San Antonio Water, Series 2013E

City of San Antonio (TX)
Water System Junior Lien Revenue & Refunding Bonds,
Series 2013E

City of San Antonio transaction highly successful despite turbulent market

The San Antonio Water System (SAWS) bonds priced in October 2013 with Siebert Brandford Shank as book-running senior manager. With a strong credit profile and experienced staff, the success of the SAWS’ transaction was fully dependent on how well the underwriting team navigated the municipal market turbulence in light of concurrent political issues—the federal budget and debt ceiling strife and ongoing government shutdown.

Entering the week of pricing, the municipal bond market was a bit skittish as investors were not willing to commit early and the Treasury and municipal bond markets were lower in early trading. With investors sitting on the fence with a wait and see approach, we considered various couponing structures to attract the largest universe of investors.

Within the first forty minutes of the order period there were $46.0 million in orders. They were mainly concentrated in the front end of the transaction with the 2017 through 2019 maturities completely subscribed for. After an hour, the only maturity not fully subscribed for was the 2029 maturity which had approximately $300,000 in unsold bonds remaining and the 2027 to 2028 maturities were only subscribed for on a member basis. By the end of the order period, the hard work put in by our sales force paid off as one of the investors who was on the fence, picked up the 2026 through 2029 maturities on a priority basis. This meant all bonds were accounted for on a priority basis with nearly all the front end maturities heavily oversubscribed.

With the transaction oversubscribed, pricing spreads were decreased from 1 to 10 basis points and despite large pricing spread decreases in the front end of the transaction, only one investor dropped. Compared to SAWS’ prior junior lien Revenue bond issuance in May, the Series 2013E Bonds had lower pricing spreads by approximately 4 to 12 basis points. Siebert Brandford Shank also generated $186 million in priority orders which accounted for 93% of the total priority orders submitted by the underwriting team.