Two upgrades boost appeal of Corpus Christi, Texas, deals

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Two rating upgrades should help Corpus Christi, Texas, achieve savings on $482 million of refunding bonds going to market over the next week, its top finance official said.

The city on the Gulf of Mexico plans to price $164 million of new money and refunding general obligation bonds Wednesday through negotiation with book runner UBS.

Tankers in the Port of Corpus Christi. The energy industry is a major driver of the Texas city's economy.

Pricing of $318 million of junior lien utility revenue refunding bonds is planned for June 29, the city said. Citigroup is senior manager and Huntington Securities is co-senior. Estrada Hinojosa & Co. is financial advisor on both deals.

Fitch Ratings upgraded the city’s utility revenue bond rating by one notch to AA-minus from A-plus. That followed a Moody’s Investors Service upgrade to Aa3 from A1.

Standard & Poor’s Global Ratings affirmed the utility revenue bond credit rating of AA-minus. Outlooks on all the ratings are stable.

The ratings reflect the Corpus Christi Utility System’s sustained strong financial profile and strong revenue-raising ability supported by a favorable customer base primarily in the city, said Heather Hurlbert, the city finance director.

The upgrade will help to keep interest costs low for the upcoming approved bond sale of $110 million for water and sewer system improvements and capital maintenance that was approved by the City Council in May 2020, she said.

“Just like a personal credit score, the bond rating indicates the credit worthiness of the city and a higher credit rating results in lower interest rates when the bonds are sold,” Hurlbert said. “This lower interest rate saves taxpayers and rate payers money over the life of the bonds.”

The city’s general obligation rating was affirmed at AA by S&P and Fitch, and Aa2 by Moody’s.

The GO bonds are coming in three tranches. Series A provides $80.6 million of new money. Series B is $27 million of forward delivery bonds. Series C is $56.9 million of taxable refunding bonds.

Mark A. Seal, executive director for public finance at UBS, is lead banker on the GO bonds.

Mario Carrasco, managing director and head of the Southwest Region for Citigroup, leads the utility bond sale.

The general improvement bonds are backed by an annual property tax limited to 68 cents per $100 of assessed valuation for maintenance and operations and a maximum $2.50 per $100 of for voter-approved debt.

The city is anticipating a $21 million reduction in its $1.1 billion budget for the current fiscal year.

“Beyond the near-term impact of the coronavirus shutdown, Fitch expects the city will continue a solid trajectory of revenue growth, despite some cyclicality due to the large energy sector presence,” Fitch analyst Jose Acosta said.

“Numerous large industrial investments by downstream users of oil and gas and growing port activity, along with moderate population growth, should help offset cyclical declines in nearby oil and gas exploration and production activity.”

Corpus Christi is the eighth largest city in Texas and serves as the regional economic hub for a 12-county area. The city's population is estimated at nearly 326,000 for 2019.

The geographic location of the city positions it as a regional trade center and international shipping point anchored by the Port of Corpus Christi, a principal outlet for agricultural and petroleum products. Tourism, military and higher education are also major employment sectors.

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