This financing funded capital improvements to the System and DC Clean Rivers Project. Additionally, it advance refunded outstanding Public Utility Subordinate Lien Revenue Bonds, Series 2013A. Siebert Cisneros Shank served as senior manager on the Series 2019A (Green Bonds) and 2019B Bonds and served as book-running co-senior manager on series 2019D Bonds.

The Bonds are secured by a subordinate lien of the pledge of Net Revenues.

Structuring Analysis

SCS evaluated and identified taxable advance refunding candidates with high PV savings, high efficiency, and low breakeven spreads. We analyzed the utilization of a make-whole call vs. a 10-year par call, and utilized a par call to preserve the call option. The new money bonds were structured to meet DC Water’s financing objectives. We placed Green Bond maturities to optimize investor demand.

Rating and Credit

SCS helped develop rating agency presentations, including a Fitch surveillance package, which ultimately resulted in a Fitch rating upgrade from AA- to AA.

Marketing Strategy

SCS developed an investor presentation which was viewed by 56 different investors, 38% of whom submitted orders. Two professionals from SCS’ underwriting desk were dedicated to this transaction—one for the tax-exempt series and one for the taxable series.

We utilized a combination of serial and term maturities to achieve the lowest overall cost of financing. A 4% coupon was utilized on the longest tax-exempt term bonds (2049) in combination with a 5% coupon on the 2044 term bonds to achieve optimal pricing results. For the taxable structure, SCS created an index-eligible term bond in 2048, totaling $303.9 million, to attract the broadest investor participation.

Tax-Exempt Pricing Results

Pre-marketing was aggressive and there was a favorable market tone leading up to the pricing. $1 billion in priority orders were received (6.2x oversubscribed) from 44 different investors and as a result, spreads were tightened by 2 – 8 bps across the yield curve.

Taxable Pricing Results

The issuance was successfully marketed with a 10-year par call, while a comparable transaction in the market ($525 million issue in Nebraska) was unable to execute its transaction, and had to utilize a make-whole call structure.

The transaction received $844 million in priority orders (2.5x oversubscribed) from 47 different investors during the “indication of interest” period.

Spreads were tightened for “price guidance” by 2 – 3 bps in the 2022, 2023, 2032, 2039 and 2048 maturities. As Treasuries rallied, spreads were lowered by another 1 – 3 bps for maturities in 2022, 2023 and 2048 during the final “launch”.

SCS was able to achieve strong timing and execution on the 30-year maturity as Treasuries rose 17 – 20 bps later in the week. $1.4 million of bonds maturing in 2025 were underwritten at the initial pre-pricing level.

The final taxable refunding structure, including an OMS escrow, generated $50.8 million in NPV savings (16.9% of refunded par).