On March 24, 2022, Loop Capital Markets served as Sole Manager and Remarketing Agent on Texas Transportation Commission’s (the “Commission”) $300 million State Highway Fund First Tier Revenue Bonds, Series 2014-B (Variable Rate Demand Bonds). Sumitomo Mitsui provided the Standby Letter of Credit (same as the prior Series 2014B-1 Weekly-Reset VRDBs with an expiration date of October 2026) with short-term ratings of A-1 by S&P and VMIG1 by Moody’s.
The financing merged two subseries ($150 million 2014-B1 Weekly-Reset VRDBs and $150 million 2014-B2 LIBOR FRNs) into a single series ($300 million 2014-B Weekly-Reset VRDBs, which is considered a new issue for tax purposes). To affect this restructuring, investors mandatorily tendered their Subseries 2014-B1 and 2014-B2 Bonds to Loop Capital Markets, who in-turn remarketed the Bonds as the single Series 2014-B Weekly-Reset VRDBs. At the request of the Commission, the Firm’s short-term underwriting desk took over the remarketing early and remarketed the Subseries 2014B-1 Bonds during a stub period preceding the mandatory tender. The Commission wished to retain variable rate exposure in light of the rising interest rate environment in order to diversify its debt portfolio, hedge its sizeable cash position, and capture interest savings vis-à-vis a long-dated financing.
Loop Capital Markets’ short-term desk began pre-marketing the transaction immediately following the release of the remarketing memorandum. At least 35 investors were contacted across a variety of account types, including money market funds, trusts, investment advisors, SMAs, bonds funds, corporations, and state and local government investment staff. Loop Capital Markets worked with bond counsel to answer investor questions regarding the credit and liquidity agreement, resulting in many investors approving the credit, which will maximize investor participation over the life of the remarketing. Investor feedback was provided to TxDOT, including the reasoning as to why some investors didn’t approve the credit.
At least fifteen accounts participated in the inaugural remarketing resulting in 2x oversubscription. Participating accounts included a variety of investor types, including: Money Market Funds, Bond Funds, and SMAs. Immediately preceding the remarketing, SIFMA reached 49 bps given pressure from tax season and the overall municipal market selloff, which was the highest level since the market dislocation at the beginning of the COVID-19 pandemic.