New York State Environmental Facilities Corporation
State Clean Water and Drinking Water Revolving Funds Revenue Bonds
(New York City Municipal Water Finance Authority Projects—Second Resolution Bonds)
Series 2018 B, Subordinated SRF Bonds
Retail: November 13, 2018
Pricing: November 14, 2018
Closing: November 29, 2018
Ratings: Aaa/AAA/AAA (Moody’s/S&P/Fitch)
Transaction allows NYS EFC to finance or refinance NYW’s water pollution control projects and drinking water projects at below market costs
This was the Firm’s fourth senior-managed transaction for EFC since 2015 and its first under the New York Water program since June 2015.
Purpose Proceeds were used to finance or refinance NYW’s water pollution control projects and drinking water projects at below market costs
Credit The bonds are secured and collateralized with “mirror bonds” issued by NYW to EFC and other available EFC equity funds.
Structuring SCS provided an extensive structuring analysis prior to pricing, evaluating the use of both EFC’s traditional blended loan model as well as a hybrid model that sought to optimize investment returns on the use of EFC Equity and to grow the revolving fund program.
Market Conditions The week prior to pricing, market opened with a reserved tone in anticipation of the Mid-Term Election on Nov. 6th, before improving following the anticipated election result. Munis trended lower in yields throughout the remainder of the week despite a challenging 30-Year Treasury auction on Wednesday the 7th.
- Taking advantage of a stronger tone in the market during retail order period, SCS offered bonds at 1 to 3 bps lower than consensus scale.
- Retail friendly 3.375% & 4% coupons were used in 2033 and 2038, respectively.
- Prior to institutional pricing, SCS engaged numerous institutional investors to assess demand for various coupon structures, resulting in lengthening the serial bonds offered.
- EFC limited retail investors to 50% of par in maturities from 2029 to 2048 during retail.
- EFC received $293.6 million in total retail orders against $119.7 million offered.
- All maturities from 2019 to 2032 (all with 5% coupons) were oversubscribed for by between 1.73x to 6.04x.
- Spreads were reduced by 2 to 5 bps for these maturities heading into institutional order period.
- SCS offered 5% coupons for all remaining bonds and extended the serial bonds to 2039 during institutional order period.
- Institutional investors placed an additional $484.8 million in priority orders.
- Total subscription levels for all maturities ranged from 1.0x to 5.04x.
- SCS was able to further reduce spreads by 1 bp from 2029 to 2035, 3bps on the 2043 Term Bond, and 2 bps on the 2048 Term Bond.