On November 15, 2022, the New York City Municipal Water Finance Authority (“NYW”) priced $750 million of Second Resolution Revenue Bonds, Fiscal 2023 Series AA, Subseries AA-1, AA-2 and AA-3 (the “Bonds”). The Bonds were rated Aa1/AA+/AA+ by Moody’s, S&P and Fitch, respectively. Bond proceeds were used to fund capital improvements, refund certain outstanding bonds and pay costs of issuance. Loop Capital assisted NYW in developing a comprehensive internet roadshow, primarily aimed at addressing the credit highlights and legal protections inherent in the structure, and the financial strength of NYW. The roadshow was viewed by 58 research analysts and investors.
The transaction was the largest negotiated transaction of the week. The Bonds priced during volatile market conditions with the Fed having raised the Fed Funds rate 375 bps in 2022. However, lower-than-expected October Consumer Price Index inflation rate on November 10 spurred a rally in the fixed income market with the ten-year Treasury and MMD decreasing by 28 bps and 12 bps, respectively. This improvement in the market increased the savings enough so the refunding component which was originally “out of the money” now met NYW’s refunding threshold. The benign Producer Price Index release on the morning of the retail order period reinforced the favorable market tone. As a result, Loop and NYW decided to accelerate the Institutional Pricing after only half day of retail order period. Ultimately, orders were placed by 85 unique accounts. The retail order period generated $445.6 million in orders, followed by an institutional order period that generated $3.3 billion in orders, resulting in at 4.6x oversubscription. Despite market volatility, NYW achieved superior pricing results. Due to strong subscription levels, the Firm was able to lower yields by 5 to 8 bps from the retail order period, and lower up to an additional 10 bps depending on the maturity in the final pricing.
The refunding of the Series 2013BB 5% coupon bonds generated $16.3 million PV savings, or 5.67%, and $32.0 million of cashflow savings for a TIC of 4.63%. Because of the overall subscription and the need for additional new money proceeds, the par amount was increased from approximately $682 million to $750 million.