This transaction represented SWS’ fifth transaction as a managing underwriter for the District since 2016
Siebert Williams Shank (“SWS”) served as senior manager on Santa Clara Valley Water District’s (“District”) $92,650,000 Water System Refunding Revenue Bonds, Series 2020A and Taxable Series 2020B, as well as the $123,325,000 Revenue Certificates of Participation (Water Utility System Improvement Projects), Series 2020C and Taxable Series 2020D on Wednesday, September 30, 2020. This transaction represented SWS’ fifth transaction as a managing underwriter for the District since 2016.
The 2020AB Bonds and 2020CD COPs are rated “Aa1” (Stable) / “AA+” (Stable) by Moody’s and Fitch
The 2020AB Bonds were issued to (i) pay the principal portion of the outstanding Commercial Paper Certificates, Series A (Tax-Exempt) and Commercial Paper Certificates, Series B (Taxable) and (ii) pay costs of issuance of the 2020AB Bonds. The 2020AB Bonds are secured by a pledge of the Water Utility System Revenues of the District’s Water Utility System and amounts on deposit in certain funds and accounts established under the Parity Master Resolution and the Indenture. The 2020CD COPs were issued to (i) finance the acquisition and/or construction of certain water utility system improvements, (ii) reimburse the District for costs previously expended on certain water utility system improvements, and (iii) pay the costs of executing and delivering the COPs. The 2020CD COPs installment payments are secured by a pledge of the Water Utility System Revenues of the District’s Water Utility System and amounts on deposit in certain funds and accounts established under the Parity Master Resolution and the Trust Agreement.
Leading up to the day of pricing, SWS’ underwriters monitored similar tax-exempt and taxable issuances in California and across the nation. Approximately $2.8 billion of $8 billion of municipal supply for the week of September 28th was taxable, while $4.9 billion was tax-exempt. On the day of pricing, the 10- and 30-year US Treasury rates were 0.69% and 1.46%, while 10- and 30-year “AAA” MMD rates were 0.87% and 1.62%, respectively.
Given strong investor interest, SWS’ underwriters recommended tightening pricing spreads on the taxable Series 2020D COPs by 5 basis points for the 2022-2024 maturities, and 3 basis points for the 2025-2027 maturities. The tax-exempt Series 2020A Bonds and Series 2020C COPs were also met with high investor demand and SWS’ underwriters tightened pricing spreads across the yield curve. The Series 2020A’s 2045 and 2050 term bonds were tightened by 1 basis point, while the Series 2020C COPs were tightened by 3-5 basis points for the 2022-2032 maturities and 2 basis points for the 2033 and 2035 maturities. These tighter spreads were achieved despite a weaker tone in the market which resulted in MMD increases of 2-4 basis points for most of the yield curve. At the end of the order period, there was $171.9 million in orders submitted by 22 different institutional investors for the tax-exempt Series 2020A Bonds and Series 2020C COPs, while there was $244.9 million in orders submitted by 26 different institutional investors for the taxable Series 2020B Bonds and Series 2020D COPs.
The Series 2020A Bonds were 2.4x oversubscribed, the Series 2020B Bonds were 1.1x oversubscribed, the Series 2020C COPs were 2.7x oversubscribed and the Series 2020D COPs were 2.1x oversubscribed. Overall, the transaction priced successfully with an all-in TIC of 3.09% and an average life of 25.7 years for the Water System Refunding Revenue Bonds and an all-in TIC of 2.15% and an average life of 11.8 years for the Revenue Certificates of Participation.