DALLAS - Robert Lee Independent School District in West Texas is coming to market with $9.5 million of triple-A rated school building bonds today to construct two new facilities on a single campus to house the entire K-12 student population.

Southwest Securities Inc. is sole underwriter for the negotiated sale. McCall, Parkhurst & Horton LLP is bond counsel. First Southwest Co. is the financial adviser to the small rural district that has a total population of 1,250 residents across 450 square miles in Coke County.

The bonds, which are structured as serials reaching final maturity in 2033, are backed by the state's triple-A rated Permanent School Fund.

The district currently serves just 250 students. This is the first tranche from a $15 million authorization approved by 78% of voters in May to consolidate an elementary school and a high school into one campus, upgrade an existing gym and agricultural facility, and build a new gym. Of the 424 votes cast, 332 were in favor of the bonds with 92 against.

Jeff Robert, senior vice president at First Southwest, said the initial plan was to wait and issue the debt next year when the district's new commercial developments are expected to come online, specifically some wind farm construction. But once the district received the PSF guarantee, officials chose to sell some of the authorization now, deciding to keep it bank qualified, as well.

"If this [sale] wasn't backed by the PSF, we might have needed to get private insurance because it would be pretty tough for the district to get an investment-grade rating," Robert said.

The lack of an underlying rating "isn't due to the financial condition of the district or anything like that, it's just that they're such a small district that they don't have some of the financial comparisons ratings agencies are looking for when evaluating a district's credit," he said. "The PSF is huge for them and may save about 50 basis points."

Standard & Poor's assigned a AAA enhanced rating to the sale based on the PSF, but didn't assign an underlying rating. Analysts said officials have "posted adequate reserves over the past five years" with a $1.1 million general fund balance for fiscal 2007, which represents 43% of operations. Neither Fitch Ratings nor Moody's Investors Service rates the district's credit.

The district's estimated fiscal 2009 assessed valuation of $196 million is up 87% from five years earlier. Officials attribute the gain to a substantial increase in oil and natural gas mineral values within the district.

The town of Robert Lee, which is named for the iconic Confederate Army general who served in Texas prior to the Civil War, is about 32 miles north of San Angelo and some 225 miles west of Fort Worth.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.