In the News: Recent Developments

August 19, 2005

Texas PUC Taps Saber Partners as FA for $1.89B Deal

By Elizabeth Albanese

DALLAS — The Texas Public Utility Commission yesterday announced that New York-based Saber Partners has been retained to serve as financial adviser for an upcoming $1.89 billion issue of taxable transition bonds. The debt will be issued on behalf of Houston-based CenterPoint Energy. Lane Lanford, the executive director of the PUC, told the board of directors yesterday that a contract between the commission and Saber was signed earlier this week.

Saber’s hiring comes after more than one year of searching for a financial adviser for the deal, and five requests for proposals. At the time, industry pundits speculated that the withdrawal of the fourth RFP was spurred by a March 16 decision by the commission to limit financial advisory fees related to the CenterPoint transaction to $1 million. That limit was not included in the earlier RFP.

PUC commissioner Barry Smitherman, however, had recommended that the limit for fees be set below the $1 million mark. Smitherman, who was a public finance investment banker for 16 years prior to joining the commission, most recently served as a consultant to Bear, Stearns & Co. from the third quarter of 2003 until April 2004.

Smitherman joined the PUC last year after a stint as an assistant district attorney in Harris County. Prior to joining the DA’s office, Smitherman held positions as head of the Houston office of J.P. Morgan Securities Inc. and managing director and national head of tax-exempt origination at BancOne Capital Markets in Chicago. He was fired by BancOne in 2002 after failing to receive company permission before co-authoring with two city councilmen a commentary about Houston’s credit quality that appeared in the Houston Chronicle.

Although the PUC declined to release the names of firms that competed against Saber for the financial advisory position, First Southwest Co. and Bear Stearns had responded to earlier RFPs.

The PUC expects in coming months to oversee the issuance of up to $3 billion of transition bonds. Proceeds from the debt allow electric utilities to recover stranded costs — capital expenses associated with building power plants and other facilities that companies believed would be paid for with revenues generated in a regulated utility environment. A 1999 Texas law allows those utilities to levy ongoing assessments to their customer bases to pay off debt associated with those capital costs.

The Texas energy market was deregulated in 2002. To help speed the process of paying down the debt, utilities have begun issuing debt backed by securitization of their assessment fees. To date, transition bonds in Texas have all received triple-A ratings.

According to the RFPs, companies that have applied for permission to issue stranded cost recovery bonds are CenterPoint Energy, Fort Worth-based Texas-New Mexico Power, and American Electric Power’s AEP Texas Central Co., which maintains its headquarters in Columbus, Ohio. The contract signed this week with Saber applies only to the CenterPoint transaction, said PUC spokesman Terry Hadley.

Saber Partners served as the financial adviser for previous stranded cost deals, worth a total of $3 billion, earning combined fees of about $5.75 million.

© 2010 The Bond Buyer and SourceMedia Inc., All rights reserved. Use, duplication, or sale of this service, or data contained herein, except as described in the subscription agreement, is strictly prohibited. Trademarks page.

Share this Article.: