Siebert Williams Shank served as the book-running senior manager for the Department’s $281.53 million 2019 Series D Bonds to fund Power System capital improvements and current refund certain of the Department’s 2015 Series A Power System Revenue Bonds.
The “Aa2/AA” (Moody’s/Fitch) rated Bonds were sold on December 12th, 2019 with a retail order period on December 11th and institutional pricing on December 12th.
SWS discussed the possibility of a pricing acceleration with the Department given the recent volatility in the market, however the Department ultimately decided not to proceed with an acceleration. On the day of pricing, due to the announcement of an imminent US-China trade deal, the stock market rose and Treasury market yields rose as much as 10 basis points, resulting in MMD yields ending the day 1 – 4 basis points higher.
The new money portion was structured utilizing a hybrid wrap around debt service approach (2026 – 49, except in years overlapping with refunding maturities) and the refunding portion was structured to match the maturities of the bonds being refunded (2032, 2037 – 40) and provide level savings to the Department.
The Bonds were very well received and generated over $790 million of orders in total despite the sharp drop in bond prices. The transaction attracted a large number of investors including the participation of 52 different buyers; significant buyers on the transaction included Franklin, Nuveen, Eaton Vance, 16th Amendment Advisors, Breckinridge Capital Advisors, PIMCO, Citigroup Alternative Investments, and Deutsche Bank.
Due to strong demand during the retail order period, which attracted over $155 million in retail orders, we were able to tighten spreads by 1 – 7 basis points in the 2026 – 30 and 2033 – 35 maturities going into the institutional order period; spreads in 2026 – 29 were further tightened by 1 basis point after the institutional order period. The strong pricing performance by SWS resulted in tighter spreads on the 2036 through 2049 maturities than any of the Department’s Power System transactions priced in 2019.
Using MMD as of the day prior to the sale date for both transactions, the Power System 2019D Bonds priced 8 basis points tighter in the 2049 maturity in terms of spread compared to the Power System 2019C Bonds, which had priced three months earlier. The 2019D Bonds achieved the tightest spread to MMD on the 17 – 30-year maturities of any Power System bond issue sold by the Department in 2019.
The refunding achieves approximately $19.1 million of PV savings (18.3% of refunded par amount). (2019D Bonds TIC = 3.20% and Average Life = 20.5 years)