Deal achieves the lowest TIC on a 30-year debt issuance in the history of the College
On Thursday, October 10, 2019, SWS served as book-running senior manager for Lansing Community College’s Building and Site Bond transaction. The Bonds are rated Aa2 by Moody’s and AA by S&P and are secured by the College’s General Fund and a limited tax general obligation pledge of the College.
Proceeds from the Bonds, together with other available funds of the College, will be used for financing the costs of acquiring, constructing, furnishing, equipping two new parking structures including appurtenances and site improvements and paying the costs of issuing the Bonds.
The College selected our firm to serve as senior manager on the financing as result of our response to the College’s RFP recommending that the College execute a single transaction to finance its two parking structure projects rather than two separate transactions in 2019 and 2021.
Pre-marketing of the College’s transaction opened on Wednesday, October 9th, with SWS soliciting price views from the co-senior manager and developing a pre-marketing structure consisting of 4% and 5% coupons. The College’s municipal advisor also suggested canvasing investor interest for the 3% coupon.
On the morning of pricing, the bond markets were volatile, showing signs of weakness. Tax-exempt bond yields of 10 years and longer drifted higher as the US – China trade talks continued to weigh on treasuries amid pressure from technical selling; MMD AAA GO yields were unchanged in 2020 – 2027, cut 1bps in 2028, and cut 3bps in 2029 – 2049.
After the order period closed, SCS had garnered $39.4 million in total orders from 12 different institutional investors. With the exception of the 2049 maturity, maturities were subscribed from 1.00x to 3.30x, based on priority orders. The transaction was 1.04x oversubscribed on aggregate and all priority orders derived from SCS.
Given the book of orders on the early part of the curve, SWS proposed tightening spreads 2 – 3 bps in the 2021 – 2029 maturities. The 2049 maturity which initially priced with a 4% coupon did not garner any priority orders by the end of the order period given the volatility on the long-end of the yield curve; as a result, SWS changed the coupon to 3% and took the entire maturity into inventory, totaling $10.5 million.
Due to our strong marketing and pricing results, as well as our willingness to commit capital, our firm was able to lower the College’s true interest cost by 13 bps (TIC) from the pre-pricing level of 3.07% to 2.94%; and achieving the lowest TIC in the College’s history for a 30-year debt issuance.