DALLAS — Dallas Area Rapid Transit is preparing a $430 million refunding this month and planning nearly $1 billion of downtown projects linked to a proposed high-speed rail line and the city's new convention center hotel.
The upcoming bonds consist of two tax-exempt series.
The $402.3 million series A is an advance refunding to be priced by a 13-member syndicate led by JPMorgan, with executive director Douglas Hartman as lead banker. David Gordon, managing director at Estrada Hinojosa & Co., and Ron Davis, vice president at First Southwest Co., serve as co-financial advisors. The expected sale date is Nov. 19.
The $28.2 million Series B is an exchange refunding with Citibank, which will tender $30 million of 2008 bonds maturing in 2043.
DART chief financial officer David Leininger said he didn't expect to issue advance refunding bonds on the debt for at least a year. However, the rates were so low that the deal was moved to this year's calendar.
"Interest rates are quite a bit lower than anyone thought they would be at this point," Leininger said. Net present value savings are expecting to land at around 6%.
"One thing the refunding does is lower our annual debt service $2 million a year," he said.
The size of the Series A could vary based on market conditions.
"It literally depends on day of pricing as to which bonds will be in and which will be out," he said.
The 13 banks on this deal represent DART's newly qualified pool of underwriters, some of whom have not worked on a DART deal in a while, Leininger said.
"We thought we would use this as an opportunity to work with some names we haven't worked with in the past," he said, noting that DART offers incentives for strong performance and disincentives for disappointing results.
Both series are rated AA-plus by Standard & Poor's and Aa2 by Moody's Investors Service. Outlooks are stable.
If market conditions remain favorable, DART could refund its first issue of Build America Bonds this time next year, Leininger said.
Subsidies for BABs fell about 7.2% to $28.3 million after the 2013 federal sequestration went into effect.
"While not desirable, DART believes that the reduction has not had and, if continued at the same reduced rate, will not have, a significant impact on DART's ability to meet its debt service requirements," according to the preliminary official statement.
As DART takes advantage of the low interest-rate environment, the agency is also mapping plans for its next big project, a second alignment light rail line in downtown Dallas linked to a proposed high-speed rail line.
The nearly $1 billion light-rail project is also linked to the new Omni Convention Center hotel that opened three years ago.
"We want to make sure the alignment serves the largest number of people," said DART spokesman Morgan Lyons. "At the same time, you've got the high-speed rail connection going on. We need to understand where that station will be, so that would affect the second alignment."
Texas Central Railway, a private developer proposing high-speed rail between Dallas and Houston, said it is scouting five potential locations for a downtown station. The developers say they want to get the project underway by 2021.
After a briefing by DART on Monday, members of the Dallas City Council expressed strong support for the downtown plans, though no timeline has been announced.
Financing for part of the project — a tunnel from the developing Victory Park to downtown's Union Station — could attract $400 million in federal funds dedicated to "core capacity" projects. Though DART would have to compete with other cities and transit systems for that funding, the agency is optimistic about its chances based on its history of developing projects on time and under budget, Lyons said.
