Volume Picks Up in Texas After Light Week

DALLAS — A few large deals boost Texas volume significantly this week after an exceptionally light holiday-shortened week.

Just 11 issues on the Thomson Municipal Market Monitor account for $722 million of bonds scheduled for pricing this week. While that’s only two deals more than last week, this week’s issues represent nearly 10 times the dollar volume and fall more in line with the $811 million issued the week of Feb. 10.

Last year, more than $11 billion of bonds and notes were sold by Texas issuers in the first quarter. At the halfway point of the 2009 first quarter, volume of less than $3 billion is running at about half of last year’s.

For issuers with underlying credits below the double-A category, accessing the market has proven extremely difficult, as insurance has become hard to come by.

The large deals this week, led by San Antonio Public Service Board’s $435 million issue of electric and gas system revenue bonds, are secure in the double-A category.

The San Antonio issue for city-owned CPS Energy carries ratings of AA from Standard & Poor’s and Fitch Ratings, with a Aa1 rating from Moody’s Investors Service. The bonds will take out commercial paper for several power projects in the service area.

The negotiated deal, led by Merrill Lynch & Co. with JPMorgan, Citi, Coastal Securities Inc., Loop Capital Markets, Siebert Branford & Shank Co., and Sterne, Agee & Leach as co-managers, is the largest in Texas this year.

The utility plans a retail pricing on Wednesday, with institutional orders the next day.

“This is the first time we’ve had a full day of retail orders,” said Paula Gold-Williams, chief financial officer of CPS. “We’re hoping for good demand, but the markets are unusual. Our financial adviser tells us it’s a pretty good time to go to market.”

Public Financial Management Co. shares advisory duties with Estrada Hinojosa & Co. Bond counsel duties are shared by Fulbright & Jaworski and West & Associates.

Also coming from San Antonio are $75 million of school building bonds from the rapidly growing Northside Independent School District. Frost National Bank is lead underwriter on the deal, with First Southwest Co. as financial adviser and co-manager, along with Sterne Agee and Stifel Nicolaus.

The serial bonds mature from 2012 through 2034.

With no triple-A backing from the Texas Permanent School Fund due to capacity limits and tumbling investment results, Northside must venture into the market on its own underlying credit of AA from Standard & Poor’s and Fitch, with a Aa2 from Moody’s.

This deal is the fourth issue from a record $693 million voter authorization in May 2007.

The district has $1.3 billion of outstanding parity debt.

Two other smaller districts, Crosby Independent School District and Joaquin Independent School District, hope to issue debt with RBC Capital Markets as senior manager. Crosby ISD is refunding a 1999 issue with its $4.4 million issue that carries PSF backing for the triple-A rating. The district got approval for the backing before the fund reached its capacity, officials said. Southwest Securities is financial adviser on the deal. 

Joaquin ISD in East Texas, 45 miles southwest of Shreveport, La., is issuing $9.5 million of school construction bonds approved by voters last November.

Williamson County north of Austin has the second-largest deal on the calendar at about $100 million. The county will issue pass-through toll revenue bonds in two tranches through Morgan Keegan & Co. and Estrada Hinojosa & Co., with Specialized Public Finance Co. as financial adviser. The bonds, maturing serially through 2034, are rated AA-plus by Standard & Poor’s and Aa2 by Moody’s.

Such toll revenue bonds are not issued for toll roads, but are treated as if they were. Under the state program, a county fronts the cost of building a project and forecasts the amount of traffic the road is expected to experience. Based on those projections, the state reimburses the local issuer for the cost of the project.

The state of Texas will issue $50 million of general obligation bonds as part of its Veterans’ Housing Assistance Program Fund, with JPMorgan as senior manager. The bonds carry ratings of AA from Standard & Poor’s and AA-plus from Fitch Ratings.

Water and sewer bonds will be coming from the North Texas Municipal Water District and the Dallas suburb of Allen. The NTMWD, a municipal utility district, is scheduling $20 million of contract revenue bonds through Coastal Securities, Morgan Keegan, and Stifel Nicolaus, while Allen is issuing about $6 million through Stifel Nicolaus. Allen’s revenue bonds are rated AA-plus by Standard & Poor’s.

Waxahachie, an exurb south of Dallas, is issuing $10.2 million of certificates of obligation through Coastal Securities, with Southwest Securities as financial adviser. The deal carries a rating of A-plus from Standard & Poor’s and A2 from Moody’s.

Proceeds from the sale of the certificates will be used to build a downtown parking garage, lengthen a runway at the municipal airport, and improve a historic train depot that functions as a tourist attraction.

Located in Ellis County 30 miles south of Dallas, Waxahachie has developed into a commercial and industrial hub due to its proximity to Interstate 35, the major thoroughfare that traverses Texas and leads into Mexico.

The competitive calendar lists only two deals worth $12 million. Both are for Houston-area municipal utility districts.

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