← Back to Latest News

Houston Issues $870 Million in Bonds

By Munichain News Desk

Houston sold $870.3 million in utility revenue bonds to refund previously issued securities.

The bonds mature between 2025 and 2054, yielding between 3.01% and 4.18%. They received a rating of AA from Fitch Ratings and Aa2 from Moody’s Investors Service.

“With steady growth in customer accounts and automatic index based rate increases, the city’s operating performance has been strong driving available liquidity to over 1000 days cash on hand in fiscal 2023,” Moody’s analysts wrote.

The city will use the issuance proceeds to achieve debt service savings by refunding utility revenue bonds that it sold in 2014.

Those savings will come in handy as the city budgets for upgrades required by a settlement it reached with the U.S. Environmental Protection Agency (EPA) three years ago. In 2021, Houston agreed to improve its wastewater system to resolve alleged violations of the Clean Water Act. These included “discharges of untreated sewage from Houston’s wastewater collection and transmission system,” according to the EPA.

The city estimates that it will need to spend $9 billion over the next fifteen years to make the upgrades required by its agreement with the EPA, according to the official statement accompanying the sale of the bonds. That will more than double the Houston utility system’s budgeted expenditures through 2039.

The bonds are special obligations of the city, payable by a lien on the net revenues of its water and sewer system. The system recorded $1.5 billion in operating revenue last fiscal year, split relatively evenly between water sales and sewer system charges.

Jefferies LLC served as lead underwriter on the issuance, purchasing the bonds for $960.2 million. The price reflected a premium of $92.8 million and a discount of $2.9 million. Masterson Advisors LLC and TKG & Associates LLC acted as financial advisors.

Subscribe to the Munichain Newsletter

The latest municipal bond market news and insights delivered to your inbox.