DALLAS — Dallas Area Rapid Transit is coming to market this week with the largest issue in Texas so far this year, while the Lower Colorado River Authority has a two-tranche deal worth about $290.2 million also set to price.
DART plans to offer $1 billion of senior lien sale tax revenue bonds Tuesday in two series, which will include about $750 million of Build America Bonds.
Authorized in the federal stimulus law, BABs allow issuers to sell taxable debt and either receive a federal subsidy or offer investors a federal tax credit. The subsidy or tax credit equals 35% of debt service.
Siebert Brandford Shank & Co. will lead the underwriting syndicate for this week’s negotiated sale from DART.
Estrada Hinojosa & Co. is the financial adviser to the issuer. Vinson & Elkins LLP and West & Associates LLP are co-bond counsel.
The taxable Series 2009B BABs represent the largest taxable sale under the American Recovery and Reinvestment Act on behalf of a local, non-state level, governmental issuer, according to Siebert Brandford Shank.
The underwriter also said the structure of the issue is designed to provide the regional transportation authority “interest cost savings of up to 70 basis points when compared to traditional tax-exempt interest rates after including the 35% federal tax subsidy received by DART.”
Standard & Poor’s assigned a AAA rating to the sale, and said the highest rating reflects DART’s deep and diverse service area, strong tax collections, and sound management.
Moody’s Investors Service assigned its Aa3 rating to the issue, citing DART’s “narrowing, but still sound coverage of debt service by pledged revenues and management’s strong debt and financial practices.”
Fitch Ratings rates DART’s underlying credit at AA-minus.
Proceeds from this week’s sale will further fund DART’s light-rail expansion.
The Lower Colorado River Authority plans to issue about $290.2 million in two tranches this week.
The Austin-based energy wholesaler will offer $114.4 million of transmission-contract refunding bonds on behalf of the state-regulated Transmission Services Corp., which operates transmission lines, and $175.8 million of revenue refunding bonds that will take out some commercial paper notes.
Goldman, Sachs & Co. is senior manager for the negotiated sales.
OBP Muni LLC is the financial adviser to the LCRA, which is one of the largest public utilities in the state, and Fulbright & Jaworski LLP is bond counsel.
Moody’s assigned its A1 rating to the revenue bonds and affirmed the rating on LCRA’s roughly $1.71 billion of revenue bonds outstanding. Moody’s also assigned an A2 rating to the transmission-contract refunding bonds.
The A1 rating reflects the authority’s “record as a well-managed wholesale electricity and water supplier to a large and growing area in central Texas,” as well as its sound and stable financial record, according to analysts.
Fitch assigned an A-plus rating to both tranches, citing the LCRA’s “competitive and diverse mix of power resources, large geographic customer base in central Texas with 43 wholesale electric customers, rate structure that provides timely fuel and purchased power cost recovery, and stable financial performance.”
Standard & Poor’s assigned an A rating to both series of bonds.
The LCRA serves 34 cities, eight electric cooperatives, and one investor-owned utility. It also provides water and wastewater services, manages water supplies, and controls flooding along the Colorado River in Texas.
Sulphur Springs Independent School District plans to offer about $48.4 million of school building bonds at some point this week for a new middle school.
The district plans to accept two types of bids for the debt — conventional tax-exempt bonds and taxable BABs — and officials will then select the lowest bid received from both options, according to analysts.
First Southwest Co. is lead manager for the negotiated sale.
Standard & Poor’s assigned an A-plus underlying rating to the sale, citing the district’s “historically very strong reserves levels, healthy and stable property tax base, and limited capital needs with no plans to issue additional debt for several years.”
Moody’s assigned its A3 rating and affirmed the rating on the district’s $13.1 million of bonds outstanding. The district’s moderately sized tax base, healthy financial position and elevated debt profile resulted in the A3 rating, Moody’s analysts said.
The district’s tax base averaged 6.9% annual growth the past five years to $1.08 billion for fiscal 2009, according to Moody’s.
Total enrollment at the northeast Texas district is about 4,150 and projected to rise 2.5% over the next five years, analysts said.
In the competitive market Wednesday, Harris County Municipal Utility District No. 165 plans to offer $28.3 million of unlimited-tax bonds. RBC Capital Markets is the financial adviser to the Houston-area utility.
Standard & Poor’s assigned a BBB rating to the sale. Analysts said credit strengths include the district’s inclusion in the Houston metropolitan area economy and “very strong financial position.” Mitigating factors include a high overall debt burden, with additional growth-driven capital needs, and a “very high direct property-tax rate.”
Analysts said the 2,730-acre, 30-year-old district is about 50% developed with utility infrastructure and includes about 3,645 completed single-family homes, 32 homes under construction, and 1,645 vacant lots.
Despite the overall national slowdown in residential construction, development within the district continues at a healthy pace, according to analysts.