Siebert Cisneros Shank’s second consecutive deal for this credit as book-running senior manager
Priced on June 12, 2018, this was the Siebert Cisneros Shank’s second consecutive deal for this credit as book-running senior manager, having senior managed the City’s prior transaction in 2017.
The Bonds were rated “Aa2/AA-” by Moody’s and S&P, respectively. Bond proceeds in addition to a release in debt service reserve funds, were used to “fix-out” a portion of the City’s outstanding variable rate debt portfolio (maturing 2039 – 2041). Prior to pricing, cash-on-hand was used to terminate the associated swap.
In the year prior to the transaction, our firm had provided the City several unsolicited financing considerations relating to the remarketing of its existing variable rate and monitoring of its outstanding swaps. On Monday, June 11th, SCS requested price views from the syndicate for both 5% and 4% coupons to better gauge possible pricing benefits of a 4% coupon for the City. After discussions with investors, we recommended the use of 5% coupons as the most optimal approach to leverage interest to further yield reduction.
On Tuesday, SCS released a moderately aggressive preliminary pricing wire, hoping to capture some scarcity value in the City’s name, with the 2039 – 2041 maturities pricing at spreads of 28 bps off AAA MMD. After the order period, priority orders reflected a 4.2x oversubscription with the transaction generating more than $217 million of priority orders, $212 million of which came from SCS. Fifteen different investors placed orders, nine of whom were new investors.
At the time of repricing, there were talks of a 2 bp cut in MMD in the respective maturities—SCS proposed tightening spreads 3 bps in all 3 maturities, bringing them to spreads of 25 bps off of the June 11th MMD.
After repricing, Atlanta’s Series 2018A transaction priced 2 bps tighter than NYC Muni Water’s Series FF higher-rated transaction which priced the same day (Aa1/AA+/AA+). Spreads were 6 bps tighter than the City’s transaction SCS priced in 2017.
Given SCS’ strong marketing and pricing results, the City was successfully able to “fix-out” $107 million of its variable rate debt at an all-in TIC of 4.15% and a reduction in outstanding par of $55.79 million.