Natural gas securitization deal arrives two years after Texas winter storm

Texas is plowing ahead with a massive bond sale to recover extraordinary costs incurred by natural gas utilities during a fierce 2021 winter storm with a deal that allows for a redemption in the event the state’s overflowing coffers are tapped to ease the blow to customers who will be paying off the debt.

The taxable $3.5 billion Texas Natural Gas Securitization Finance Corporation customer rate relief bonds are slated to price Wednesday and Thursday with Jefferies leading an underwriting team that shrank from the deal in October, followed by Citigroup in February.

Citigroup’s removal followed the Texas attorney general’s office January action barring the bank from participating in municipal bond deals after determining its commercial firearms policy runs afoul of a 2021 state law prohibiting government contracts with companies that “discriminate” against the gun industry.

The Texas comptroller’s placement of UBS on a list of fossil fuel industry boycotters in August, under another 2021 law, disqualified it from state and local government bond issues.

The preliminary official statement contains notices for potential investors in several countries. Jefferies officials did not respond to questions about whether the taxable bonds will be marketed overseas. 

Deviney said the underwriting syndicate still includes “several banks with global reach at both the senior, co-senior, and the co-manager level.”

Morgan Stanley and HilltopSecurities are co-senior managers and the remaining co-managers are Barclays, Blaylock Van, Loop Capital Markets, Piper Sandler & Co., Raymond James, Siebert Williams Shank & Co., and Stifel.

Estrada Hinojosa & Company is the issue’s financial advisor; Norton Rose Fulbright is bond counsel; McCall, Parkhurst & Horton is disclosure counsel; and Locke Lord is issuer counsel.