Nearly a dozen students attend a “Bond Finance 101” presentation during the order period and watch as the underwriting syndicate builds an impressive book of institutional orders
Siebert Cisneros Shank served as the senior manager for Fort Worth Independent School District’s Unlimited Tax School Building Bonds, Series 2018 on April 11, 2018. This was SCS’ first senior-managed transaction for the District, which was awarded as a result of SCS’ strong performance as a co-manager on previous District bond issues and dedicated and persistent banking coverage.
The Series 2018 Bonds were the District’s first installment of a $750 million bond program passed in an election held in November 2017 for the purpose of improving learning programs such as Science, Technology, Engineering, and Math (STEM) and Career and Technical Education (CTE), making upgrades to libraries, fine arts, athletics and infrastructure items at 14 high schools, and addressing current classroom overcrowding, as well as preparedness for future population growth. The bonds were structured as a 25-year amortization, level debt service, and a traditional 5% coupon structure. The Bonds were guaranteed by the Texas PSF program and received an “Aa1” underlying rating from Moody’s with a stable outlook and a “AA” underlying rating from S&P with a stable outlook.
The transaction entered the market against the backdrop of rising tensions between the United States and Russia over the situation in Syria, where a US missile strike seemed imminent. This looming geopolitical conflict caused a flight to quality, resulting in a positive tone in the fixed income markets. SCS was able capitalized on these favorable market conditions because of the robust comprehensive marketing strategy which began more than a week before the transaction. With efforts by the underwriting desk through its unique pre-marketing activities and even by SCS’s bankers. SCS’s bankers showcased their municipal market clairvoyance by understanding that the District’s large urban and demographic profile would fit the investing appetite of social impact funds. In a major effort to expose the transaction to the largest possible universe of potential buyers, SCS reached out to social impact funds such as AllianceBerstein’s Impact Municipal Income Shares, which reviews and scores each issuer based on environmental, social, and governance criteria for portfolio inclusion. This outreach resulted in a $4 million order by an affiliated fund. Additionally, SCS received inquiries from State Farm, one of the largest holders of the Texas PSF bonds. State Farms questions also included understanding the District’s positive impacts on the local community. SCS was able to provide State Farm information regarding some of the District’s unique initiatives to improve lower performing schools and ultimately State Farm submitted $20 million in orders.
SCS also worked with the District and its financial advisor to conduct a Bond Finance 101 during the order period at the District’s offices. During the presentation, nearly a dozen students watched as the underwriting syndicate, led by SCS, successfully built an impressive book of institutional orders which resulted in all maturities oversubscribed (with the exception of the 2020 maturity).
SCS generated over $1 billion in institutional orders, including over $380 million in orders from notable investors such as Susquehanna Financial Group, Old Orchard Capital Management, Citibank Arbitrage Account, Vanguard and 16th Amendment Advisors, all whom were not current holders of the District’s bonds. Oversubscriptions ranged from 1.3x to 10.7x. With this heightened investor demand, our desk proposed reducing spreads by 3 to 6 bps.