DALLAS - San Antonio expects to sell as much as $1 billion of debt during the next month, including one transaction that could break the city's record for the largest deal ever by a local issuer in Texas.

Financial advisers to the city say underwriters have already been selected for the two issues: a general obligation new-money and refunding deal that could total $349 million, and a $600 million-plus refunding and commercial paper program for the city's electric and gas utility system.

The latter deal could top the record $620 million water and sewer system issue sold in late April by the city.

One underwriter said the final size of the utility deal will depend on how many bonds the city can refund with a present-value savings of 5% or more.

"If rates continue to drop, the size of the issue goes up," said Jorge Garza, managing director to Dean Witter Inc., which belongs to both syndicates. "If they rise, the size goes the other way."

Of the total issuance expected, the gas and electric deal could include $200 million to $300 million of commercial paper. The utility system currently has about $2.3 billion of long-term debt rated double-A by Standard & Poor's Corp. and Moody's Investors Service.

"It may break the record if we include some commercial paper," said Milt Halpern, senior vice president and manager at Rauscher, Pierce, Refsnes Inc. in San Antonio, the city's financial adviser on the revenue deal.

The city has named First Boston Corp. and Merrill Lynch as co-senior managers on the electric utility deal, which will be sold next month. The GO deal, led the bookrunner, Paine Webber Inc. and Dean Witter Inc., is set to be priced beginning July 28.

Jim Seal, executive vice president and manager of the bond department at M.E. Allison & Co. of San Antonio, the city's co-financial adviser, said the GO deal will include an estimated $320 million of refunding bonds and a $19.1 million new-money component of combination tax and revenue certificates of obligation.

The offering would be the first GO deal in 18 months and the city's largest since selling a $247.9 million refunding on July 18, 1985, according to Securities Data Co./ Bond Buyer.

"This issue is going to be done for savings," Mr. Seal said yesterday. "We expect savings of $20 million to $25 million ... but we haven't firmed up the numbers yet."

On a net present-value basis, a city official said the savings will total 6.5% if current interests rates hold.

The refunding would represent nearly half the city's estimated $658 million GO debt.

City officials plan to meet next week with rating agencies in New York. In addition to talking with Moody's and standard & Poor's, San Antonio will be seeking its first GO rating from Fitch Investors Service.

"We expect no surprises. At the very least we expect a confirmation," said Nora Chaves, the city's finance director. "We're coming back [economically] sooner than most cities in Texas and the country."

Even the decline of the city's property tax base, considered its thorniest problem, has begun to slow. Despite earlier estimates that the tax base would decline 4.6% this year, the city now expects the drop to be under 2.5%, Mr. Seal said.

"It's all positive news," he said.

Peter D'Erchia, senior vice president at Standard & Poor's, said the decline is still significant, adding, "When you're talking about a tax base that large, 2% is still considerable ... That reflects the stagnation in the local economy."

Standard & Poor's cited stagnation and recessionary pressures on city finances in March 1990 when it lowered San Antonio's GO rating to AA from AA-plus.

Once completed, the two transactions would make San Antonio the largest issuer in Texas for the year so far, with total bond sales nearing a record $1.6 billion.

The city does not anticipate debt sales late in the year, Ms. Chavez said, adding, "This will be it for a while."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.