DALLAS — A sale on behalf of a city-owned utility to fund a coal plant and a two-tranche issue from the state for its college loan program lead the way this week in the Texas municipal market.
San Antonio plans to issue $289 million of electric and gas system revenue bonds Thursday on behalf of its CPS Energy utility, using proceeds to for its share of a coal-fired plant and other projects as part of a five-year, $5.2 billion capital-improvement plan.
Lehman Brothers will lead the underwriting syndicate for the negotiated sale. Public Financial Management Inc. and Estrada Hinojosa & Co. are co-financial adviser to the Alamo City.
The bonds come to market rated AA by Standard & Poor’s, Aa1 by Moody’s Investors Service, and AA-plus from Fitch Ratings. The utility carries the same ratings on $3 billion of senior-lien debt and $402 million of subordinate debt outstanding.
CPS provides electricity to 674,000 customers in Bexar County and parts of seven surrounding counties. The utility also serves 317,000 customers in and around San Antonio.
Texas is bringing $147.7 million of bonds subject to the alternative minimum tax to the competitive market Tuesday, only the second sale this year of student-loan debt.
New laws and the credit crunch have hindered the market for student-loan issuers of late. But last week, the Department of Education said it will advance money, through Treasury borrowing, to lenders in the Federal Family Education Loan program to ensure new loans can be originated for the coming school year.
The Lone Star state plans to issue about $74.4 million of college student loan bonds Series 2008A and possibly $28 million of refunding bonds Series 2008B and $45.7 million refunding bonds Series 2008C.
First Southwest Co. is the financial adviser to the state and Vinson & Elkins LLP is bond counsel.
Moody’s assigned its Aa1 rating to the sale, as well as about $9.5 billion of parity debt outstanding.
Analysts said the refunding should “provide liquidity for additional student loans” and the rating reflects Texas’ strong economy, low debt levels and history of balanced budgets. The debt is secured through repayments and investment proceeds and the student-loan programs “historically have covered debt-service requirements … without [the] need for general revenue fund support, “ according to Moody’s.
Over the past decade, the Texas Higher Education Coordinating Board has issued $1.2 billion of general obligation college student loan bonds, of which $661 million are outstanding, and made more than 324,000 loans, analysts said.
Arlington plans to bring a three-tranche sale to market following an upgrade to AA-plus from Standard & Poor’s. The growing city in between Dallas and Fort Worth will take bids for $39.9 million of permanent improvement and refunding bonds and $5.9 million of combination tax and revenue certificates of obligation. The city also plans to issue $38 million of combination tax and tax increment reinvestment zone COs Series 2008A through a negotiated sale led by Piper Jaffray & Co.
PFM is the financial adviser and Vinson & Elkins is bond counsel.
Cash and debt administrator David Balsamo said the refunding component of the issue takes out about $8 million of commercial paper.
Proceeds from the COs will finance infrastructure improvements around the major sports and entertainment complex in the city, which includes the Ballpark at Arlington, the new still to be completed Dallas Cowboys Stadium, and the Six Flags Over Texas amusement park. The city’s TIRZ No. 5 encompasses the facilities and also includes the Glorypark mixed-use development. A couple weeks ago, the developers of the 1.2 million square-foot Glorypark project said construction has stalled due to the credit crisis and rising costs of materials.
Standard & Poor’s analysts said the higher rating reflects the city’s stable and diverse economic base, strong financial position, stable and diverse revenue streams, and moderate debt.
“We expect that Arlington will continue to sustain its sound financial position and maintain its manageable debt levels,” said analyst Horacio Aldrete-Sanchez.
Moody’s assigned an Aa2 rating to the debt and Fitch rates it at AA.