Deals 05/23/2023

Loop Capital Markets Serves as Bookrunning Senior Manager and Lead Tender Dealer Manager for $636.580 Million CPS Energy Revenue Refunding Bonds, New Series 2023AB

On May 23, 2023, the City of San Antonio, Texas – Electric and Gas Systems (CPS Energy) priced its $636.580 million Revenue Refunding Bonds, New Series 2023AB with Loop Capital Markets serving as the bookrunner and lead dealer manager for the tender financing. Since 2021, there have been many tender offers in the municipal market, and this transaction represents the largest tender offer in the State of Texas during this timeframe.

The New Series 2023A Bonds were issued to takeout $500 million of commercial paper that initially financed Winter Storm Uri costs, and the New Series 2023B Bonds were issued to purchase the accepted tendered bonds. $823.610 million of CPS Energy’s Taxable New Series 2020 and Taxable New Series 2022 Bonds were offered for tender. Of which, $218.935 million (or 26.580% of the offered amount) of the target bonds were tendered by investors and accepted by CPS Energy. In connection to the tender, CPS Energy achieved $14.238 million PV savings, or 6.503%  – resulting in $28.579 million of cashflow (gross) savings. The tender for the taxable bonds was financed on a tax-exempt basis. The tax-exempt refunding bonds were sold with 4.00% – 5.50% coupons with a call date in 2033, giving CPS Energy greater option value for the potential future refunding of these Bonds since the refinanced taxable bonds had very low coupons.

The transaction came to market during the current U.S. Treasury debt default discussions, where there was significant volatility in the interest rate markets leading up to the projected June 1st deadline. Despite challenging market conditions, the transaction generated $1.191 billion of total priority orders from approximately 50 accounts, reflecting 1.8x overall subscription. At the end of the order period, there was a balance of $108.960 million. An extended order period was then held for the benefit of the syndicate after the verbal award. At the end of the extended order period, the Firm underwrote $29.775 million of the Bonds.