Harris County Toll Road 2015B

Harris County, Texas
Toll Road Senior Lien Revenue Refunding Bonds,
Series 2015B

Harris County Toll Road Financing achieves $20 million in savings

Siebert Cisneros Shank led the sale of $161.6 million of Harris County Toll Road Authority bonds in October 2015 to refinance a portion of the Authority’s existing debt at lower interest rates. The firm’s robust marketing campaign and sales efforts generated more than $900 million of investor orders and helped the County achieve over $20 million in savings without extending the life of the debt.

On October 29, 2015, Siebert Cisneros Shank successfully priced this offering, the proceeds of which were used to refund and defease a portion of the 2006A and 2008B Toll Road Senior Lien Revenue Bonds. This transaction marked the 6th transaction that the firm has senior managed for the County.

In the days leading up to the pricing, Siebert Cisneros Shank developed a detailed marketing plan and engaged in extensive investor Q&A in order to ensure maximum investor participation.

In evaluating the market and speaking with investors, there were was a significant amount of interest in advance of pricing as the credit (Aa2/NR/AA) provided some additional yield to investors in the TX market compared to the higher rated issuers such as the State of Texas (Aaa/AAA/AAA) that priced earlier in the week and the County had not been in the market with fixed rate Toll Road paper in several years.

On the day before pricing, the FOMC announced on October 28th that it would maintain interest rates at current levels, however, fueled a significant Treasury sell-off by changing the language in its statement and downplaying the global drag on economic growth. Given continued uncertainty about when rates would increase, Treasuries sold off 7-8 bps and MMD was cut by 3 to 4 basis points across the curve in the day before pricing.

During the order period, investors placed over $930 million in priority orders, which left the deal 5.7x oversubscribed (excluding member orders). The strong order book allowed SBS to tighten spreads further, between 4 and 7 bps from the initial pricing.

Due to the sales force strong and focused efforts, we were able to attract 24 new investors and bring back key anchor buyers such as State Farm, Travelers, Vanguard, and AIG. Compared to the 2012 HCTRA transaction, the final spreads to MMD on the 2015 transaction were between 6 and 12 bps lower, as shown in the graph below. Ultimately, the County achieved approximately $20 million of net present value savings, representing 10.8% of refunded par, at an all-in TIC of 3.22%.