Houston Sees Savings on $372M Issued Over Two Days

DALLAS — Houston saved about $16.6 million on $372 million of new money and refunding issues over a two-day period and raised $39.2 million for improvements to the George R. Brown Convention Center, Controller Ronald Green said.

"We are constantly looking for savings opportunities," Green said. "Clearly, Houston is 'happening,' so there is considerable demand."

The deals priced July 22 and 23.

The first issue, rated Aa2 by Moody's Investors Service and AA-plus by Standard & Poor's with stable outlooks, took out about $232.4 million in commercial paper used for various city projects and $60.1 million of general obligation bonds. The city has about $3.2 billion of outstanding GO debt, according to Moody's.

Priced through negotiation with Mesirow Financial Inc., the 2014-A bonds saved the city $8.2 million, Green said. With a true interest cost of 2.945%, the yield came to 2.565%.

Mesirow's managing director Anderson Bynam was lead banker on the deal.

The next day, Houston priced $80.7 million of refunding and new money bonds backed by the convention and entertainment hotel occupancy tax.

Net present value savings on $41.5 million of refunding bonds came to $6.4 million or 9%, Green said, with a true interest cost of 3.959% and a yield of 3.470%.

Those bonds carried ratings of A2 from Moody's and A-minus from S&P with stable outlooks. Hutchinson, Shockey, Erley & Co. was senior manager with J.P. Morgan as co-manager. Mark C. Nitcholas, managing director at Hutchinson, was lead banker.

First Southwest Co. vice chairman Michael Bartolotta was financial advisor on both deals.

After the recent sale, Houston has $484.6 million of outstanding hotel occupancy tax bonds, according to Moody's. That includes 14.4% in variable auction-rate securities that reset every seven days based on the S&P Municipal Bond 7-Day Intermediate Grade Rate Index. Over the past 12 months, the rates have averaged 0.25% with the last reset rate of 0.19% on July 2, according to Moody's.

The $39.2 million of new money will be used for improvements to the convention center that are tied to the construction of the city's second convention center hotel.

City leaders broke ground for the privately financed 30-story, 1,000-room hotel in April. While the city bought the land for the hotel, the city is not financing construction or management.

The Marriott Marquis will join the existing Hilton Americas as a convention center hotel, providing a combined 2,200 rooms to conventioneers. The Marquis is expected to be open in time for the 2017 Super Bowl.

Financing for the $335 million Marquis project will include funds from the Houston First Corp., a city agency that operates the convention center. The agency bought the land and is building an adjacent parking garage, along with other improvements such as new retail space. Houston will lend money from the bond proceeds to Houston First.

In 2012, the Houston City Council approved nearly $138 million in economic development incentives and tax rebate agreements to jump-start a second convention center hotel. Houston-based RIDA Development Co. will own the hotel.

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