Dallas County to come with $150M new-issue after 6-year hiatus

BY SourceMedia | MUNICIPAL | 08/16/22 12:07 PM EDT By Gabriel Rivera

Dallas County, Texas, is set to price $150 million of certificates of obligation Wednesday, the county's first issuance after a six-year hiatus from the municipal bond market.

The issuance follows the county's opening of a renovated Records Building Complex, a project backed with proceeds from a $168 million deal from 2016, the last time the county priced on the muni market.

"I think the commissioners, the public have seen what great work that was done in the record building," Dallas County Treasurer Pauline Medrano said.

The deal's proceeds will finance infrastructure upgrades and new construction on several governmental buildings within the county.

"This was a big project, so I believe that now that this is done, they're ready for a couple more projects," Medrano added.

The county opened the building complex back up to the public at a ribbon-cutting ceremony at the beginning of the month, the result of a project that blended sustainability with historic preservation.

The new complex is LEED- and WELL-certified and has historic plaques on most of its seven floors, denoting facts about the history and significance of the building and the surrounding local community.

Ramirez & Co. and Cabrera Capital Markets, LLC ? two Hispanic MWBE firms ? are joint bookrunners for the deal, part of Dallas County's sustained push to "maximize professional diversity on the issuance," according to press release.

"The county made it a priority to select a diverse team of professionals across the working group to bring this transaction to market successfully," Medrano said.

"The county will be opening doors for these firms for future projects, not only in Dallas County, but other governmental entities in the North Texas area and beyond," Medrano told The Bond Buyer.

Ramirez & Co. has a longstanding relationship with the county that extends beyond underwriting, into services such as educating local officials on the basics of the muni market. The firm was also involved in Dallas County's last deal in 2016.

"The DEI efforts are coming from the leadership across the county, whether it's the judge, the commissioner's court, as well as the treasurer directing those goals," according to Lorraine Palacios, managing director at Ramirez & Co. "They want to be leaders in this space and so they're hoping others recognize what they're doing in a diverse team and they know that's important to their mission."

The county intends to continue its practice of retiring the certificates on a level principal basis over a maximum of 20 years to accelerate principal amortization for faster debt repayment, official said.

The bonds are rated AAA by S&P Global Ratings. The bonds are structured to mature serially from August 2023 to 2042.

Dallas County currently has $117 million of outstanding debt.

The county's hiatus from pricing on the muni market was due in part to the construction of the 2016 project, which faced some delays due to the pandemic and related health and safety protocols, Medrano added.

But the six-year gap is likely to improve investor reception, Palacios said.

She noted the break from the muni market allowed the county to "diversify its portfolio," and that such gaps are not unusual among Texas counties due to the state's legal structure that requires issuers to create a petition notifying the public about the issuance of certificates of obligation.

"For instance, the commissioner's court is very prudent on when they are going to go to the market," Palacios said. "And what that's telling investors, as well as their constituents, is 'we're not constantly accessing the market, we're being very prudent with your taxpayer money. And so we want to make sure, obviously, it's going to be repaid and repaid as fast as possible.' "

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

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