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Citi to lead $1B DFW airport bond sale in Texas withdrawal

(Bloomberg) – Citigroup Inc. Dallas is underwriting a $1.2 billion bond sale for Fort Worth International Airport, the largest since re-entering the Texas municipal-bond market last year after being temporarily sidelined over the bank’s firearms policy. Big deal.

The transaction would be a major victory for the bank’s public finance business, which has seen its position in the Lone Star state slide after GOP law seeking to keep companies “discriminating” against firearms entities operating in Texas . Citi, which limits its business with gun retailers but has repeatedly said it complies with the law, has written only four Texas deals amounting to $216 million since the law went into effect in September. Is.

According to data compiled by Bloomberg, the bank was ranked as the 22nd largest underwriter of Texas municipal-bond deals in the seven-month period ended March 31, down 17 slots from the same period a year ago. Meanwhile, Bank of America Corp., Goldman Sachs Group Inc. And other large banks, including JPMorgan Chase & Co., have not underwritten a bond deal by a Texas city or state during that time.

It has not been easy for Citigroup to rebuild its business in the state. It lost two major bankers, Mario Carrasco and Mark Tarpley, to competitors. Even though Citi provided a written verification of compliance with the law, it has been accused by industry group National Shooting Sports Foundation of not complying. The group also filed its case with the Texas Attorney General’s office, which oversees bond deals.

still pushback

In an emailed statement last week, Lawrence Keane, the industry group’s senior vice president and general counsel, said the entity had provided Attorney General Kenneth Paxton details of the bank’s “discriminatory policies against members of the gun industry.”

“We believe Attorney General Paxton will find an invalid verification filed by Citigroup based on undisputed facts and that taxpayers are ineligible under Texas law to receive funded contracts,” he said.

Paxton’s office asked Citigroup in January for more information about its gun policies. The Texas Attorney General did not respond to requests for comment.

Citigroup has repeatedly said that it does not view its policies as a violation of the new Texas law. The June blogpost said the bank “simply needs to use best practices when selling firearms to our customers.” It also said it continues to work with retail customers who sell firearms in Texas. A spokesperson for Citigroup also declined to comment further.

Banks’ public-finance businesses face a growing threat from legislation backed by the National Shooting Sports Foundation seeking to punish Wall Street for taking down gun policies. Bills proposed by Republican lawmakers in Arizona and Oklahoma have gone ahead in their state legislatures this year.

borrowing spree

There is no mention of the Texas law, known as Senate Bill 19, or concerns about underwriters’ compliance in bond documents. A spokesman for DFW Airport declined to comment.

Meanwhile, DFW Airport is on a borrowing spree. A $3.1 billion loan between the fiscal years of 2022 and 2025 to help fund a $5.9 billion capital program designed to equip the facility to support more passengers, according to investor roadshow documents plan to sell. According to the documents, the population of the DFW area is expected to exceed that of Chicago by about 2033.

The $1.2 billion deal, set for price earlier this week, is federally taxable. Its proceeds will be used to finance improvements to the airport and pay the reserve fund, the initial offer document says.

The new deal is rated A1 by Moody’s Investors Service, A+ by S&P Global Ratings and Fitch Ratings, and AA by Crawl Bond Rating Agency, LLC. S&P upgraded the airport’s credits in March, the company wrote in a report.

“The upgrade reflects our view of DFW’s demonstrated financial resilience and rate-setting flexibility during periods of materially depressed activity, as well as strong passenger recovery trends,” S&P Credit analyst Ken Bidison said in a statement.

© 2022 Bloomberg LP

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