DALLAS — Alvin Independent School District near Houston will take advantage of low short-term interest rates with $103 million of soft-put variable rate bonds expected to price Jan. 7.
Two weeks later, the district will offer $68.7 million of fixed-rate debt, according to Ryan O'Hara, managing director of financial advisor BOSC. This issue is the first from $212.4 million approved by nearly 68% of the district's voters on Nov. 5. The bond proposal included funds to build a new high school for 2,500 students in west Pearland's Shadow Creek Ranch subdivision.
The soft-put bonds will come in three equal tranches with the initial rate period ending on Aug. 14, 2015, 2017 and 2019, O'Hara said. Stated maturities are 2033, 2036 and 2039 respectively.
Soft puts, which are a specialty of this deal's senior manager Baird, do not require the liquidity provisions that made variable-rate deals impractical after the 2008 market collapse, O'Hara said. The Texas Permanent School Fund guarantees debt service and triple-A ratings but is not a liquidity provider.
"Rates are so low on the short end of the yield curve, we're going to maximize that," O'Hara said.
The variable-rate mode allows the district to shave 3-cents off the tax rate that otherwise would have been required to support the debt, O'Hara said.
"These bonds are multi-modal, so you can remarket them or you can fix them out if you want to," O'Hara said. Should a remarketing fail, the stepped rate investors would earn would be in the 6.5% to 7% range, he said.
Tommy King, deputy superintendent for business and support services, is supervising the deal for Alvin ISD. Andrews Kurth serves as bond counsel.
Co-managers on the deal are Raymond James, Southwest Securities, First Southwest Co., and RBC Capital Markets.
This issue is the first from $212.4 million approved by nearly 68% of the district's voters on Nov. 5. The bond proposal included funds to build a new high school for 2,500 students in west Pearland's Shadow Creek Ranch subdivision.
The district, about 20 miles south of downtown Houston, is geographically large and is about half built out, O'Hara said.