DALLAS — The Austin Independent School District will current refund its outstanding commercial paper notes with proceeds from Tuesday’s negotiated $75.8 million bond sale.

The sale by the capital-city district includes $58.4 million of taxable Build America Bonds and $17.4 million of conventional tax-free bonds.

Austin ISD is one of a handful of Texas school districts with a commercial paper program. The district is authorized to have up to $150 million of outstanding notes, backed by a credit agreement provided by Bank of America that was recently extended to July 2013.

The CP program provides flexibility as well as cost savings, according to district treasurer Debbie Fleming. The school system finances capital projects with the short-term notes, she said, which are refunded annually with proceeds from general obligation bonds.

“This program has been a tremendous benefit for the school district,” Fleming said. “We are able to issue commercial paper for the amount needed to pay contracts as construction projects progress.

“With commercial paper we don’t have to issue large amounts of bonds that we have to pay interest on for months before we need the proceeds,” she said. “The interest rate on the notes is extremely good at this point, so we pay interest rates in the range of 0.2% to 0.3% on the CP. We’ll take the CP program down to zero with this sale, and then we’ll start again.”

The bonds are rated Aaa by Moody’s Investors Service, and AA-plus by Fitch Ratings and Standard & Poor’s. The district has an enhanced across-the-board triple-A rating due to coverage of its debt by the Texas Permanent School Fund. It’s short-term notes are rated A-1-plus by Standard & Poor’s and P-1 by Moody’s.

Bank of America Merrill Lynch is the lead underwriter on next week’s sale. Other underwriters include Estrada Hinojosa & Co., Goldman, Sachs & Co., JPMorgan, and Wells Fargo Securities.

Andrews Kurth LLP is Austin ISD’s bond counsel. Financial adviser is the PFM Group.

The district opted to include $58.4 million of BABs in the sale to take advantage of the direct 35% subsidy on interest costs from the U.S. Treasury, Fleming said.

“We determined it was the best way to go after looking at a whole spectrum of options,” she said. 

The district has $329.3 million of authorized but unissued debt remaining from a total of $863.2 million of GO bonds approved by voters in 2004 and 2008. Austin ISD has $742 million of outstanding debt.

The district has an enrollment of 85,000 students at its 100 campuses. Its assessed property valuation has doubled in the past 10 years to $64.2 billion in fiscal 2010.

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