City of San Antonio, Texas
Water System Junior Lien Revenue Refunding Bonds, Series 2017A
Third successfully senior-managed deal for San Antonio Water System saves $7.5 million for issuer
On January 31st SCS priced our third senior-managed transaction for the San Antonio Water System (“SAWS”). The bonds, rated Aa2/AA/AA, were used to current refund the outstanding 2007A junior and 2007 senior lien obligations.
To minimize negative arbitrage and increase debt service savings, SCS recommended a maximum 30-day window between pricing and closing to ensure no pricing penalty.
In the week prior to pricing, MMD increased sharply compared to the second week of January, especially in the long end. In anticipation of pricing, our team engaged in extensive market outreach and facilitated Q&A with investors which resulted in orders submitted.
Out of the six underwriters, SCS’ price views were the most aggressive but still relatively conservative, reflecting our understanding of the market volatility and our conviction in the strength of SAWS’ credit. On the day of pricing, the market stabilized and saw increased support on the front end, where SCS tightened by 3 bps before entering the order period.
Due to our strong marketing and pricing approach, the deal was oversubscribed by an average of 3.5x and SCS tightened pricing spreads by up to 5 bps on final pricing. Further, there were potentially 33 new investors who did not previously report holding SAWS’ credit in their portfolio.
SCS’ sales desk submitted $243 million in priority orders, accounting for 83% of the priority orders placed by the underwriting team. In total, SCS helped SAWS achieve a savings of $7.5 million, equaling 7.49% of refunded par.