This transaction represented SWS’s 7th consecutive senior managed transaction for the District

Series 2021A and 2021B Bonds were the first series of bonds issued under the District’s 2020 $735 million Measure Y bond authorization. Series 2021 proceeds were used for capital projects and the Series 2021B Bonds were issued to fund the District’s headquarters lease until 2023. Series 2021 Refunding Bonds were issued to advance refund outstanding debt for debt service savings.

Underlying ratings of A1/NR/NR and all maturities except for the Series 2021B Bonds were insured by Build America Mutual. SWS proactively supported the District and its Municipal Advisor on the rating agency presentation and led the efforts for the investor presentation.

Preceding the week of pricing, the municipal bond market saw a rise in both the benchmark tax-exempt and taxable yield curves due to inflationary pressures and tapering discussions along with widening credit spreads because of a robust primary market calendar as issuers were looking to avoid the next FOMC meeting on November 3rd where there might be significant volatility from a rate decision.

The weakening municipal bond market was certainly challenging, but SWS’s pricing strategy focused on developing a book of orders comprised of investors who thoroughly understood the District’s general obligation bond credit through numerous one-on-one investor meetings over the years that SWS had facilitated. The participation of these anchor investors was a testament to the proactive engagement of the District with those investors in prior bond sales. 17 investors from previous SWS senior-managed OUSD bond issuances submitted orders.

Despite the weak market environment, the Series 2021A Bonds were all fully subscribed for from 1.0x to 2.1x and the taxable Series 2021B and 20210 Refunding Bonds were also fully subscribed for (except for the 2026 maturity) at 1.0x to 3.4x. Series 2021A Bonds: $199 million in priority orders from 16 different investors – potentially 8 new investors. Taxable Series 2021B & Series 2021 Refunding Bonds: $317 million in priority orders from 17 different investors – potentially 9 new investors. The District had the same coupons as the Stockton USD’s higher rated GO bond offering, which priced on the same day, in four maturities. The District’s bonds priced tighter than Stockton USD’s higher rated in three maturities and matched them in one. Oversubscription allowed SWS to lower spreads 2 – 3 bps for the Series 2021A Bonds and 2 bps for Series 2021B and Series 2021 Refunding Bonds.

SWS stepped up to underwrite $1.23 million in unsold bonds. With the SLGS window closed, the open market securities escrow was bid out and received four bids – the lowest bid providing a $194,014 benefit over SLGS. The Series 2021 Refunding Bonds generated total gross debt service savings of $12.02 million and PV savings of $9.23 million (9.01%).