Texas Water Agency Sells Market-Beating Debt: Muni DealsRomy Varghese
North Harris County Regional Water Authority in Texas is selling about $107 million of bonds, refunding debt to cut costs after such securities beat the municipal market the past two years.
The obligations, slated for sale this week, are rated A+, the fifth-highest grade by Standard & Poor’s, which changed its outlook to positive from stable Jan. 30. S&P said the authority has a sustainable financial position even as it takes on capital-intensive projects.
Water and sewer bonds returned 7.7 percent in 2012 and 11.8 percent in 2011, outperforming the broader $3.7 trillion muni market in consecutive years for the first time since 2008, according to S&P data.
“Capital market conditions remain favorable and should spur more borrowing this year,” S&P analysts led by Theodore Chapman in Dallas said last week in a report. Refinancings to lock in long-term interest rates and fund projects drove issuance from U.S. water and sewer agencies up more than 40 percent in 2012 from 2011, according to the New York-based company.
The North Harris County authority expects to save $24 million through the refunding, according to minutes of a board meeting Dec. 3. Officials project an average interest rate of 3.05 percent for the new bonds, compared with 5.03 percent on the 2003 securities to be paid off. The agency will have about $433.5 million in debt following the sale, which has a final maturity of 2033, bond documents show.
The authority, formed in 1999, serves a suburban Houston area covering about 335 square miles (870 square kilometers), according to its website. The district had a population of about 602,000 in the 2010 Census, S&P said.
The issuer may return to the market next year, Cyndi Plunkett, financial assistant to the general manager, said from Houston. Its capital-improvement plan calls for $60.3 million in projects this fiscal year and $111.3 million in 2014.