Santa Clara Valley Water District
Refunding and Improvement Certificates of Participation, Series 2017A
The District locked in PV savings of more than $8.9 million, achieving its goal to finance improvements to its Watersheds and provide cash flow savings to its general fund
Siebert Cisneros Shank served as book-running senior manager on the Santa Clara Valley Water District’s Refunding and Improvement Certificates of Participation in February 2017. The Bond proceeds were used to current refund the District’s outstanding Series 2004A and Series 2007A Refunding and Improvement Certificates of Participation for savings. The District will use a portion of these savings to finance certain capital improvements at four of its Watersheds.
The Certificates are payable from Installment Payments secured by a pledge of the District’s Flood Control System Revenues. They were rated “Aa1/AA+” by Moody’s and Fitch respectively.
Since the District had not brought this credit to market in several years, our firm developed an investor presentation for potential buyers.
Given the volatility in the market in the months leading up to the pricing, SCS worked closely with the District’s staff and Municipal Advisor to monitor the PV savings generated by the refunding. Despite challenging market conditions—where MMD yields started increasing at the end of the week prior to pricing and by up to 5 basis points on the day of pricing—Siebert Cisneros Shank led a very successful pricing for the District.
With the weaker market tone compared to the previous week, we proposed using the same spreads that were used for pre-marketing but adjusted for MMD movement that occurred the day prior to pricing. Structured as serial bonds maturing 2018 – 2030, the Certificates were offered at spreads to MMD of 0 to 20 basis points at the time of preliminary pricing.
Despite volatile market conditions, SCS and the co-manager garnered significant support from investors as a result of strong pre-marketing efforts. The Certificates generated more than $209 million of orders, including $1.9 million of individual retail orders and approximately 24 new investors of the District’s credit.
As a result of the strong order period, SCS proposed tightening spreads 2 – 7 basis points throughout the curve at re-pricing; given the increases in MMD on the day of pricing, the spreads ended up at -7 to 14 basis points to MMD. A comparable credit sold the prior week for California State University had priced at -8 to 23 basis points to MMD in the corresponding maturities and the District’s COP transaction in 2016 had priced at 3 to 20 basis points over MMD as of the day of pricing.
The District locked in more than $8.9 million of PV savings on the refunding and achieved its goal of financing certain improvements at its Watersheds as well as providing cash flow savings to its general fund.