Jackson Public School District’s offering priced on November 15, 2018 with an insured rating of “AA (Stable)” and an underlying rating of “A+ (Stable)” both by S&P.
The 2018 Bonds were issued for the purpose of purchasing, erecting, repairing, equipping, remodeling and enlarging school buildings and related facilities; as well as providing necessary water, light, heating, air conditioning and sewerage facilities for school buildings.
Concurrently with the issuance of the 2018 Bonds, Build America Mutual Assurance Company (“BAM”) issued its Municipal Bond Insurance Policy for certain maturities of the 2018 Bonds.
Effective Investor Outreach
In preparation for the offering, SCS assisted the District in creating a detailed investor presentation that was viewed by 12 investors, 5 of which ultimately placed orders for the transaction.
Market Tone Leading up to Pricing
In the week leading up to pricing, the market moved in a positive direction, despite the Brexit negotiations and geopolitical tensions with Saudi Arabia dominating the news. The 5-, 10- and 20-year MMD were 6 bps, 7 bps and 9 bps lower respectively, compared to the prior week, which helped decrease the District’s borrowing costs on this transaction.
On Tuesday, November 13th, the markets opened relatively quiet and unchanged from the previous day. SCS received price views from the syndicate on the afternoon of November 13 and recommended tightening spreads by 5 bps in the 2019-2022 maturities and 3 bps in the 2023 maturity for premarketing. The bonds were pre-marketed on November 14 following a syndicate pricing call.
On the morning of pricing, November 15, due to interest received in alternative coupon structures during the premarketing period, SCS recommended switching to 5.25% coupons in the 2035-2038 maturities. At the conclusion of the two and a half hour order period, the bonds in 2019 through 2028 were oversubscribed by 2.5x to 5.1x.
Based on the strong performance in the front part of the curve, our desk recommended tightening spreads by 1 – 4 bps in the 2019 – 2027 maturities.
With the lowest amount of demand in the 2029 – 2035 maturities, our desk recommended widening spreads by 4 – 5 bps in 2029 – 2033, switching to 4% coupons in 2034 and 2035, and running a second order period limited to those maturities to allow investors to place orders on the revised structure.
At the conclusion of the second order period, the 2029, 2030, 2034 and 2035 maturities received approximately 1x subscription, with balances remaining in 2031 – 2033. SCS took about $10.9 million of bonds into inventory, or 16.8% of par.
22 different investors placed orders for the District’s bonds, 5 of which viewed the District’s investor presentation. The District generated an all-in TIC of 3.98%.