The state of Texas sells short-term debt to manage its cash flows from the start of every fiscal year starting from September 1 till the arrival of tax revenues in the latter part of the fiscal year. These Texas bonds are backed by tax revenues that the state will generate in the future.
On August 25, 2009, the state issued Tax and Revenue Anticipation Notes (TRAN) worth $5.5 billion. These bonds received impressive ratings by the country’s three largest rating agencies. While Standard & Poor’s Ratings Services rated the bonds SP-1+, those that were issued by Moody’s Investors Service got rated as MIG 1. Meanwhile, Fitch Ratings assigned the F1+ rating to these bonds. The ratings reflected highest possible credit rating scores that could be assigned by these rating agencies.
The state of Texas had planned to utilize most of the proceeds from these bonds in school funding as districts prepare for the start of the school year.
Profile of Texas Bonds
Some of the Texas bonds and their profile are:
Austin Community College District bonds: Standard & Poor's Ratings Services raised its long-term and underlying rating (SPUR) on the outstanding bonds issued by ACC District, Texas from ‘A' to ‘AA-‘ on October 22, 2009. The upgrade is due to the district’s overall healthy financial operations on a full accrual basis.
Revenue Financing System (RFS) bonds, series 2009B: Issued in January 2009 by the University of Texas System, there are approximately $100,000,000 bonds, which offer a fixed rate. Proceeds from the sales of these would be applied by the RFS to pay the purchase price of outstanding RFS debt. These bonds were assigned the 'AAA' rating by Fitch Ratings in January 2009.
The rating reflected the university’s strengths such as its:
experienced management team
diversified revenue streams
consistently robust financial performance
manageable debt burden.
A series of bonds for the Harris County Health Facilities Development Corp and Harris County Cultural Education Facilities Finance Corp, Texas,' namely, 1999A, 2008D, 2007B, 2008B, 2008E, 2007A, 2008A, and 2008C were issued for the Baylor College of Medicine (BCM). The rating for this series was downgraded from ‘A’ to ‘A-‘
by Standard&Poor's in October 2009. This is attributed to BCM’s operating deficits, technical default of its bonds and the delayed progress in the construction of its hospital.