The Series 2021ABC transaction achieved the tightest 10-year spread for Phoenix Tax-Exempt and Taxable issuances since 2011

The transaction size was upsized by $121 million after the POS posted. Proceeds of the Bonds were used to pay the costs, or reimburse the City for costs, of various improvements to the Water System and to refund certain outstanding Water System bonds. The Bonds are special, limited obligations of the Corporation payable solely from payments received under the City Purchase Agreement and secured by a pledge of the “Designated Revenues” of the System.

The market was relatively stable leading up to the day of pricing with municipal supply for the week of May 17th totaling $9.4 billion including $7.8 billion in tax-exempt supply and $1.6 billion in taxable supply. On the day of pricing, 10- and 30-year “AAA” MMD rates were 1.02% and 1.59%, respectively, while the 10- and 30-year US Treasury rates were 1.64% and 2.36%, respectively.

Marketing and Pricing Strategy. The POS and slides-only investor presentation were posted 2 weeks prior to pricing. The roadshow was viewed by 40 unique investors. Tax-exempt bonds utilized 4% coupons on maturities from 2040-2042 to garner diverse investor types and serialized taxable maturities out to 2041 to meet investor demand and take advantage of the yield curve slope.

The Tax-Exempt 2021A&B Bonds attracted broad investor demand resulting in SWS tightening pricing spreads across the yield curve between 2 basis points (bps) on shorter maturities to 7 bps on longer maturities. Given strong investor interest for the Taxable Bonds, SWS recommended tightening spreads by 6 bps for the 2026-2031 and 2044 maturities, and 5 bps for the 2032-2041 maturities.

These tighter spreads were achieved with a mostly steady tone in the market with MMD unchanged from 2022-2028 and bumped 1 basis point in 2029-2051 on the day of pricing. At the end of the order period (before reprice), there were more than $1.2 billion of orders from 62 different institutional investors for the Tax-Exempt 2021A&B Bonds and approximately $474 million of orders from 37 different institutional investors for the Taxable 2021C Bonds.

The Tax-Exempt 2021A and 2021B Bonds were oversubscribed by 3.9x and 3.8x, respectively and the Taxable 2021C Bonds were oversubscribed by 3.1x. The smoothly executed transaction resulted in an overall All-In TIC of 2.42% with an average life of 13.9 years and achieved more than $28.4 million in combined net present value savings on the Series 2021B&C Refundings, or approximately 13.5% of total refunded par amount.