Texas State Technical College
Revenue Financing System Improvement Bonds
October 25, 2022
JOINT SENIOR MANAGER
The 2022A Bonds were used for the purpose of financing the costs to acquire, build, improve, and renovate various campuses or related infrastructure of the System
TSTC is rated A2/A-/A+ by Moody’s, S&P, and Fitch, respectively. The Series 2022A Bonds hold an insured rating from AGM of A1/AA by Moody’s and S&P, respectively. Series 2022A Bonds included serial bonds from 2023 to 2037 with term bonds in 204, 2047, and 2054.
Leading up to pricing, extreme volatility persisted in both the municipal and Treasury markets
The calendar for the week of October 24 had $6.4 billion of negotiated deals and $3.4 billion of competitive issuances, of the negotiated issuances, 11% werein Texas and only 6% were for Higher Education purposes. The volatility in the market was further exemplified in MMD movements seen between mailing and pricing. In that time frame rates increased 29 bps in 5 years, 30 bps in 10 years, and 32 bps in 30 years.
Given the System’s unique credit profile, a thorough marketing strategy, that included an investor roadshow, retail advertising, and 1-on-1 investor calls , was important to attract the best investor participation. SWS led the working groups efforts in creating the Rating Agency Presentation and was also instrumental in developing the Investor Presentation that appropriately outlined the System’s unique credit profile and incentive-based funding formula. The System’s legislative appropriation is based on this “Returned Value Funding Formula”, that determines the value added to the state from the surplus of wages of a cohort of former TSTC students. Given the recent volatility of the market in the weeks leading up to pricing, SWS participated in weekly market update calls in September and October to discuss with the System and its financial advisor marketing strategies and what the market tone would be leading up to pricing. The initial pre-marketing wire was sent out on Friday (October 21) and was revised Monday (October24), and again on Tuesday morning (October 25) before the midday release of the preliminary pricing wire that widened the spreads of the 2042, 2047, 2054 maturities to ensure full investor participation.
Despite a recently choppy market, the syndicate was able to tighten spreads and execute with investor orders 4.3x oversubscribed. At re-pricing, spreads tightened by up to 5 bps on all maturities except, 2030 and 2042.