DALLAS — In an $84 million remarketing deal priced this week, the Roman Catholic Diocese of Austin sought to eliminate interest rate risk in favor of fixed-rate bonds, securities executives said.
While the deal produced no actual savings on interest cost, it eliminated the need to renew a letter of credit every three years along with synthetic fixed-rate swap agreements established with Wachovia Bank in 2005.
“The transaction wasn’t so much for savings as it was for budgeting certainty,” said financial adviser Carlos de Quesada of O’Meara, Ferguson, Whelan and Conway Inc.
The bonds were issued through the Capital Area Cultural Education Facilities Finance Corp. in 2005.
Wells Fargo, which acquired Wachovia in December 2008, assumed the letter of credit with the merger.
With five-year call provisions on the 2005 bonds, the diocese took the opportunity to eliminate the LOC and swap agreements between Goldman, Sachs & Co. and Wells Fargo, said Tripp Robinson, public finance investment banker for Wells Fargo.
Wells was senior manager with Ziegler Capital Markets as co-manager. Andrews Kurth of Houston was bond counsel.
The deal included $21.1 million of Series A serial bonds maturing through 2025 and $65.9 million of term bonds maturing in 2045. The bonds carried only one rating, Baa2 from Moody’s Investors Service.
The pricing on Wednesday produced all-in yield of 6.24%, Robinson said.
“We were very pleased with the results,” Robinson said. “We had a diverse set of 15 investors and were three times oversubscribed.”
Deals from Catholic dioceses are infrequent, Robinson noted, particularly those that carry ratings.
The diocese includes 125 parishes in 25 counties in central Texas, serving 180,000 families. It also operates 23 schools.