DALLAS — The calendar shows limited supply this week in Texas ahead of the Labor Day holiday.
The Tarrant County Cultural Education Facilities Corp. plans to offer $99.4 million of hospital revenue bonds in two series on behalf of Hendrick Medical Center in Abilene at some point this week through negotiated sales led by Morgan Keegan & Co. First Southwest Co. is financial adviser to the conduit issuer.
Moody’s Investors Service assigned its A3 rating to the sale while Standard & Poor’s assigned a BBB-plus rating. Analysts said the ratings reflect the hospital’s strong position as the leading acute-care provider in the area with a 65% market share and sound liquidity.
Standard & Poor’s said the $74.4 million of Series 2009A bonds are expected to be insured by Assured Guaranty Corp. and that will earn the agency’s AAA.
The $25 million of Series 2009B variable-rate hospital bonds will be enhanced by a letter of credit from JPMorgan, according to analysts.
The 504-bed Hendrick Health System is about 150 miles west of Fort Worth and is the dominant community provider in Taylor County, serving a population of about 158,000 in a three-county service area.
The Texas City Independent School District and LaPorte Independent School District each plan to offer $29.9 million of school building bonds through negotiated sales this week.
Southwest Securities Inc. is lead manager for both issues. The LaPorte ISD deal will price today and the Texas City school bonds will come to market Tuesday.
Both districts are on the Galveston Bay and local voters passed bond packages in recent years to build new schools and renovate existing campuses.
Voters in LaPorte ISD approved a $202.9 million bond referendum in September 2005 for a new elementary school, technology upgrades and land acquisition for future campuses. The district serves about 7,800 students at 11 campuses.
Moody’s assigned its Aa3 rating to the sale and Standard & Poor’s assigned a AA rating.
Texas City voters approved four propositions totaling $122.5 million in November 2007 for three new schools, upgrades to at least seven other campuses, stadium improvements, and district-wide technology upgrades. The school system currently serves a total student population of about 5,800 at seven campuses.
The district carries underlying ratings of AA-minus from Standard & Poor’s.
Texas schools have been relying upon their underlying ratings when issuing bonds for most of this year, as the state’s triple-A rated Permanent School Fund has not been providing school bond guarantees due to declining values for its investments.
But one underwriter in Dallas said Texas schools rated double-A or higher haven’t had any problems getting bonds sold and “there’s still huge demand for bank-qualified school paper.”
He added that school districts rated lower than double-A can still find strong demand for their debt “but have to pay a premium in their rate due to the lack of insurance from the PSF or private insurers and the lower rating.”
Both issues from Texas City ISD and LaPorte ISD are bank-qualified, albeit barely. As part of the federal stimulus package earlier this year, the exemption for bank-qualified deals was raised to annual issuance of up to $30 million from $10 million.
Elsewhere, Fort Worth returns to the public market with the competitive sale of about $144.7 million of GO debt Tuesday. The growing North Texas city has relied upon private placements to issue debt the past few years due to an inability to file audits in a timely manner.
Fort Worth plans to offer about $85.2 million of general purpose refunding and improvement bonds and nearly $55.6 million of combination tax and limited surplus revenue certificates of obligation.
Estrada Hinojosa & Co. and First Southwest are co-financial advisers to the city.
Standard & Poor’s upgraded its underlying rating on the city’s GO debt two notches to AA-plus from AA-minus ahead of the sale due to “maintenance of strong reserves, coupled with an improvement in the timely delivery of monthly financial reports.”
Moody’s assigned its Aa2 rating to the debt, citing the “continuing challenges related to the city’s financial reporting infrastructure.”
Fitch Ratings assigned a AA rating to this week’s sale. Last August, Fitch lowered its rating on Fort Worth’s GO bonds and water and sewer system debt to AA from AA-plus, citing delays in the filing of the comprehensive annual reports.