscal year 2015, taxable values grew 12.6% to $26.9 billion, resulting in a 6.6% average annual growth rate over the past five years."

Development is largely driven by oil companies inside and adjacent to school district boundaries as well as the continuation of a master community development on a 2,000 acre site, Kushimo pointed out. Exxon Mobil is building a massive new campus in The Woodlands, a growing suburban community in Montgomery County, of which Conroe is the seat of government.

The school district is also beginning discussions on a bond referendum that could come in November 2015.

Current enrollment is close to 50,000. The student population has been increasing at a rate of about 1,100 to 1,200 students per year for the past few years. Demographers project a continuation of that trend.

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