Oakland Unified School District’s General Obligation Bonds (Election of 2012) Series 2019A and Series 2019B (Taxable) priced on Thursday, August 1, 2019 with Siebert Cisneros Shank serving as senior manager.
The Series 2019A&B GO Bonds were SCS’ fifth consecutive senior-managed transaction for the District. SCS’ wealth of experience coupled with its built-up institutional knowledge of investors’ appetite for the credit allowed it to successfully navigate a volatile market environment and price the transaction at aggressive interest rate levels.
Investor outreach strategies inclusive of an early EMMA notice several weeks before pricing, an online investor presentation, and one-on-one investor calls gave the District the potential to reach a larger investor universe. SCS also suggested that the POS be posted two weeks in advance of pricing with the intention of giving investors ample time to review the District’s underlying credit and present its Citywide Plan and Fiscal Vitality Plan to those potential investors.
To ensure that the couponing structure of the transaction complied with California’s legal limitation on the original issue premium, SCS marketed the transaction with 4% coupon serial bonds from 2033 through 2037 and a 3% coupon term bond in 2040. SCS was able to limit the premium generation further by offering the transaction with an 8-year par call with no additional pricing penalty on the yield-to-call.
In the days leading up to the transaction, the FOMC announced the first interest rate cuts in over ten years and a new 10% tariff was placed on $300 billion of Chinese goods. Taken together, these factors adversely affected the equity markets and caused a flight to quality, working to the benefit of the municipal bond market.
At the time of pricing, bond insurance was cost effective and enabled the District to satisfy investor interest at the AA credit level.
The tone of the market was strong prior to the start of the order period, leading SCS to recommend reducing pricing spreads by 2 basis points for the 2033 through 2040 maturities.
SCS’ sales desk generated approximately $737 million in institutional orders (4.2x oversubscribed), compelling SCS to lower interest rates by 3 to 8 basis points throughout the curve for the Series 2019A tax-exempt bonds and by 2 basis points for the Series 2019B taxable bonds.
Out of the current holders of OUSD debt, 14.1% placed orders for the Series 2019 A&B Bonds. 43.8% of the firms that had reviewed the investor presentation placed orders for the 2019 A&B Bonds. Two-thirds of the investors who participated in the one-on-one calls with the District also placed orders for the Bonds. In total, the transaction received orders from 39 different institutional investors, 27 of whom were new investors for the District.
Compared to the District’s 2017 transaction, which was rated Aa3/AA-/AAA, the strong market environment helped the lower-rated Series 2019A Bonds generate pricing spreads 1 to 6 basis points lower than the comparable 5% coupon bonds in the 8-year to 13-year maturities.
Overall, the transaction priced successfully with an all-in TIC of 2.95% and an average life of 14.5 years.