Houston hopes the third time is a charm to sell speculative-grade
The city, which issues the bonds on behalf of the airline, has twice shelved the roughly $400 million transaction: once
Now the issuer hopes to bring the borrowings back, said Houston treasurer Vernon Lewis last week at the Texas Public Finance conference.
"We actually had to pull the United deal prior to pricing the first week of March because the jet fuel cost of energy going up," Lewis said. "We had to pull them because of what was going on in the geopolitical environment," he said. "And so now we're going to go back into the market and help price those two facilities."
No specific date has been set yet, Lewis told The Bond Buyer.
The original November financing featured three tranches, including $220 million to finance a larger catering operations facility for United and $180 million of bonds for construction and equipping of a replacement ground services equipment facility for the airline, which is the airport's biggest carrier.
The team had a tough time attracting investor interest, especially in the shorter maturities, buyside sources at the time told The Bond Buyer. A third piece, $277.4 million of AMT airport system special facilities revenue refunding bonds, successfully priced, and saw strong demand.
The bonds are secured by rent paid by United to the city for use of leased premises at the airport, according to S&P.
All financial markets including the muni market were rattled in early March from the war with Iran and its attendant rising oil prices and the prospect of inflation. The uncertainty prompted some issuers, like Houston as well as Chicago, Bay Area Toll Authority and New York City,
Despite the volatility, the city opted at the time to go forward with a
"We actually priced this deal the first week of March. Anyone have a guess what took place the weekend prior? Yeah, a war in Iran," he said. "And so we said, 'Okay, well, this is going to be interesting, because now we see energy prices are rising, Treasury rallies are going up, and we're pricing a deal, so the cost of borrowing is going to be a lot more expensive for the city.'"
The market has since recovered slightly although high-yield mutual funds have suffered three straight weeks of outflows, according to LSEG. "Equity and fixed income investors want to put the Iran conflict in the rearview mirror, but we feel that they might be a bit too optimistic," said Barclays in an April 2 client note. Heavier supply and potential rate volatility will test the market in coming weeks, the bank said.
The United bonds carry below-investment grade ratings of BB-plus rating from S&P Global Ratings, same as its issuer rating for the airline, and are subject to the alternative minimum tax.
Lead underwriter Bank of America Securities declined to comment.
