UBS is out of Texas Municipal bond deal without Texas
The bank is one of the firms that it considers boycotting the fossil-fuel industry after the state listed it as one of the underwriting arm of the Bloomberg Group AG has been left out of the group that is poised to handle the biggest municipal bond transaction from Texas.
The Texas Natural Gas Securitization Finance Corp., board members of the issuer, announced a new underwriting syndicate for the $3.4 billion transaction without UBS at a meeting on Thursday, according to Lee Deviney, executive director of the Texas Public Finance Authority, the state agency overseeing the sale.
The Corporation board adopted a resolution reconstituting the underwriting syndicate for the upcoming natural gas utility securitization bond sale, Deviney said in an email. UBS will not be part of the syndicate. There were no other changes made to the previously appointed underwriting syndicate. Underwriters on the deal were approved by the issuer in May, and UBS was among them. The UBS Group was included in a list published by Texas Comptroller Glenn Hegar, a Republican, along with nine other companies he deemed to be hostile to the energy industry. The list was released after a months-long investigation by his office into companies' energy policies to determine whether they were shunning the oil and gas industry in favor of sustainable investing and financing goals.
A spokesman for UBS in New York didn't have an immediate response.
The loss of the deal is a blow for the Zurich-based bank's US municipal bond business. The firm dropped from a $119 million revenue-bond transaction in August, and the bank withdrew from a Kerrville, Texas bond sale that month, according to the city s finance director.
According to Bloomberg, UBS is the 20th- biggest underwriter in the Texas muni market this year, down one slot from the same period a year ago.
The bank was the only US muni underwriter included in the Texas comptroller's list of so-called boycotters. A Texas law enacted in 2021, Senate Bill 13, prevents the state and its local governments from entering contracts of $100,000 or more with companies unless the firms don't boycott the energy industry.
In Texas, most municipal bonds have to be approved by the state's attorney general, Republican Ken Paxton, before deals can close, and the inclusion of UBS on Hegar's list may have disrupted that clearance.
A 4 billion deal will raise money to bail out natural gas utilities that have been stricken by the deadly storm that struck the state in February 2021. The financing is designed to spread out the sky-high energy costs over decades to avoid burdening residents with high energy bills.
The deal could price as early as Nov. 9, according to Paul Jack, an Estrada Hinojosa Co. financial adviser who is working on the deal, said at a Texas Public Finance Authority board meeting this week.
According to a recording from the session provided by Deviney, the Texas Public Finance Authority official said that we would avoid pricing the first week in November, which is an FOMC meeting week, which suggests a pricing window shortly after the November election.
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