DALLAS - Texas State University helped set the pace for the municipal market Feb. 26 with a $315 million issue that combined new money and refunding.
The deal came to market through senior manager Barclays Capital Inc. as $182.6 million of tax-exempt Series A and $132.2 million of taxable Series B term bonds. Both series were rated Aa2 by Moody's Investors Service and AA by Fitch Ratings.
Series A bonds with 4% coupons maturing in 2045 earned a yield of 3.69%. Series B bonds maturing in 2045 with 3% coupons earned yields 165 basis points above Treasuries.
"It went pretty well," said Roland Smith, vice chancellor for finance at the TSU System. "I think yesterday would have been a little better, but we're only talking about 2 or 3 basis points. Yellen's comments were beneficial to this transaction as well."
Federal Reserve Chair Janet Yellen indicated to Congress on Feb. 24 that the central bank was not in any hurry to raise rates, despite signs of an improving economy. Prospects of rising interest rates are detrimental to bond prices.
Smith said the interest-rate environment remained favorable for issuers.
"We're going to achieve considerable present-value savings on the refunding," he said.
John Daniel, managing director at Barclays, was lead banker on the deal, with Mary Williams, senior vice president at First Southwest Co. as financial advisor.
Co-managers were Morgan Stanley, Ramirez & Co., and Piper Jaffray & Co.
McCall, Parkhurst & Horton was bond counsel.
TSU structured the deal with the largest tranche of Series A bonds -- $16.6 million -- maturing in 2026.
With 61,814 students, the TSU system continues to grow and is running out of room at its original San Marcos campus, Smith said. To accommodate growth, TSU is seeking tuition revenue bonds in the current legislative session so that it can move its nursing program to its Round Rock campus north of Austin.
Ratings analysts noted the system's growth and debt structure in conferring stable outlooks.
"The stable outlook reflects expectations that operating cash flow will remain in line with recent years, even as revenue growth may slow," Moody's analyst Faiza Mawjee said. "The outlook incorporates our expectation that additional borrowing will be offset by the system's rapid amortization schedule or debt service reimbursement from the State of Texas."
