DALLAS City of El Paso Downtown Development Corp. changed underwriters on last week’s sale of $60.8 million of hotel tax revenue bonds after the first attempt failed in late July’s market turmoil.
The bonds, sold to fund a minor league baseball stadium in the border city, included $45.1 million of 30-year tax-exempt bonds and a $15.7 million taxable tranche.
Goldman, Sachs & Co. was lead underwriter for the Aug. 21 sale, with juniors Raymond James and Wells Fargo Securities.
“We went out the first time and the bonds didn’t sell in the marketplace,” said William F. Studer Jr., El Paso deputy city manager. “We went with different underwriters, and this time it sold.
“I’m not sure there’s much more to it than that,” he said.
The initial underwriting team was Morgan Stanley & Co. LLC and Citi.
The tax-exempt revenue bonds were priced to yield 5.95% at the Aug. 21 sale. Goldman Sachs purchased the 25-year taxable portion at 7.2%.
Fulbright & Jaworski LLC is El Paso’s bond counsel. First Southwest Co. is the city’s financial advisor.
The city council, acting as trustees of the El Paso Downtown Development Corp., raised the interest rate cap for the deal in early August after the bonds failed to attract buyers in late July as rates rose.
The interest rate limit was raised to 6.5% from the original 5% cap on the tax-exempt debt to be issued for the stadium, and to 7.25% from 5.75% for the taxable bonds.
El Paso CFO Carmen Arrieta-Candelaria told the council at an Aug. 1 special meeting that the higher rates would add $17 million to total debt service costs.
The city will pay $143 million in debt service over the 30-year span of the bonds, she said, up from an earlier estimate of $126 million. Total revenues pledged to support the bonds over the next 30 years is estimated at $153 million, she said.
The development district’s revenue bonds are rated A-plus by Fitch and AA-minus by Standard & Poor’s. They are supported by a 2% increase in El Paso’s hotel occupancy tax approved by voters in November 2012, and stadium revenues.
The downtown stadium is under construction at the former site of El Paso City Hall and a science museum, which were razed in April.
The city is paying for the work from its reserves and will be reimbursed from bond proceeds. The price tag so far is about $11 million, Arrieta-Candelaria said.
The 9,000-seat stadium is to be ready by the opening of the 2014 minor league season.
The El Paso City Council in late May limited the stadium project to $52.8 million of bonds supported by the city’s hotel tax after rejecting a proposal to add $10 million to the project’s cost.
But in mid-June the council agreed to raise the debt ceiling to $60.8 million after investors in the Class AAA minor league team set to occupy the stadium offered to pay an additional $12 million in rent to support the revenue bonds.
Mountainstar Sports Group purchased the Tucson Padres in 2012. The club will move to El Paso after the current season ends and be renamed before the beginning of the 2014 minor league season.
