Proceeds of the issue were used for new money and refunding purposes. The transaction consists of tax-exempt fixed-rate bonds, including $100.0 million of medium term notes, also called “Refundable Principal Installments” (“RPIs”).
SWS provided substantial structuring analysis, including identifying the ideal spots on the yield curve to offer RPIs (including a longer maturity than traditionally offered), and creating a series-based refunding structure, each generating positive PV savings to facilitate a multi-purpose allocation for the combined new money/refunding issue at the request of NYW and its FA. SWS also assisted in revamping the investor presentation that addressed the impact of COVID-19 on NYC and highlighted that the core operations of the Authority and Water System are unimpaired by the pandemic. The presentation received 103 views.
In the weeks leading up to the pricing, the market continued to be threatened with volatility related to the COVID-19 pandemic and consistent heavy outflows. The market began experiencing more stability the week of pricing with a favorable trend in MMD, including some of the lowest interest rates to date among the earlier maturities. The strong tone in the market continued as demand began to match supply. The week of pricing had a manageable, yet strong supply with tax-exempt offerings approaching $6 billion; NYW’s deal being one of the largest. The issue had serial maturities in 2025, 2027, 2028, 2030, 2041, 2048 and 2050. RPIs matured in 2026 and 2029.
Most bonds were offered to retail. A combination of 3%, 4%, and 5% coupons were used to diversify offerings for a wider group of investors. Investors placed a total of $442.8 million in orders during the ROP. The bonds maturing between 2025 and 2028 were 1.40x – 3.81x oversubscribed. Throughout the course of the ROP, SWS received strong feedback from institutional investors, including specific interest for 5% coupon bonds.
NYW received $1.6 billion in institutional priority orders, which combined with retail orders brought the overall book to $2.0 billion (3.0x oversubscribed) from 75 unique investors. Strong demand for the RPIs led to an upsizing in both the 2026 and 2029 maturities of $15.0 million and $35.0 million respectively. The 2050 maturity was increased by $50.0 million in proceeds due to robust orders for the 5% coupon bonds. Strong institutional demand throughout the curve created oversubscription levels of approximately 1.4x – 3.8x and allowed SWS to tighten spread by 2-5 basis points.