The transaction consisted of the issuance of $900.0 million in new money bonds and the reoffering of $223.0 million of bonds from Fiscal 2006 Series I, Subseries I-3 and I-7; Fiscal 2008 Series J, Subseries J-5; Fiscal 2008 Series J, Subseries J-6; Fiscal 2008 Series J, Subseries J-10; and, Fiscal 2012 Series A, Subseries A-3. The proceeds of the new money bonds will be used for capital purposes and the proceeds of the reoffered bonds will be used to pay the purchase price of the variable rate bonds in connection with the conversion.
The final structure of the new money portion consisted of tax-exempt serial bonds maturing between 2022-2044, and the Reoffering Bonds consisted of serial bonds maturing between 2023-2036. The new money series was structured to meet NYS LFL, yet still resulted in minimal additional debt service through Fiscal Year 2024. In addition to the new money bonds, SWS structured five separate series of bonds that were converted to fixed rate from their variable rate mode. Structuring of these bonds included the utilization of premium to reduce par, application of reissuance tests, and Current Refunding Transition Rule calculations. In order to attract investors and maximize demand, SWS worked closely with the City and its FAs to offer an array of couponing alternatives in addition to the 5% coupons, including 2.75%, 3% and 4% coupons. SWS also assisted with preparing an investor presentation, which included the City’s response to the COVID-19 pandemic. The presentation received 144 unique views.
Despite the political and social uncertainty due to the onset of the COVID-19 pandemic and the upcoming US Presidential Election, the MMD curve had been relatively stable and at historic lows in the weeks leading up to pricing.
During the week prior to pricing, mutual funds saw outflows for the first time in months. On October 1st, Moody‘s downgraded New York City’s GO bonds to Aa2 from Aa1 and maintained its negative outlook which reflected the substantial financial challenges facing NYC caused by the economic response to the coronavirus pandemic. The week of pricing had an above average supply, with tax-exempt new issuance in excess of $7.8 billion and taxable supply around $5.5 billion. On October 6th, news of President Trump ending all federal stimulus negotiations and other political news led the municipal market to slightly higher yields.
Despite the weaker market tone during the two-day retail order period and institutional order period, SWS managed a successful transaction and produced a strong book. Individual and retail investors placed $566.8 million in orders during the retail order period, and institutional investors placed $2.7 billion in orders during the institutional order period, for a combined total of $3.3 billion (2.94x oversubscribed). Over the course of pricing, SWS worked with the City and its FAs to tighten spreads on the new money bonds by 2-7 bps across all maturities and tighten spreads by 4-7 bps on the Reoffering Bonds across all subseries and maturities. The order book was between 0.99x-7.32x oversubscribed, depending on the maturity
Overall, orders were received from 66 unique investors for both the new money and reoffering portions of the deal.