DALLAS — With investors seeking opportunities to lock in higher yields amid the current market turmoil, a few Texas school districts will try once again this week to get their deals done.
The Houston Independent School District late last week was monitoring the market after postponing the sales of the first tranche of debt from an $805 million authorization passed in November by voters. Officials plan to wait until the market improves before selling the debt.
Earlier this month, the Texas attorney general’s office ruled the November authorization valid, freeing HISD to proceed with the first sale, which had been held up by lawsuits claiming the bond package doesn’t address critical needs in some of the district’s predominately black neighborhoods.
Northeast of downtown Houston, the Humble Independent School District plans to offer $96.7 million of school building and refunding bonds in the fifth phase of a $342 million bond package approved in November 2005. About $15 million to $20 million of the negotiated sale will be refunding bonds, and the district expects savings of at least 4%.
Morgan Keegan & Co. is lead manager for the negotiated sale, and First Southwest Co. is the financial adviser to the district. Vinson & Elkins LLP serves as bond counsel.
The district plans to issue the sixth and final phase of the 2005 authorization sometime next winter, and voters will decide on another $244.9 million bond package in May. Although the suburban district may need twice that amount to keep pace with annual enrollment gains of nearly 2,000 students, a nearly 50-year-old district policy limits debt to 7% of the taxable assessed value and that capped the May bond package at $245 million.
In North Texas, the Celina Independent School District will try to price just under $10 million of general obligation bonds for the second week in a row.
RBC Capital Markets is the lead manager for the negotiated issue by the district about 45 miles north of Dallas. The school district serves 1,700 students in four schools. Moody’s Investors Service assigned its A3 rating to the sale
Rapidly growing Frisco Independent School District plans to bring $90 million of unlimited-tax school building bonds to the competitive market Thursday.
This is the first issue from a $798 million bond package passed by voters in November 2006. At that time, the bond referendum was the third-largest ever passed for a school district in Texas, and the largest ever by a suburban district. A few ISDs had larger bond packages approved last November, including the $805 million in the HISD and $807 million in the Cypress-Fairbanks ISD.
Southwest Securities Inc. is the financial adviser to the Frisco district, which is about 25 miles north of downtown Dallas. McCall Parkhurst & Horton is bond counsel.
In early September, the district competitively sold $100 million of similar debt. Yields ranged from 3.6% with a 5.25% coupon in 2009 to 4.7% with a 5% coupon in 2036. Some of the bonds weren’t reoffered.
Frisco ISD’s building schedule calls for 19 new campuses, including 10 elementary schools, six middle schools and three high schools, to accommodate a student population that’s expected to triple in the next decade to close to 60,000. Officials anticipate 5,000 children enrolling each of the next two school years, pushing the student population to roughly 37,500.
Frisco’s 2008 population of about 101,500 is up 41% since 2004 and more than triple the 2000 Census figure of 33,714. The taxable assessed valuation within the school district has climbed to $14.92 billion for fiscal 2007 from about $2.62 billion at the start of the decade.
Fitch Ratings assigned an A rating to the sale and affirmed the rating on roughly $903 million of debt outstanding. Moody’s Investors Service rates Frisco ISD at A1.
When they eventually price, the bond sales by Texas school districts will come market with the triple-A enhancement provided by the state’s Permanent School Fund.
Elsewhere, the Matagorda County Navigation District expects to price $120.3 million of pollution-control revenue bonds at some point this week through a negotiated sale led by Morgan Stanley. The bonds have a three-year put option, and the district is working as a conduit issuer on behalf of American Electric Power.
Additional information about the sale wasn’t immediately available.
Back in North Texas, Denton County plans to price a two-tranche issue this week worth $23.9 million. The growing county will offer $15.4 million of permanent improvement bonds and $8.5 million of tax anticipation notes. Southwest Securities is the financial adviser.
Moody’s assigned its Aa1 rating to the sale and affirmed the rating on the county’s parity general obligation debt. Analysts said the rating reflects the county’s “sizeable and growing tax base, which is accompanied by the continuation of a significant influx of population that has bolstered the socio-economic profile of the county.”
Standard & Poor’s assigned a AA-plus rating to the issue.