DALLAS — After several weeks of extremely limited supply amid the deepening financial crisis, two Texas issuers have larger deals on the calendar this week.
Harris County plans to offer $203 million of permanent improvement bonds Wednesday through a negotiated sale led by Loop Capital Markets LLP. First Southwest Co. is the financial adviser to the county and Greenburg Traurig LLP serves as bond counsel.
Meanwhile, in North Texas, Irving may issue $125 million of convention center hotel occupancy tax revenue bonds this week through a negotiated sale led by JPMorgan. Vinson & Elkins LLP is bond counsel.
The Harris County sale takes out commercial paper notes and the bonds won’t be insured due to the county’s gilt-edged underlying ratings.
In April, Standard & Poor’s raised the credit of the nation’s third most-populous county to the highest rating due to “continued strong economic trends and financial performance.” Harris County, which includes Houston, is now home to nearly 4 million residents.
The county also carries underlying ratings of Aa1 from Moody’s Investors Service and AA-plus from Fitch Ratings.
Director of financial services Edwin Harrison said the county had been looking to price this issue for a while and he fully expects demand for the debt to be strong.
“There appears to be an appetite for high-rated paper right now,” Harrison said. “No question it’s been rocky lately, but the old adage 'there’s no bad bonds, just bad prices’ rings true, and we feel confident this deal will be sold. Retail has been an important part of the market of late and while our sales usually involve mostly institutional buyers, we’re 100% sure in the syndicate we’ve put together for this sale and their ability to include some retail investors.”
Kipling Jones & Co. is co-manager and the remaining underwriters include Cabrera Capital Markets LLC, Citi, Estrada Hinojosa & Co., Goldman, Sachs & Co., JPMorgan, Merrill Lynch & Co., Ramirez & Co., and RBC Capital Markets.
In one of the few deals priced last week, the Frisco Independent School District managed to sell $100 million of school building bonds, but scrapped the more than $30 million refunding component of the deal. Still it appears the market may be opening back up somewhat, and the Forney Independent School District expects to price about $34.7 million of unlimited-tax bonds this week.
Southwest Securities Inc. and RBC Capital Markets are co-managers for the negotiated sale.
Proceeds will be used to complete construction of the second high school in the rapidly growing district about 20 miles east of Dallas. Officials said the district needs to sell these bonds despite the recent market uncertainty to accommodate the growing enrollment, which has more than tripled the past decade to about 7,410 this year. And less than half of the district is currently developed, according to analysts.
The bonds, which will be backed by the state’s triple-A rated Permanent School Fund, are structured as serials reaching final maturity in 2029.
First Southwest is the district’s financial adviser and McCall, Parkhurst & Horton LLP is bond counsel.
Fitch assigned an A underlying rating to the issue and affirmed the rating on the district’s $214 million of parity debt outstanding. The district’s taxable assessed valuation climbed 68% to $2.25 billion this year from $1.34 billion in 2005, as the population within the school district nears 36,000 up from 23,326 for fiscal 2005.
In May, Standard & Poor’s raised Forney ISD’s underlying rating two notches to A-plus from A-minus due to continued tax-base growth and diversification and a consistently strong financial performance.
In the competitive market Wednesday, Sienna Plantation Municipal Utility District No. 3 will offer about $6.6 million of unlimited-tax bonds on the heels of an upgrade from Standard & Poor’s.
Analysts raised the underlying credit of the utility to BBB from BBB-minus due to continued economic expansion and a moderating debt level that remains high.
RBC Capital Markets is the financial adviser to the district, which is about 20 miles southwest of downtown Houston.