DALLAS — Texas issuers continue to include tranches of Build America Bonds in deals coming to market and this week both Bexar County and the Texas Public Finance Authority have large issues with a slice of BABs set to price. 

The county, which includes San Antonio, will offer $95 million of combination tax and revenue certificates of obligation and $50 million of COs that are BABs, as well as $132.5 million of combination flood-control tax and revenue COs with another $50 million of combination flood control certificates that will be BABs.

Officials chose to use the direct subsidy function of the federal program and will receive payments of 35% of the interest cost from the U.S. Treasury.

Estrada Hinojosa & Co. Inc. is lead manager for the sale of the general obligation bonds and Loop Capital Markets LLP is senior manager for the negotiated sale of the flood-control debt.

SAMCO Capital Markets and M.E. Allison & Co. are co-financial advisers to the county.

Duane Westerman, managing director at SAMCO, said the debt won’t be insured and there is the authority to issue up to $50 million of BABs for each types of certificate, but the exact size of the tranches won’t be known until just before pricing, which he expects Thursday.

Moody’s Investors Service assigned its Aa1 rating to the certificates and affirmed the rating on $230 million of limited-tax debt outstanding and $143.4 million of flood-control tax debt outstanding.

The debt is secured through annual ad valorem taxes and a subordinate lien on certain revenue of the county’s parking facilities, according to analysts.

Moody’s said the Aa1 rating reflects a substantial tax base with no growth anticipated for the next two years, as well as a declining general fund reserve and manageable debt burdens.

Both Fitch Ratings and Standard & Poor’s rate the county’s GO credit at AA-plus.

Analysts said the county’s fiscal 2009 assessed value of more than $97 billion is up 57% the past five years. San Antonio is the seventh-largest city in the country, home to nearly 1.4 million. Roughly 1.6 million people live in Bexar County.

The area has seen an influx of new manufacturing facilities take root the past few years, including a Toyota plant that opened in 2006, while medical and biomedical companies are now “contributing an estimated $11.9 billion to the area economy,” according to analysts.

The TPFA plans to issue $468 million of general obligation bonds in three tranches on Thursday through negotiated sales led by Merrill Lynch & Co. Siebert Brandford Shank & Co. is co-senior manager.

Coastal Securities Inc. is financial adviser to the TPFA.

The state agency expects to issue about $288 million of GO refunding bonds, $141 million GO BABs, and $39 million of tax-exempt GO bonds. The refunding bonds take out some commercial paper notes and the new-money bonds will fund various projects at state facilities.

Moody’s assigned its Aa1 ratings to the debt, which may price Tuesday.

Analysts said the rating reflects a Texas “state economy with strong fundamentals that lagged the nation entering the downturn, but now is fully feeling the effects of the recession.”

Other credit factors include the state’s history of balanced budgets with a “growing structural imbalance resulting in part from recent changes to its school finance and property tax relief funding mechanism, near-term reliance on federal stimulus funds that further delays difficult fiscal decisions, and low but rising debt levels.”

Fitch Ratings assigned a AA rating to the issue while Standard & Poor’s puts the state agency’s rating at AA-plus.

Elsewhere, Lone Star College System, which was recently upgraded to AAA by Standard & Poor’s, may price $150 million of general obligation bonds at some point this week.

The upgrade to the gilt-edged rating reflects the Houston-area community college system’s “record of strong financial performance, low direct debt, and sizable and expanding tax base,” according to analysts.

Standard & Poor’s also said management forecasts revenues and expenditures for a two- to three-year period and completed a facilities master plan two years ago.

Moody’s rates the college system’s underlying credit at Aa2. 

Proceeds from the negotiated sale will fund numerous projects at each of the system’s seven campuses.

RBC Capital Markets is the financial adviser to the system that was established in 1973 and changed its name in January 2008 from North Harris Montgomery Community College District. Vinson & Elkins LLP is bond counsel.

The coming sale is the second slice of a $420 million authorization approved by voters in May 2008.

The sprawling college system covers more than 1,400 square miles and serves all of Montgomery County and portions of Harris, Liberty, and Waller counties. There are 11 independent school districts within the system’s boundaries and the total current population is estimated at 1.5 million, more than double the roughly 700,000 in 1998.


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