SWS’ sixth consecutive senior-managed transaction for Bexar County Hospital District

Siebert Williams Shank served as book-running senior manager for the Bexar County Hospital District’s $285,365,000 Certificates of Obligation and Limited Tax Refunding Bonds Series 2020 issuance on Tuesday, January 14, 2020. This was SWS’ sixth consecutive senior managed mandate for the District and seventh overall.

The Certificates of Obligation will be used to fund $170 million for the construction of the new Women’s and Children’s Hospital. The Hospital, anticipated to be completed in 2022, will include approximately 300 beds and is to be built on the footprint of the existing University Hospital campus located in the South Texas Medical Center in San Antonio.

The Limited Tax Refunding Bonds currently refunded the District’s outstanding Unlimited Tax School Building Bonds, Series 2010B, callable on February 15, 2020. The $140.68 million will defease $162.310 million of BABs debt.

The Certificates were structured with level, 30yr debt service while the Refunding Bonds would match the structure of the 2010B BABs with a final maturity in 2040. The 2020 Obligations were rated Aa1 and AA+ by Moody’s and Fitch, respectively.

SWS worked with the District and their advisors to structure the Certificates with 5% coupons and the Refunding Bonds with 3 and 4% coupons. The lower coupons would not only maximize refunding savings, but the combination would also attract an array of possible investors.

U.S. / Iran tensions that resulted in a U.S. drone strike on a top Iranian general and a retaliatory missile launch on U.S. assets in the region increased volatility in weeks leading up to pricing. The initial flight to quality (higher Treasury demand, lower interest rates) was followed by steady increases in rates as tensions seemed to ease.

With municipal yields near all time lows and tight long-term UST / MMD ratios, feedback from investors was positive in a week that would see relatively low supply as the new year began. As a result, the first half hour of the order period set the tone for a deal that would ultimately by 2.1 times oversubscribed with most maturities’ subscriptions being 1.2 – 2.8 times the par amount.

SWS’ sales desk led the syndicate with over $584 million in priority orders allowing the firm’s underwriter to recommend 1 – 3 basis point yield decreases in all but 3 maturities.With a True Interest Cost (TIC) of 2.51%, the refunding generated $18.9 million in gross savings for the District, equivalent to $14.8 million in Net Present Value savings (or 9.09% of the refunded par).