Pennsylvania Turnpike Commission
Turnpike Subordinate Revenue Bonds, Series B of 2014
Siebert Brandford Shank supports Turnpike Commission’s transaction in secondary market by purchasing over $10 million in bonds
The Bonds priced in October 2014 and were issued to finance the Commission’s payment of half of a constitutionally mandated annual payment to the Pennsylvania Department of Transportation to fund grants to mass transit agencies and for multi-modal projects.
We worked with the Commission and its Financial Advisors to develop a structure utilizing a back-loaded debt service that allowed the Commission to lock in low long-term interest rates and maximize debt service coverage by amortizing principal after the years with the most constrained coverage.
Preceding pricing, interest rates decreased as much as 20 basis points due to many factors including weakness in the equity markets. The morning of pricing AAA MMD yields reached levels within 40 basis points of historical lows while the Treasury market experienced significant intraday volatility. As a result of major bumps in MMD and volatility in the bond market, investors were reluctant to participate in the primary market offerings later in the week, and several transactions were forced to widen their spreads to accommodate investor demand.
We began the order period at aggressive pricing levels despite the market weakness. After the order period, unsold bonds still remained so we worked with investors and the Commission to develop an optimal couponing structure to minimize the re-pricing necessary to reach investor demand. With interest rates at extremely low levels, we adjusted the 2039 and 2044 term bonds to include 5.25% coupons instead of the initially offered 5.00% coupons, leading to increased future refinancing flexibility. $210.7 million in priority orders were received, 99.5% of which were placed by our firm.
The week following pricing, Siebert Brandford Shank supported the Pennsylvania Turnpike Commission’s transaction in the secondary market by purchasing over $10 million in bonds from institutional accounts.