DALLAS — Continued unrest in the financial markets is keeping some Texas issuers on the sidelines with just a few deals expected to price this week and a couple entering the volatile market do so after garnering credit upgrades from Standard & Poor’s.
The Fort Bend Independent School District plans to offer $223.7 million of school building and refunding bonds in a negotiated sale led by Coastal Securities Inc. on the heels of an upgrade of its underlying credit.
Standard & Poor’s raised its rating on the district to AA from AA-minus on the back of continued property-tax base growth. The upgrade applies to about $857 million of debt outstanding, including this week’s sale.
Fitch Ratings assigned a AA underlying rating and Moody’s Investors Service doesn’t rate the district’s credit.
The bonds also come to market with the triple-A wrap provided by the state’s Permanent School Fund.
Southwest Securities Inc. is the financial adviser to the suburban district southwest of Houston.
Standard & Poor’s said the higher rating reflects the district’s easy access to the Houston-area employment base, healthy assessed-valuation growth, sound financial position with solid reserves, and long-range planning that demonstrates management’s ability to handle growth pressures.
“We expect that steady property tax base growth will continue,” said analyst Sarah Smaardyk. “We also expect the district will continue to practice strong financial management and long-term planning while managing significant additional capital requirements. Student enrollment growth should continue, keeping the district’s financial position under pressure and sustaining high debt levels.”
Fitch analysts said the AA rating reflects “favorable financial management practices, solid reserves, strong tax base and enrollment growth, and substantial state support for operations and capital construction.”
Fitch said the district’s taxable-assessed value has nearly doubled the last five years to $20.5 billion for fiscal 2008 from $10.5 billion in 2001. Preliminary estimates “point to more moderate, but sustained growth of $1.3 billion, or 6.5%,” for fiscal 2009, according to analysts.
The rapidly expanding central Texas town of Kyle is issuing $22.7 million of combination tax and revenue certificates of obligation this week following an upgrade of its underlying credit by Standard & Poor’s.
Analysts raised the rating two notches to A-plus from A-minus due to steady property tax base growth, a strong financial position, and expanding economy.
Kyle’s population has risen about 350% since the 2000 Census to more than 25,000 currently from 5,300 at the start of the decade.
“We’re well on our way to 30,000,” said Jerry Hendrix, the city’s director of communications. “For the better part of this decade it’d been mostly residential growth but there’s been a huge surge in commercial development of late. And what makes us look good to the bond market and the analysts is the fact we have a lot of projects on the ground already … and we just have a sound financial management team in place, as well.”
Standard & Poor’s said the city’s assessed value rose 17% to $1.1 billion for fiscal 2008 and has averaged 30.4% annual growth the past five years.
Southwest Securities is lead manager for the negotiated sale, and First Southwest Co. is the financial adviser to the growing city, which is 22 miles south of Austin.
Hendrix said proceeds from the debt will fund various projects, including road expansions, traffic-related improvements, a new public works building, land acquisition for parks, technology upgrades, and a new water tower.
On the other side of Austin, Cedar Park plans to offer about $19.7 million of general obligation bonds this week through a negotiated sale.
The underwriting syndicate includes RBC Capital Markets, SAMCO Capital Markets, Morgan Keegan & Co., and Estrada Hinojosa & Co.
First Southwest is the financial adviser and McCall, Parkhurst & Horton LLP is bond counsel to the growing city 20 miles north of the Lone Star capital city.
Cedar Park carries underlying ratings of A1 from Moody’s and AA-minus from Standard & Poor’s.
The city’s population and taxable-assessed value have increased drastically the past five years. With nearly 53,000 people now, the population is up 50% from about 35,200 in 2004. The fiscal 2008 taxable value of $3.04 billion is about 55% higher than five years ago.
The Gulf Coast city of Port Arthur will offer $9 million of general obligation bonds competitively Tuesday. Proceeds will fund upgrades to park and recreation facilities, drainage improvements, and a new fire station. The bank-qualified bonds are structured as serials reaching final maturity in 2028. Insurance will be at the bidder’s option.
First Southwest is the financial adviser, and Vinson & Elkins LLP is bond counsel to the city.
The taxable-assessed value of Port Arthur has grown by more than 46% the past five years to $1.73 billion for fiscal 2008.
The city carries underlying ratings of A2 from Moody’s and A from Standard & Poor’s.
Port Arthur’s locale, on the the west shore of Sabine Lake directly adjacent to the Gulf of Mexico, provides an attractive location for petrochemical companies to operate, according to analysts.