Oakland USD 2016 GO

$220,780,000
General Obligation Bonds, Series 2016A & 2016 Refunding
(August)

Oakland School District’s 4th consecutive deal with SCS as senior manager saves District $38 million

In August our firm served as sole manager for the Oakland USD’s $65 million Series 2016A GO Bonds and $156 million 2016 GO Refunding Bonds—the 4th consecutive deal with SCS as senior manager.

The Series 2006 and 2009A GOs were refunded to produce enough savings for the District to issue $65 million authorized but unissued Measure B bonds.

Ratings strategy. After several years of issuing non-rated debt, the District’s new management team successfully completed five years of audits within a three-year period, concluding with the completion of the fiscal year 2014 – 15 audit in June. We worked with the District to obtain ratings for the first time in over five years, resulting in ratings of Aa3/AA-/AAA (Moody’s/S&P/Fitch).
Marketing. To attract investors’ attention and prepare them for the forthcoming ratings update, we worked with the District to prepare and release a press statement to EMMA 21 days before pricing, notifying investors that the District had completed its FY 2015 audit and intended to pursue a credit rating. We also assisted the District in crafting an additional EMMA notice during the week of pricing to communicate to investors that the District intended to comply with its previous covenants to pursue ratings on its previously non-rated bonds.

Subsequent to the POS posting one week before pricing, SCS designed an investor presentation which highlighted the District’s strong tax base.

Pricing & Results. Pricing occurred during the second highest week of primary market supply to date in 2016. The refunding bonds were structured as serials amortizing from 2017 to 2031 primarily with 5% coupons and the new money bonds were structured as serials amortizing from 2020 to 2036, as well as a term bond maturing in 2041 with sinkers between 2037 and 2040.
We structured a 3% discount term bond in 2041, 4% coupon bonds in 2020 – 2027, and 4% coupon bonds in 2032 – 2036 to attract additional investors and comply with premium restrictions. 43 new investors submitted orders as well as 10 current investors, resulting in an oversubscription of 2.22 times. As a result of the strong investor interest, spreads were re-priced lower across every maturity from 1 to 6 bps.

The Series 2016 Refunding Bonds produced $38.6 million of PV savings, or 21.1% of refunded par. The Series 2016A Bonds priced with an All-in TIC of 2.81% and an average life of 16.0 years.