St. Louis Municipal Finance Corporation
Leasehold Revenue Bonds, Series 2015
(Convention Center Refunding and Improvement Projects)
A time-sensitive refunding for St. Louis Convention Center
Siebert Cisneros Shank successfully priced this time-sensitive transaction in January 2015. The Bonds were issued as multi-purpose obligations to advance refund the Series 2008 Bonds and produced significant present value savings, a portion of which was to finance new money projects. The City had a pressing desire to upgrade its closed circuit television system to enhance security and safety of its conference attendees.
Based on several iterations of analytics we provided to the City, $2 million of the debt service savings were targeted for new money proceeds. The transaction was structured to produce level annual savings from 2015 through 2030. The Bonds received an underlying rating of ‘A’ (with Stable Outlook) from S&P. To widen the universe of possible investors, Siebert Cisneros Shank prepared a breakeven analysis for municipal bond insurance; the analytics demonstrated that insurance provided value for all but the 2015 and 2016 maturities.
A massive blizzard warning for the entire Northeast region prompted officials in New York City and Boston to shut down roads and public transit. This impacted numerous municipal bond investors as many funds advised their employees to stay home. As a result, pricing was delayed to allow more investor participation. In addition to $1.7 billion of other municipal bond deals also being delayed, the new pricing date was also a Federal Open Market Committee (“FOMC”) meeting date. Siebert Cisneros Shank addressed this restriction by pricing the City’s Bonds in the morning and securing commitments from investors before the FOMC released its key market impacting statement at 2:00 pm (ET).
We conducted a 90 minute institutional order period concluding 90 minutes before the FOMC released its statement. At the conclusion of the order period, the transaction had $47 million in total orders, including orders for stock. Seven maturities were fully subscribed for and four maturities received no orders. These four maturities were the 2016, 2017, 2019, and 2020 maturities that averaged $65,000 in principal. Only $15 million in priority orders were entered as investors were more selective in the low interest rate environment.
To increase demand, Siebert Cisneros Shank recommended changing the 2026 and 2027 maturities to uninsured 3.00% coupon bonds, bifurcating the 2028 maturity to include a 3.00% coupon, and increasing the yield by three basis points in the 2017 through 2025 maturities. The City accepted our verbal offer and underwriting team ended up underwriting approximately $16.5 million in unsold bonds to support the City’s transaction and set a strong tone for the City’s pending issuances.
Our recommended adjustments at the conclusion of the order period reduced the overall true interest cost (TIC) from 2.899% to 2.859%, (four basis points better). The refunding component of the transaction generated net present value savings of $2.7 million or 12.37% of the refunded par amount. After taking into account the $2 million in new money proceeds generated for the Convention Center projects, the City saved approximately $35,000 per year from 2016 through 2031. On balance the City was extremely pleased with our firm’s nimble execution and the creativity demonstrated by both our underwriting and public finance departments.