Dallas County Hospital District $705M Deal, State's $5.5B Trans Sale Top This Week's Texas Docket

DALLAS — The state's $5.5 billion tax and revenue anticipation note sale and a $705 million, three-tranche issue by the Dallas County Hospital District lead the way this week in Texas.

The triple-A rated district plans to offer $26 million of Series 2009A tax-exempt limited-tax bonds and two tranches of Build America Bonds, including $185 million of taxable Series 2009B limited-tax bonds and nearly $493.9 million of Series 2009C taxable limited-tax bonds through negotiated sales. The bonds ae secured by an ad valorem tax on the property within the county, which is now home to nearly 2.4 million people.

Merrill Lynch & Co. Inc. leads the underwriting syndicate for the sales, which may price as early as today. Proceeds will fund construction of a new hospital on the sprawling campus just north of downtown Dallas.

The tax-exempt series matures in 2014, 2015, and 2016, while the Series 2009B BABs are term bonds maturing in 2044 and the Series 2009C BABs mature in 2014 through 2025.

Issuers of the BABs, which were introduced earlier this year as part of the federal stimulus package, receive a 35% subsidy from the Treasury Department on their interest costs.

First Southwest Co. and Estrada Hinojosa & Co. Inc. are co-financial advisers to the hospital district. Vinson & Elkins LLP and West & Associates LLP are co-bond counsel.

Standard & Poor's assigned a AAA rating to the bonds due to the district's "deep and increasingly diverse economy, good wealth and income levels, solid property-tax base growth, with high collection rates, strong voter support for the project, and positive operating margins, with adequate cash levels."

In November, Dallas County voters approved a $705 million bond package for the new hospital that's expected to cost about $1.27 billion in total. Additional funds will come from existing cash and investments, and about $150 million from private philanthropy.

Meanwhile, the state is bringing the $5.5 billion of Trans to market this week following a recent upgrade of its underlying credit to AA-plus from AA by Standard & Poor's.

Fitch Ratings already had Texas at AA-plus and Moody's Investors Service rates the state at the comparable Aa1.

Texas uses Trans to smooth its cash-flow issues at the beginning of its fiscal year September 1, and this borrowing represents just 7% of projected general revenues, slightly lower than in prior years.

Texas Comptroller Susan Combs believes the strong credit ratings are reflective of the state's overall economic strength.

"Certainly, our economy has slowed, but our housing market and business community are not as hard hit as other states," she said in a news release.

Elsewhere, Killeen is bringing three tranches worth about $29.6 million to the competitive market Tuesday. The the central Texas town plans to offer $13.2 million of general obligation bonds, $12 million of combination tax and revenue certificates of obligation, and about $4.4 million of GO refunding bonds. The certificates are structured as serials maturing in 2010 through 2029, while the GO bonds mature in 2011 through 2034 and the refunding bonds mature in 2010 through 2013.

Specialized Public Finance Inc. is the city's financial adviser and McCall, Parkhurst & Horton LLP is bond counsel.

Killeen carries underlying ratings of Aa3 from Moody's, AA-minus from Fitch Ratings, and AA from Standard & Poor's.

The city's fiscal 2009 taxable-assessed value of $4.4 billion is up 63.6% from five years earlier.

This sale uses most of the city's authorized by unissued debt from a $64.3 million bond package approved in November 2002. Following this week's issue, the city will have about $7.5 million remaining with no plans for another sale within the next year.

Austin plans to offer about $136.8 million of GO debt, including some BABs, through a negotiated sale led by JPMorgan and Estrada Hinojosa at some point this week.

The Texas capital plans to issue about $46 million of Series 2009A public improvement bonds and nearly $64 million of Series 2009B public improvement bonds. The Series 2009A bonds are structured as serials maturing in 2010 through 2019, while the Series 2009B debt is a term bond maturing in 2029.

The city also will issue $12.5 million of certificates of obligation, which mature in 2010 through 2039, and $13.8 million of public-property finance contractual obligations that mature in 2010 through 2019.

Austin carries underlying ratings of AAA from Standard & Poor's, Aa1 from Moody's and AA-plus from Fitch.

Standard & Poor's raised its rating to AAA in January 2008 "based on the likelihood that the city's employment base and fiscal policies should allow it to maintain its strong financial condition even during economic fluctuations such as the current recession."

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