The purpose of the bonds is to fund projects dedicated towards various purposes such as general state purposes, economic development, and manufacturing, small business, and housing development and rehabilitation, among others. The 2020 Series A Bonds are general obligation bonds of the State of Connecticut (the “State”), and the full faith and credit of the State will be pledged for the payment of principal and interest on the Bonds. The structure of the bonds consisted of a level principal maturing from 2021 to 2030. The State utilized a make-whole call for the first time providing additional redemption flexibility.
The Bonds marked the second of three State bond sales coming to market before FY 2020 concludes June 30, 2020 and after the COVID-19 pandemic. SWS worked with the State and FAs to develop an investor presentation highlighting the impact of COVID-19 on the State and the State’s finances, which was viewed by 69 different investors, and facilitated a conference call between the State and interested investors a day prior to pricing. Due to market volatility in the weeks leading up to pricing, SWS recommended a modified offering schedule where the Indications of Interest, Price Guidance and Launch periods were all accomplished in one day.
The week of pricing following Memorial Day weekend had about $4.0 billion of new issuances in the market. The market tone in the lead-up to pricing constituted all three major US stock indices rising due to the optimism surrounding the US economy re-opening and the latest round of economic data. The 1-year Treasury lowered by 1 bp, the 2- and 3-year Treasury lowered by 2 bps, and the 5- and 7-year Treasury lowered by 3 bps, continuing a stable tone through the day of pricing. Premarketing at the consensus levels garnered strong traction and SWS’ underwriter elected to tighten spreads by 5 bps going into the Indications of Interest period.
In going out at the revised levels, SWS received $4.4 billion in total orders (8.9x oversubscribed) from 103 different investors, 51% of whom were SMAs and bond funds. SWS further tightened spreads by 5 to 12 bps going into “price guidance” and incorporated ranges of +/- by 5 bps in 2021-2023, by 3 bps in 2024-2027, and by 5 bps in 2028-2030 for the Launch. After the Launch, the strong book of orders allowed SWS to tighten all prices resulting in an overall interest cost of 2.43%, which compares favorably to a 3.28% and 3.76% overall interest cost on the State’s last two ten-year Taxable G.O. Bond issuances.