DALLAS — A handful of Texas issuers try to time the market this week with sizable refundings.
In the largest deal of the week, Houston is bringing $481.1 million of combined utility revenue and refunding bonds to market. Piper Jaffray is lead manager for the negotiated sale.
Standard & Poor’s assigned a AA rating to the sale and Moody’s Investors Service assigned its A1 rating.
Moody’s also affirmed the rating on the city’s $4.2 billion of outstanding first lien revenue bonds and an Aa3 rating on $749 million of prior lien revenue bonds outstanding.
The Harris County Cultural Education Facilities Corp. plans to offer $64.7 million of special facilities revenue refunding bonds on behalf of the Texas Medical Center at some point this week in two tranches. The conduit issuer will issue $54.6 million of Series 2009A bonds and about $10.1 million of taxable Series 2009B bonds in negotiated sales led by RBC Capital Markets.
First Southwest Co. is financial adviser to the issuer, and McCall, Parkhurst & Horton LLP serves as bond counsel.
Standard & Poor’s assigned an A-plus rating to the issue, citing the strong market position of the medical center’s parking facilities, the positive financial performance of the system, and consistently strong liquidity. Moody’s assigned its A1 rating to the sale.
The refunding bonds will fix out some variable-rate bonds sold last year, as the medical center tries to limit exposure to unhedged variable-rate debt. The medical center also plans to enter a floating-to-fixed rate swap after the sale to synthetically fix $21.2 million of unhedged variable-rate debt, according to analysts.
Following this sale, the medical center will have about $238 million in revenue bonds outstanding, 48% of which are fixed rate, 32% synthetic-fixed rate, and 20% unhedged variable rate, according to Standard & Poor’s. After another planned swap later this year, the unhedged variable-rate debt will decrease to about 11%, analysts said.
Harris County, which includes Houston and is the third most populous in the country with more than four million residents, expects to price $25.7 million of permanent improvement refunding bonds this week through a negotiated sale with Estrada Hinojosa & Co. as sole manager.
First Southwest is the county’s financial adviser and Greenberg Traurig LLP is bond counsel.
The refunding takes out the county’s Series 1998 certificates of obligation.
Moody’s assigned a Aa1 rating while Standard & Poor’s rates the county’s credit at AAA.
Harris County’s taxable-assessed value for fiscal 2009 of $310.14 billion is 127% higher than the $136.4 billion a decade ago.
Standard & Poor’s said the gilt-edged rating reflects the county’s “substantial and continually diversifying economic and property tax base, continued maintenance of strong financial reserve levels, low direct debt levels with modest capital needs relative to the resources available, additional financial resources available through surplus toll road revenues, and strong financial management.”
The Conroe Independent School District is bringing $98.4 million of debt to market following an upgrade of its underlying credit to AA from AA-minus by Standard & Poor’s.
The growing suburban Houston district plans to offer $85 million of Series 2009A unlimited tax school building bonds and about $13.4 million of Series 2009B unlimited tax refunding bonds either today or Tuesday through negotiated sales led by Goldman, Sachs & Co.
Analysts said the upgrade reflects the district’s consistent tax-base expansion, sustained enrollment growth, and “very strong financial performance.”
Manor Independent School District hopes to issue $7.6 million of unlimited-tax refunding bonds this week in a negotiated sale led by Morgan Keegan & Co.
Specialized Public Finance Inc. is the district’s financial adviser and McCall, Parkhurst & Horton LLP serves as bond counsel.
The district carries underlying ratings of A-plus from Standard & Poor’s and A3 from Moody’s.
Sante Fe Independent School District also will try to price $28.3 million of debt this week through a negotiated sale with Southwest Securities Inc. and Coastal Securities Inc. as co-managers. The small Gulf Coast district plans to issue $25.8 million of unlimited-tax school building bonds and $2.5 million of refunding bonds.
RBC is the district’s financial adviser.
Moody’s assigned an A3 rating to the issue and Standard & Poor’s assigned a AA-minus rating.
Analysts said the strong ratings reflect the district’s participation in the greater Houston-metro area, strong financial position and low overall debt per capita.
None of the school debt will be backed by the state’s triple-A rated Permanent School Fund because the Texas Education Agency suspended the bond-guarantee program earlier this month until at least September due to the declining value of the fund.