DALLAS — The Texas calendar lightens up in the last week of the first month of 2009 after issuers made it to market with several large deals last week.
With eight competitive sales worth $70 million and nine negotiated worth a combined $466 million, total Texas volume this week on the Thomson Municipal Market Monitor is down about 19% from last week’s $664 million.
The Corpus Christi Independent School District tops the negotiated calendar with $162.3 million of school building bonds led by Merrill Lynch & Co. as senior manager and Southwest Securities as financial adviser.
With the triple-A rated Texas Permanent School Fund sidelined by sinking investments and guarantee capacity limits, school districts must rely on their credit to attract investors. Corpus Christi’s ratings of AA-minus from Standard & Poor’s, Aa3 from Moody’s Investors Service, and AA from Fitch Ratings are expected to appeal to individuals and institutions seeking safety in munis, according to market sources.
Corpus Christi ISD won voter approval of $192 million of bonds and a two-cent operations and maintenance tax increase in November, four years after rejection of a $230 million bond proposal.
A school bond deal originally on last week’s calendar will reappear on this week’s schedule.
The Round Rock Independent School District expects to issue $139 million of general obligation bonds through senior manager RBC Capital Markets with First Southwest Co. as financial adviser.
Round Rock ISD bonds do not carry PSF backing because the district is considered too wealthy to qualify. Its underlying ratings are also strong at AA from Standard & Poor’s and Aa1 from Moody’s Investors Service.
The Allen Independent School District in the suburbs north of Dallas will offer $62 million of school building bonds to meet growth needs. Morgan Stanley is senior manager. Allen ISD will also lack PSF backing but the wealthy district boasts ratings of AA from Standard & Poor’s and Aa3 from Moody’s. Fitch does not provide an underlying rating.
While districts with double-A ratings or better have had no problem issuing recently, those with lower ratings must decide whether to wait for PSF backing to be available or brave the market on their own credit ratings.
In the San Angelo Independent School District, trustees gave financial adviser First Southwest an interest-rate ceiling of 6% to consider in making the decision. District voters approved $117 million of school bonds in November, but the district’s ratings of A-plus from Standard & Poor’s and A1 from Moody’s leaves it on the periphery of the very high-grade bonds most investors are seeking.
Meanwhile, deals from cities and counties are comparatively small this week, led by El Paso’s $58 million of certificates of obligation to be sold through negotiation with Southwest Securities. First Southwest is the city’s financial adviser. The bonds carry ratings of AA from Standard & Poor’s and AA-minus from Fitch Ratings.