Connecticut GO 2015 Series B

State of Connecticut
$500,000,000
General Obligation Bonds
(2015 Series B)

Retail advertising campaign proves highly successful for Connecticut GO bonds

Siebert Brandford Shank priced this transaction as book-running senior manager on May 12, 2015. We assisted the State with the execution of an aggressive pre-marketing campaign that included print, online and e-mail advertisements which ran during the 5-days prior to the retail order period, and proved highly successful in attracting retail investors.

Because the State had run retail advertising campaigns for recent G.O. and State Revolving Fund transactions, we recommended utilizing publications that had not been included in the media campaigns for the State’s two other recent transactions.

For the 2015 Series B advertising campaign, SBS introduced the State to geographically targeted e-mail ads to the Bond Buyer’s e-mail distribution list and to subscribers of the “Bond Buyer eNewsletter”. “An Investment in Connecticut’s Future” emails were sent to over 92,000 individuals in the days prior to the retail sale date. Additional email advertisements and animated online banner advertisements, linked to www.buyCTbonds.com, were posted on websites various high-profile news websites for the five days leading up to pricing.

Carrying out the SBS proposed strategy, $280 million of the 2015 Series B bonds were made available for retail investors, with serial bonds offered in the 2018 – 2035 maturity range with select 2027, 2028, 2031, 2033 and 2034 maturities reserved for institutional pricing. The bonds were offered to retail with spreads to MMD for bonds maturing prior to the call date or with 5% coupons ranging from 15 to 44 basis points (“bps”) and for lower coupon callable bond spreads ranged from 74 to 82 bps, representing spreads that were 2 to 4 bps through the consensus scale. Despite a significantly weak market, the SBS-led syndicate generated orders amounting to 10% ($56.1 million) of the transaction during the retail order period, 59% of which were placed by Connecticut retail investors.

Coming into Tuesday morning for the institutional order period, there was a weaker market tone in the market, SBS recommended delaying the institutional order period until a MMD read was available in an effort to manage the market seeking additional spread given market volatility. For the institutional order period, SBS recommended widening spreads 8-20 bps in an effort to sell the balance of the unsold $443.8 million bonds. The transaction received strong support for the transaction from up to 14 existing traditional buyers of the State’s paper totaling 439,630 million in orders. Additionally the SBS-led marketing effort also identified interest from new buyers 55 new buyers of its paper placing a total 271,935 million in orders. At the conclusion of the institutional order period, institutions had placed over $713.9 million in priority orders, which combined with the $56.1 million of retail orders, represented a retail and priority order oversubscription of 1.5 times. A majority of maturities were fully or oversubscribed, with the exception of $17 million of the 2024 and 2025 maturities which Siebert Brandford Shank agreed to underwrite. Given the successful strategy of waiting for the MMD read and SBS’s willingness to underwrite bonds, if necessary, the level of oversubscription allowed for repricing yields on the longest maturity to be lowered by 3bps. Final yields ranged from 0.30% in 2016 to 3.95% in 2035, with spreads for bonds maturing prior to the call date or with 5% coupons ranging from 5-57 bps and for callable bonds with low coupons spreads ranged from 87 to 98 bps. Despite the spreads being a bit wider than the State has experienced in the past, recent transactions including the $1.24 billion State of Pennsylvania G.O. transaction (Aa3 Moody’s/AA- Fitch) that was competitively sold on May 27th experienced spreads in the +70 bps and +110 range for callable bonds with 5% and lower coupons, respectively. As such, the State’s was ability to achieve relatively favorable spread levels resulted in an attractive all-in TIC of 3.559%.