Houston Toll Road Taps Investors for Congestion Relief

Builders of a toll road around Houston return to the $3.7 trillion municipal market this week to finance the project serving the fourth-biggest U.S. city.

Grand Parkway Transportation Corp. is selling $733 million of bond-anticipation notes due December 2016 to repay some of last year’s borrowing for the 184-mile (296-kilometer) highway, deal documents show.

The roadway connects seven Texas counties and circles the Houston metropolitan region, where the population of 6.2 million is expected to swell to 9.6 million by 2035, the documents show.

“The Grand Parkway Project will accommodate the extensive ongoing population and economic growth and provide much-needed congestion relief in the region,” Mark Cross, a spokesman for the Texas Department of Transportation, said in an e-mail.

Two segments of the highway have already been built, with toll collection set to begin this month, said Cross. The project, approved by the state and counties in 2009, has been proceeding as planned, he said.

The notes, which are selling tomorrow, could be repaid with either a U.S. loan under the Transportation Infrastructure Finance and Innovation Act or with state funding known as a toll-equity loan, Cross said. Standard & Poor’s grades the notes SP-1+, the highest short-term rank, and outstanding bonds backed by the state loan AA+, second-highest.

Minimal Risk

Fitch Ratings in January called the construction “fairly straightforward” with minimal risk.

After the sale, the project would have $2.9 billion in debt outstanding, sale documents show.

A revenue bond due in 2053 sold Jan. 31 at an average yield of 4.9 percent and average spread of 0.23 percentage point over benchmark munis, compared with 0.18 percentage point for the month, data compiled by Bloomberg show.

Transportation securities are beating the broader market this year, earning 2.4 percent, compared with a 2.1 percent return for the market, according to S&P indexes.

Grand Parkway joins issuers offering about $4.7 billion in long-term debt this week, down from $5.5 billion in the period ended Jan. 31. Investors added about $334 million to municipal-bond focused mutual funds in the week through Jan. 29, the third-straight period of inflows, according to Lipper US Fund Flows data.

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