SWS’ performance on this deal was featured in a City of Newark press release
Proceeds of the bonds were used to refund all of the City’s callable and outstanding Qualified General Improvement Bonds, Series 2010A, Qualified School Bonds, Series 2010C, and Qualified Water Utility Bonds, Series 2010D. The bonds were secured by an unlimited tax G.O. pledge with additional benefits provided by the Municipal Qualified Bond Act for all Series 2020 Bonds; the Series 2020B Bonds are additionally secured by a reserve established by the School Bond Reserve Act.
SWS worked closely with the City and the financial advisors to develop a plan of finance which provides significant debt service relief in the City’s next two fiscal years. The transaction consisted of three tax-exempt series with bonds amortizing from 2021 through 2039. SWS prepared a slides-only investor presentation for the City emphasizing its general fund balance growth since 2015, amongst other credit considerations. SWS and its financing team determined that it would be cost-effective to utilize bond insurance in all but the first two maturities to lower the overall cost and to satisfy investor demand. With market volatility resulting from the COVID-19 pandemic in the backdrop, tax-exempt index reached historical lows during the week of August 10th . On Thursday morning (August 13th), SWS released a pre-pricing wire with 5% and 4% coupons to attract demand across the investor spectrum, including bond funds, SMAs, bank portfolios, insurance companies, bank trusts, private wealth management and prop/trading accounts.
The transaction attracted broad investor interest, with an overall subscription nearly 11x the amount offered. SWS received combined retail and institutional orders from 34 different investors, totaling over $1.1 billion. Given the strong book of orders, SWS was able to lower bond yields (or pricing spreads) by 11 to 13 bps for bonds maturing in years 2021 through 2028, and 5 bps for bonds maturing in years 2034 through 2039. In order to maintain the competitive pricing levels, SWS underwrote $575,000 of remaining balances at the stated yields. This successful pricing led to an all-in interest cost of 1.36% and generated present value savings of $13.8 million (or nearly 12% of refunded bonds) to the City.