Transaction Summary

Siebert Williams Shank served as the sole manager on Santa Clara Valley Water District’s Water System Refunding Revenue Bonds on Tuesday, November 19, 2019. This is the fourth transaction our firm has served as a managing underwriter for the District since 2016.

The 2019 Bonds were issued to (i) refund the District’s outstanding Revenue Certificates of Participation (Water Utility System Improvement Projects) Taxable Series 2007B which were LIBOR-based floating rate notes and (ii) pay costs of issuance of the 2019 Bonds.

The Bonds are secured by a pledge of the Water Utility System revenues and amounts on deposit in certain funds and accounts established under a Parity Master Resolution and the Indenture. They are rated “Aa1” (Stable) / “AA+” (Stable) by Moody’s and Fitch, respectively.

Market Conditions

Leading up to the day of pricing, SWS’ underwriters monitored similar taxable issuances in California and across the nation. Estimated taxable municipal bond issuances for the week of November 18 remained at a high volume due to the advantages of the historically low Treasury market. Approximately $4.1 billion of the anticipated $13 billion for the week of November 18 was taxable.

On the day of pricing, the 10-year US Treasury rate was 1.79%, 5 bps lower than close-of-business the Friday before.

Pricing Results

Due to initial investor feedback, SWS’ underwriters recommended tightening pricing spreads by 2 basis points for the 2020, 2022, and 2024 – 2026 maturities, and widening spreads by 2 basis points for the 2030 maturity. After conversations with the District, SWS included a two-year term bond with a maturity date of June 1, 2036 on the day of pricing.

At the end of the order period, there was $55 million in orders submitted by 11 different institutional investors, 9 of which were potentially new investors for the District.

In total, the Series 2019C Bonds were 1.2x oversubscribed; however, the 2027, 2028 and 2036 maturities were undersubscribed and SWS agreed to take $9.1 million into inventory.

Overall, the transaction priced successfully with $9.7 million of PV savings or 25.5% of refunded par, an all-in TIC of 2.76%, and an average life of 9 years.