Plenty of Supply This Week as San Antonio and LCRA Lead the Way

DALLAS — Texas issuers start getting back in the market as the final month of the year begins with more than $1 billion of debt expected to price this week.

San Antonio has a three-tranche deal worth $179 million on tap, as the Alamo city hopes to cash in on the recent flight to quality now that its general obligation debt has gained a triple-A rating.

The city plans to offer $77 million of GO bonds, $86 million of certificates of obligation, and $16 million of tax notes. This is the second issue from a $550 million bond package approved by voters last year.

Standard & Poor’s raised San Antonio’s underlying rating to AAA in October, citing an increasingly strong financial position.

Fitch Ratings rates the bonds AA-plus, while Moody’s Investors Service assigned its Aa1 rating.

Siebert Brandford Shank & Co. is senior manager for the negotiated sale of the $163 million of bonds and certificates, with Citi, JPMorgan, SAMCO Capital Markets, and Southwestern Capital Markets as co-managers. Southwest Securities will lead the notes offering. 

Coastal Securities and Estrada Hinojosa & Co. are financial advisers to the growing city. Winstead PC and West & Associates serve as bond counsel.

With an estimated population of 1.3 million, San Antonio is the nation’s seventh-largest city.

San Antonio’s taxable-assessed valuation for fiscal 2008 rose 10.4% to nearly $73 billion from a year ago and is up roughly 57% over the past five years, according to analysts.

The Lower Colorado River Authority plans to issue $290 million in two tranches this week.

The Austin-based energy wholesaler will offer $190 million of Series 2008A refunding and improvement bonds and $100 million of revenue refunding bonds for the state-regulated Transmission Services Corp. that operates transmission lines.

Morgan Stanley is senior manager for the issue with JPMorgan, First Southwest Co., Goldman, Sachs & Co., Merrill Lynch & Co., Rice Financial Products Co., and Wachovia Bank as co-managers.

OBP Muni LLC is the financial adviser to the LCRA, which is one of the largest public utilities in the state, and Fulbright & Jaworski LLP is bond counsel.

Moody’s assigned its A1 rating to the refunding bonds and its A2 rating to the transmission-contract debt. Analysts said the outlook is stable and affirmed the A1 rating on $1.45 billion of revenue debt outstanding. Most of the LCRA’s revenue streams are locked in through 2016 with wholesale power contracts, and about 30% of customers have signed amended agreements that extend to 2041, according to Moody’s.

Standard & Poor’s assigned an A rating to both tranches and affirmed its A-1 rating on the authority tax-exempt commerical paper program. Analysts said the ratings reflect the LCRA’s competitive wholesale generation, a diversified generation portfolio that includes coal, natural gas, hydro, and power purchases, and consistent maintenance of debt-service coverage.

Fitch assigned an A-plus rating to both the revenue refunding bonds and the transmission-contract revenue bonds.

The LCRA serves 34 cities, eight electric cooperatives, and one investor-owned utility. It also provides water and wastewater services, manages water supplies, and controls flooding along the Colorado River in Texas.

Dallas Independent School District will issue the first slice of a $1.35 billion authorization passed in May, following downgrades from both Fitch and Standard & Poor’s.

Analysts at both agencies lowered the underlying rating of the second-largest school system in the state to AA-minus from AA, as officials plan to offer $400 million of unlimited-tax school building bonds through a negotiated sale led by  RBC Capital Markets, Citi, and Siebert Brandford Shank.

The bonds will be backed by the state’s triple-A rated Permanent School Fund.

Fitch also revised its outlook on the district to negative from stable and assigned the lower rating to $1.4 billion of debt outstanding.

Analysts said the downgrade reflects “a weakening financial profile at the district, as well as recent exposure of systemic problems regarding financial controls and oversight.” 

About 54% of voters approved the bond referendum earlier this year and officials hoped to get some of the debt to market in July. But a federal civil rights lawsuit alleging the district failed to use proceeds from debt authorized in 2002 as laid out in that bond package precluded any sale from the most-recent authorization.

In October, a district court judge ruled in favor of the the school system, granting an “expedited declaratory judgment” that validates the election and the bonds.

First Southwest and Estrada Hinojosa are co-financial advisers to the district and Vinson & Elkins LLP and West & Associates LLP are co-bond counsel.

Houston is coming to market at some point this week with $430 million of taxable pension obligation refunding bonds to take out notes and $20 million of taxable pension obligation bonds in a negotiated transaction led by JPMorgan.

First Southwest and Estrada Hinojosa are co-financial advisers to Houston while Vinson & Elkins and the Law Offices of Francisco G. Medina serves as co-bond counsel. 

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