DALLAS — Texas volume climbs sharply with two large deals dominating an otherwise light calendar.

Dallas will issue $294 million of convention center refunding bonds on Tuesday, and the Texas A&M University System will follow with a $350 million issue on Thursday.

Those two issues are among 10 negotiated deals on the calendar representing a total of $787 million. Competitive deals are comparable to last week’s at $24 million from three scheduled sales. The negotiated deals represent an increase of 64% over last week and mark the third week in a row of increasing volume.

For highly rated credits such as Dallas and Texas A&M, the market should remain very receptive, said Jeffrey Timlin, vice president and portfolio manager for Sage Financial Advisors Inc.

“We continue to see a significant demand for munis,” Timlin said. “There’s still a lot of money sitting on the sidelines.”

The Dallas bonds, expected to price Tuesday through negotiation with senior manager JPMorgan, will be insured by Assured Guaranty Corp. for ratings of AAA from Standard & Poor’s and Aa2 from Moody’s Investors Service. The underlying ratings are A from Standard & Poor’s and A1 from Moody’s.

The new issue for Dallas will refinance all of the convention center debt, which was issued in 1998. The restructuring comes as the city is moving toward construction of a convention center hotel that has prompted a petition drive to stop it.

Bonds for higher education have enjoyed good reception this year, and Texas A&M expects that to continue.

“We do expect strong demand,” said A&M treasurer Maria Robinson. “We’ve been watching deals going forward this week. People tend to be looking for high-quality debt.”

With ratings of AA-plus from Fitch Ratings and Aa1 from Moody’s, the A&M bonds are expected to hit the sweet spot with minimal risk but more upside than investors might find in treasuries. Standard & Poor’s is expected to rate the bonds before the issue comes to market. The agency previously rated A&M’s revenue bonds AA-plus.

The A&M bonds are negotiated through JPMorgan as senior manager with First Southwest as financial adviser. The bonds will be issued in two series. Series A will total about $271 million, while Series B amounts to $79 million. About $284 million will be used for improvements on campuses throughout the system.

Proceeds will also refinance about $64 million of outstanding commercial paper notes and current refund approximately $2.1 million of outstanding series 1997 revenue bonds.

For the fall 2008 semester, the A&M system enrolled 109,441 students. Over the past five fall semesters, headcount enrollment has increased at an average annual growth rate of 1.5%. Demand trends, measured by applications, acceptances, and matriculations, remain quite strong, according to Fitch.

Later this year, the university expects to issue about $250 million of bonds backed by the Permanent University Fund.

The A&M bonds follow $174 million of bonds from the Texas Tech University System that was oversubscribed and brought the university a record low total interest cost.

The Dallas and A&M sales are the only two over $100 million on the calendar so far. The next largest issue is $77 million from the Tarrant County Regional Water District for a refunding negotiated through JPMorgan.

School districts are also venturing out this week with smaller negotiated deals.

Katy Independent School District offers $25 million of school building bonds, followed by Denver City ISD with $15 million, Hudson ISD with $6.2 million, and Anahuac ISD with $4.5 million. 

 

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