Atlanta Water and Wastewater Revenue Refunding Bonds, Series 2017A

City of Atlanta
Water and Wastewater Revenue Refunding Bonds, Series 2017A

City of Atlanta achieves strong pricing results despite a run-up in MMD on the day of pricing

Siebert Cisneros Shank senior managed the City of Atlanta’s Water and Wastewater Revenue Refunding in April 2017. Bond proceeds were used to advance refund a portion of the City’s Water and Wastewater Revenue Bonds, Series 2009B.

SCS developed an investor presentation for potential buyers to highlight the ongoing credit strengths since the City’s last transaction in 2015 and outline forecasted scenarios for potential expiration of the sales tax revenues. The presentation was viewed by 39 institutional investors, 13 of whom ended up participating on the transaction and placing nearly $128.9 million in orders.

The Bonds were rated “Aa2/AA-/A+” by Moody’s, S&P and Fitch, respectively, with Moody’s upgrading the Bonds prior to the transaction, citing sound coverage and ample liquidity sustained despite significant capital investment.

Despite unfavorable market conditions—where MMD yields started increasing at the end of the week prior to pricing and were up by as much as 5 basis points on the day of pricing—SCS led a very successful pricing for the City. The firm pre-marketed the bonds on Monday at a +35 bps spread on the longer bonds, which was on the tighter end of the price views and the final spreads for recently priced higher rated water and sewer transactions.

Given the negative tone in the market and a sell-off in U.S. Treasuries the morning of the pricing, the firm proposed using slightly wider spreads than were used for pre-marketing to gain some traction with investors and consequently get back down to pre-marketing levels. Both 4% and 3.5% coupons were sold to diversify the participation on the transaction.

After the order period the total transaction was 2.8x oversubscribed with the bonds generating more than $634 million of orders, $632 million of which came from SCS. As a result of the strong order period, spreads were tightened 1 – 4 basis points throughout the curve at re-pricing.

The City locked in approximately $27.5 million of PV savings on the refunding with an all in total interest cost of 3.49%.