City of Los Angeles Department of Water and Power
Power System Revenue Bonds, 2016 Series A
LADWP’s Power System revenue bonds garner robust retail sales and achieve tight pricing spreads.
Siebert Cisneros Shank (as Siebert Brandford Shank) served as the book-running senior manager for the City of Los Angeles Department of Water & Power’s $275 million 2016 Series A Bonds to fund capital improvements to the Department’s Power System and refund certain of its Series 2007A Bonds. The “Aa2/AA-/AA-” rated Bonds were sold on May 4, 2016.
The transaction was originally scheduled for retail pricing on May 4th and institutional pricing on May 5th. Given the extensive pre-marketing efforts resulting in a robust book of retail orders of over $224 million by mid-day on May 4th, as well as a firm tone in the market, after discussion with the Department SBS terminated the retail order period early and completed the pricing on May 4th.
The financing was structured with principal amortizing from 2018 to 2046 (serials 2018-38 and term bonds in 2040 and 2046) utilizing a hybrid wrap around debt service approach for the new money portion to cater to a broad range of investors and create a more level overall debt service profile for the Department.
The Bonds were very well received and generated over $1.38 billion of orders in total (5 times available allotments). While there were some balances in the 2020-21 maturity range during the order period, the Department and its Financial Advisor decided to take advantage of the over subscriptions in other maturities by restructuring the new money amortization and adjusting the refunding candidates.
The transaction attracted a very large number of investors including the participation of 73 different buyers. Significant buyers on the transaction included Vanguard, BlackRock, JP Morgan, Morgan Stanley, Franklin Funds, Gannett Co., Inc., Lord Abbett, Samson Capital Management, and Eaton Vance. The strong demand allowed spreads to be tightened by up to 8 basis points.
Other comparable financings sold during the week included the “AA-/A+” rated $72.615 million City of Glendale (CA) Electric Revenue Bonds that were priced at 15 basis points over MMD with a 5% coupon in the 2038 final maturity (via competitive sale) compared to the Department’s bonds in the same maturity that were priced at 10 basis points over MMD.
The 2016A Bonds achieved the lowest 30-year yield and tightest spread to MMD of any Power System bond issue sold by the Department. Additionally, the refunding achieves approximately $10.5 million of PV savings. 2016A Bonds had a TIC of 3.265% and Average Life of 17.2 years.