City of Houston, Texas Convention and Entertainment Facilities Department

$41,525,000
City of Houston, Texas
Convention and Entertainment Facilities Department
Hotel Occupancy Tax and Special Revenue Refunding Bonds, Series 2012
Underlying Rating: A-/A2/NR
Role: Senior Manager

In August of 2012, Hutchinson, Shockey, Erley & Co. (“HSE”) served as senior manager to the City of Houston in connection with the issuance of $41,525,000 Hotel Occupancy Tax and Special Revenue Refunding Bonds. The Bonds were issued by the City of Houston Convention and Entertainment Facilities Department. The City is the fourth most populous city in the nation and the most populous city in Texas.

The Bonds were issued to refund the callable Outstanding Hotel Occupancy Tax and Special Revenue Bonds, Series 2001B. The City refunded a portion of the Series 2001B bonds in 2011, where HSE served as co-senior manager on the transaction. The 2011 transaction was structured with a 5-year call option. The call option was put into place to provide the City with flexibility should the City decide to sell the Hotel located adjacent to the George R. Brown Convention Center.

In January 2012, HSE started to monitor the small portion of the 2001B bonds which were not refunded. Due to the lower interest rate environment, the unrefunded portion of the 2001B bonds were showing approximately 5.0% of present value savings. HSE presented our analysis which included several call options to the City. One of the structures included a 4-year call which matched the 2011 bonds. Although the call option diminished some of the present value savings, the City had not been presented such a structure on this refunding. Ultimately, the structure of the proposed transaction with the 4-year call option is what led to HSE being hired as senior manager on the transaction.