DALLAS - The Carroll Independent School District yesterday enjoyed a strong response to its $86 million issue that appeared to be the first by a Texas district to include Build America Bonds.

The total deal included about $58 million of taxable BABs, with $22 million of tax-exempt refunding bonds and about $7 million of zero-coupon refunding bonds.

"We're actually bumping the price a little bit," said Lewis Wilks, managing director of public finance for financial adviser Coastal Securities. "We're seeing a good market today."

The tax-exempt refunding bonds with 4.7% coupons drew yields of 4.8% with maturities of 2030 in the initial pricing. Pricing for the BABs was not available before deadline.

Federal Reserve Board chairman Ben Bernanke's comments on the recession appeared to help Treasury bond prices, whose yields influence rates for BABs.

"The Treasury market improved dramatically today after starting off pretty soft," said David Holland, head of public finance for Coastal. "We had the best of all possible worlds."

The deal was structured to make Carroll's tax-exempt bonds bank-qualified under new federal rules that raised the threshold to $30 million. That helped create a more diversified market for the debt, Holland said.

RBC Capital Markets served as senior manager on the deal, with Citi, First Southwest Co., Merrill Lynch & Co., Southwest Securities, and Wells Fargo Securities as co-managers.

Carroll ISD, an affluent district in the Dallas-Fort Worth area, earned the kind of ratings that investors have sought out this year: AA from Standard & Poor's and Aa3 from Moody's Investors Service.

Now that Carroll has jumped into the BAB pool, two other districts in the Houston area, Spring Branch Independent School District and Cypress Fairbanks Independent School District, are expected to come to market soon with even larger BAB deals.

Like other suburban districts in Texas, Carroll has seen its rampant growth of recent years slowed by the recession. Since 1997, the Tarrant County district's enrollment has doubled to about 28,235.

Analysts at Standard & Poor's see the affluent demographics and strong management as support for the solid credit, offset somewhat by higher debt loads due to demand for new buildings.

For Texas school districts, a rating in the double-A category is especially important this year because the state's Permanent School Fund is unavailable to confer triple-A backing to bonds. With falling fund values amid poor investment results and soaring demand, the PSF reached its capacity limit at the end of last year.

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