DALLAS — Cities, school districts, universities, and other issuers in Texas hope to begin clearing a backlog of bonds this week as demand for munis appears to be strengthening.
“The calendar’s picking up again after a quiet period the last month or so,” said Jeffrey Timlin, portfolio manager at Sage Advisory Services in Austin. “Supply has been low and there’s a lot of pent-up demand, so issuers should be able to take advantage of this low-yield environment.”
Texas issues on this week’s calendar come to about $640 million, including competitive and negotiated deals.
The largest issue, Round Rock Independent School District’s $150 million of general obligation bonds may be postponed a week. Financial adviser First Southwest Co. had not issued the preliminary official statement last week and was in consultation with senior manager RBC Capital Markets.
Since the Round Rock ISD bonds carry some of the last remaining backing from the state’s Permanent School Fund to earn triple-A ratings, the debt should have no trouble finding buyers, Timlin indicated.
The district’s underlying rating is also strong at AA from Standard & Poor’s. Moody’s Investors Service has not reported its rating but conferred a Aa2 on issues in 2008.
While Round Rock ISD enjoys the PSF backing, Tyler ISD in East Texas is going to market on its own double-A credit with $125 million of school building bonds with Merrill Lynch & Co. as senior manager and RBC s as financial adviser.
“That’s a really strong rating,” Tosha Bjork, director of financial services for the district said of the double-A ratings from both Fitch Ratings and Standard & Poor’s. “Our financial adviser was telling us that it might cost us about 25 basis points” to issue without PSF backing.
The debt, authorized by voters last November, will finance construction of five elementary schools in the growing district. The serial bonds will carry maturities from 2009 to 2034.
The Bishop Consolidated Independent School District held off last week on plans to sell $14.2 million through negotiation with RBC. The deal has moved to this week’s calendar.
The district south of Corpus Christi won voter approval of $24 million of bonds in November to build a new high school, add security systems to all schools, and make improvements to the district stadium. The first tranche of $10 million was sold in 2008.
Bishop CISD won an upgrade of its underlying credit last month from Standard & Poor’s. The rating moved three notches from BBB to A, but the deal is expected to carry PSF backing.
“The upgrade is due to continued tax-base growth and maintenance of a strong financial position,” said credit analyst Kate Choban.
Brownsville Independent School District, which has been in the day-to-day mode, could come to market with $7.3 million of bonds in a deal managed by Morgan Keegan & Co., with Estrada Hinojosa & Co. as financial adviser. The southernmost district in Texas won voter approval of $135 million of bonds in 2006. Among the projects still under construction are Veterans Memorial High School and Edward Manzano Jr. Middle School, both expected to open in 2010.
Among Texas cities, the triple-A-rated Dallas suburb of Irving leads the parade with $130 million of convention center hotel occupancy tax revenue certificates of obligation with JPMorgan as senior manager. Co-managers are Estrada Hinojosa, Banc of America Securities, Morgan Keegan, Oppenheimer & Co., RBC, and Wells Fargo Brokerage Services.
First Southwest is the city’s financial adviser and Vinson & Elkins serves as bond counsel.
The certificates will be divided between current interest serials with final maturity in 2038 and capital appreciation mode.
Proceeds of the bonds will be used to build a convention center at the Las Colinas Urban Center, a business and residential development near Dallas-Fort Worth International Airport that features waterways, a golf course, hotels, office towers and residential buildings. The convention center is expected to open in 2010.
Universities are also coming to market this week, with the University of Houston System topping the charts with its $114 million of consolidated revenue and refunding bonds. The deal is led by RBC as senior manager, with First Albany Securities, Loop Capital, and Ramirez & Co. as co-managers.
First Southwest is the university’s financial adviser, with Fulbright & Jaworski as bond counsel.
The bonds, maturing through 2033, carry ratings of AA-minus from Standard & Poor’s and Aa3 from Moody’s.
The bonds will be used to refund notes and to cover the costs of maintenance and expansion of facilities on the campus.
Stephen F. Austin State University will issue $23 million of revenue bonds through the Texas Public Finance Authority to build a nursing school and expand other buildings on the Nacogdoches campus.
Morgan Keegan serves as senior manager. Co-managers are Citi, Edward Jones, RBC, and Siebert Brandford & Shank.
First Southwest serves as financial adviser, and McCall, Parkhurst & Horton LLP is bond counsel.
The issue will include current interest and premium capital appreciation bonds, payable from the university’s pledged revenues. Maturities run through 2029.
The bonds are rated A-plus by Fitch. Moody’s Investors Service, which has rated previous revenue bonds A2 has not yet reported its rating on the upcoming deal. Standard & Poor’s does not rate the debt. The Fitch rating, with a stable outlook, applies to $133 million of outstanding parity bonds.
“The A-plus rating is primarily anchored by SFASU’s historically healthy liquidity; track record of generally balanced to positive operating performance; and experienced, proactive management team which has made significant investment in both facilities and programs to position SFASU in a highly competitive marketplace,” analysts wrote.
In far South Texas, Hidalgo County will be pricing $25 million of certificates of obligation through negotiation with Stifel Nicolaus. The certificates carry ratings of AA-minus from Standard & Poor’s, A1 from Moody’s and A-plus from Fitch.
The tiny town of Little Elm near Dallas will offer $10.3 million of combination tax and limited pledge revenue certificates of obligation through negotiation with First Southwest. The certificates are rated A-plus by Standard & Poor’s and A2 by Moody’s, with no Fitch rating.
The city of Wichita Falls will also offer $10.9 million of certificates of obligation through RBC, and the West Orange-Cove Consolidated Independent School District will price $9.5 million of school building bonds through First Southwest.
Eight municipal utility districts will also offer bank qualified debt on the competitive calendar. Those issues are worth $33.5 million combined.
