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Port of Houston Authority



First Lien Revenue Bonds, Series 2021 (Non-AMT)

November 16, 2021


Image by Sam Mgrdichian

In July 2021, the Port of Houston Authority of Harris County, Texas (“Authority”) selected Siebert Williams Shank & Co., LLC (“SWS”), the nation’s top M/WBE municipal bond underwriter to lead its inaugural revenue credit transaction that will serve as the first tranche to fund the Authority’s new “Project 11”, a sizeable capital spending plan for the purpose of widening the Houston Ship Channel to provide for more efficient two-way vessel traffic. SWS served as book-running senior manager on $322,180,000 First Lien Revenue Bonds, Series 2021 (Non-AMT) which priced in the market on Tuesday, November 16, 2021.

Proceeds of the Bonds will be used to (i) pay a portion of the Authority’s costs for the design, construction, property acquisition and equipment of the Houston Ship Channel Improvement Project (“Project 11”) and (ii) pay the costs of issuance of the Series 2021 Bonds. The Bonds are secured by a first lien on net revenues of the Authority’s facilities.

The Series 2021 Bonds are tax-exempt and structured as fixed-rate serial bonds maturing in years 2022-2041 and term bonds in 2046 and 2051 with level debt service. The Bonds are optionally callable at par beginning on 4/1/2032.

SWS prepared an investor presentation for the bond sale that highlighted the Authority’s credit strengths and was viewed by 38 investors, 14 of which ultimately placed over $644 million of orders for the Bonds, including facilitating an investor one-on-one with the Authority that resulted in $44.1 million of orders.

The Bonds received a Moody’s “Aa3” rating (stable) and an S&P “AA+” (stable) rating.

In the week leading to pricing, the fixed income market experienced a divergence in taxable versus tax-exempt rates with taxable rates rising 8 to 20 basis points and tax-exempt rates falling 2 to 5 basis points in the 5-yr to 30-yr range.  This dynamic set the stage for the week’s $14 billion primary supply calendar.  High inflation, questions surrounding economic growth, and confusion around government spending proposals continued to capture the focus of rate markets.  In addition, buyers were trying to factor in the Fed’s position on interest rates and how soon tapering of Treasury purchases would begin.

On pricing day, the Authority received a substantial influx of orders, with the SWS-led syndicate generating over $1 billion in institutional orders. The transaction overall was 3.3x oversubscribed. At reprice, SWS’ underwriting desk recommended lowering yields on all but one maturity, with reductions in yields ranging from 2 to 9 basis points.

In total, 55 different investors participated in the transaction led by Bond Funds and SMAs.

The Authority achieved an All-in TIC of 2.795%.

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