On June 28, Loop Capital Markets (“Firm”) served as Senior Manager for a combined $280,845,000 offering of tax-exempt General Obligation Bonds issued by Sacramento City Unified School District (“District”), comprised of $225,000,000 Election of 2020 (Measure H), 2022 Series A Bonds (New Money) and $55,845,000 Refunding Bonds, (collectively, “the Bonds”) rated A3 (negative) by Moody’s, AA by S&P (based on BAM insurance), and AA (stable) by Kroll, respectively.
The Refunding Bonds current refunded the District’s 2012 GO Refunding Bonds, and the Series A Bonds were the first drawdown of the District’s $750 million Measure H authorization.
The Firm worked closely with the District’s Municipal Advisor to tailor the amortization of the Series A Bonds to give the District maximum flexibility for subsequent drawdowns of Measure H, keeping a keen eye on the $60 tax rate indicated to voters under Measure H. Both Loop and the District’s Municipal Advisor recommended applying for a Kroll rating due to our agreement with Kroll’s rating methodology for California K-12 GO Bonds, which focuses on an issuer’s underlying tax base ($40 billion AV in the case of the District), the statutory framework supporting the imposition, collection, and administration of voter-approved unlimited ad valorem tax levies, as well as the statutory lien and oversight mechanisms provided by State law. Our banking team recommended using an 8-year call for the Series A New Money Bonds to sync up with the District’s 2021 Bonds, setting up a potential future “consolidated current refunding.”
Following the posting of the POS, our bankers held a “teach in” call with our sales force to explain the ratings differential and to emphasize the very strong underlying security. To focus our premarketing efforts, we mapped out the top holders of the District’s 2012 GO Refunding Bonds (who will be refunded out), as well as the top holders of the District’s outstanding GO Bonds. Our underwriting desk added a discount 4% coupon and two 5.50% coupon Terms in response to reverse inquiry from an “anchor” order. Our sales force generated over $1 billion in orders from 38 unique accounts, including 12 previous investors and 26 new accounts compared to the District’s June 2021 sale. At the final pricing, the Refunding Bonds generated $4.7 million of gross taxpayer savings, or $3.8 million present value (6.38%). In support of our price views, the syndicate underwrote $21.2 million bonds (approximately 8% of the loan).
On June 8, 2022, Loop Capital Markets (the “Firm”) served as the joint bookrunner for the city of Atlanta, Georgia’s (the “City”) $382.370 million Airport General Revenue Bonds, Series 2022AB (“Series 2022AB GARBs”) and the City’s $164.050 million Airport Passenger Facility Charge and Subordinate Lien General Revenue Bonds, Series 2022CD (“Series 2022CD PFC Bonds” and together with the Series 2022AB GARBs, the “Bonds”). All of the Bonds were rated Aa3 (Stable) / AA- (Stable) by Moody’s and Fitch, respectively.
The Bonds were issued to finance portions of the 2022 Project, which is comprised of new money projects related to the City of Atlanta’s 2026 Capital Plan (including renovations to runways, terminal, parking facilities and supporting infrastructure). The Series 2022AB GARBs had maturities from 2023 through 2052 while the Series 2022CD PFC Bonds had maturities from 2026-2042.
The Firm provided both superior banking coverage in anticipation of the financing (mandated for senior positions on consecutive GARB financings) and exceptional sales efforts during pre-marketing and marketing during a volatile pricing period. Benchmark tax-exempt and taxable rates rose considerably during the days leading up to pricing in anticipation of May’s CPI release on Friday, June 10. In total, the issue was 2.1x oversubscribed with heavy demand flow in the front end. MMD rose 10 bps, but despite the volatility, the Firm and the other senior manager were able to underwrite at or near pre-pricing levels for the AMT bonds and for some maturities of the Non-AMT bonds.
Across all series, over $44 million of priority orders were generated by the Firm. Serving as joint bookrunner, the Firm was allotted $11.4 million bonds across the 4 series. At the verbal award, the senior managers agreed to underwrite the offering with approximately $180 million in unsold balances. By end of day, the underwriting syndicate committed capital to inventory $39 million of bonds in certain maturities from 2028 to 2047. Undeterred by the daunting and volatile market, the Firm was willing to contribute a significant amount of capital on behalf of the issuer. Despite extremely difficult and volatile markets that saw interest rates increase by more than 60 bp on certain maturities, as 40 year inflation highs and a 75 bp increase by the Federal Reserve negatively impacted the market as well.
On May 17, 2022, Loop Capital Markets (“Loop” or the “Firm”) served as Senior Manager on Princeton University’s (the “University”) $300 million Taxable Bonds, Series 2022 (Corporate CUSIP). The Bonds were rated Aaa/AAA by Moody’s and S&P. The Firm also served as Co-Senior Manager on the University’s tax-exempt issuance through the New Jersey Educational Facilities Authority (totaling $300MM), which priced the same day.
The University elected to issue the taxable bonds in a long-dated maturity and issue the tax-exempt bonds in 5-year and 10-year maturities, and Loop assisted the University and its Financial Advisor to develop a Plan of Finance that best captured current market dynamics (e.g., tax-exempt-to-taxable ratios), debt management objectives, and Index Eligibility benefit. Broader Fixed Income Markets had a softer tone leading up to pricing due to concerns around inflation, slowing growth, and an increasingly hawkish FOMC, leading to investors increasingly focusing on credit quality, with greater appetite for high-grade names such as the University. Ultimately, Loop and the syndicate generated over $1 billion in orders and was able to successfully execute a transaction that resulted in a yield of 4.201% to the University.
Immediately following the release of the Preliminary Offering Memorandum, our salesforce and the syndicate actively began the pre-marketing process and contacted a broad range of prospective investors. Loop’s team compiled an investor analysis identifying the University’s top corporate buyers and targeting the top national higher education taxable bond holders. The Firm also facilitated a one-on-one call with an existing investor and the University that led to a large order which helped drive leverage in the order book.
A total of 57 accounts participated in the transaction, resulting in over $1 billion of orders, or 3.5x oversubscription. Participating accounts included a variety of investor types, including Insurance Companies, Bond Funds, Prop/Trading Accounts, Money Managers, Investment Advisors, ETFs and Banks. The transaction also had a strong reception from International Investors. The Firm targeted Insurance Companies during pre-marketing as likely to participate strongly in the transaction and these investors ultimately composed 43% of the initial order book. Due to strong subscription levels, the Firm was able to tighten spreads by 10 basis points to achieve a final spread of +100 bps.
Loop Capital Markets served as joint bookrunner for a $500 million taxable financing for Harvard University on April 11th. The financing was a direct issuance of Harvard using a corporate CUSIP. The bonds were structured as a 30 year bullet, rated Aaa/AAA by Moody’s and S&P, respectively, and were priced at a spread to the 30 year Treasury plus 90 bps for a yield of 3.745%. The offering was completed in a day starting with an Indications of Interest (IOI) period in the morning with a spread of plus 105 and going directly to a launch with a spread tightening of 15 basis points to plus 90 bypassing the typical price guidance phase.
The transaction received strong subscription levels with three orders generated by Loop Capital which were from one of the largest global asset managers, an insurance company, and a hedge fund. This financing was the first component of a two-part financing from Harvard including a 10-year tax-exempt Green Bond to be issued by the University through the Massachusetts Development Finance Agency which is expected to price in early May 2022.
On March 30, 2022, Loop Capital Markets served as the Book Running Senior Manager for the NYC Transitional Finance Authority’s $950 million Future Tax Secured Subordinated Bonds, Fiscal 2022 Series F, Subseries F-1. The Bonds were rated Aa1 (Stable) by Moody’s, AAA (Stable) by S&P and AAA (Stable) by Fitch. Bond proceeds will be used to finance general City capital expenditures. Additionally, $300 million of Fiscal 2022 Subseries F-2 and F-3 (Taxable) were sold competitively on the same day.
In preparation for pricing, a roadshow was created, which was viewed by 52 investors. The Firm conducted a two-day Retail Order Period (ROP) with $706 million offered on Day 1 and $750.66 million on Day 2. $212.93 million in orders were received on Day 1 and $320.30 million by the end of Day 2. After the ROP, TFA entered the market with $747.28 million of bonds offered for the Institutional Order Period (IOP). The bond market experienced a high level of volatility due to potential increase in Fed Funds Rate, ongoing geopolitical tension between Russia and Ukraine, Fed speakers’ comments, and major economic announcements. Given the overall significant New York supply over the last month, Loop Capital’s salesforce worked diligently to produce superior results and generated total institutional orders of $5.86 billion from 121 accounts. Total orders during the ROP and IOP were $6.13 billion, and the transaction was oversubscribed by 6.5x. The transaction was the third largest negotiated tax-exempt transaction of the week, with a total volume of almost $9.6 billion ($7.32 billion negotiated and $2.23 billion competitive). Due to strong subscription levels, the Firm was able to lower yields by up to 8 bps depending on the maturity.
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.
Earlier this month, Loop Capital Markets served as the Senior Manager on the City of Pittsburgh’s (the “City”) $51.1 million General Obligation Bonds, Series of 2022 (the “Bonds”). The Bonds were rated AA- (Stable) / AA- (Stable) by S&P and Fitch, respectively.
Bond proceeds were used to finance new money capital needs of the City. The Bonds had a maturity structure, comprised of serial maturities from 2023-2042 and generated an All-In TIC of 3.24%. The Bonds were structured with an 8-year par call and 5.00% coupons. As part of the financing, Fitch upgraded the City’s Bonds rating outlook from negative to stable based on the City’s stable financial performance and gradually rebuilding reserves. The strength of the City’s General Obligation credit also reflected very strong operating performance evidenced by a high reserve cushion and its significant independent legal ability to increase revenues.
The Firm entered the order period after the release of February’s CPI data, which came in line with the expectation of 7.9% YoY increase and as inflationary concerns in the U.S. reached a new 40-year high. The Bonds were structured to achieve increasing stated yield and yield-to-maturity for each maturity in compliance with the Pennsylvania DCED Local Government Unit Debt Act. The Firm’s robust marketing efforts resulted in over 64% of the bonds (or $32.8 million) being sold to professional retail investors.
A total of 29 investors participated in the transaction, including separately managed accounts, bond funds, money managers, insurance companies, broker-dealers, and arbitrage accounts. The Firm generated nearly $170 million in total orders and achieved oversubscription levels of 3.3x. Due to strong subscription levels, the Firm was able to lower yields by up to 4 basis points depending on maturity, despite benchmark MMD rates on the day being higher by 5 to 7 bps throughout the curve. Despite challenging market conditions amid a rising interest rate environment and ahead of the FOMC meeting on March 15 and 16 (in which the Fed will begin a series of rate increases this year), the City achieved the best pricing results for its Bonds.
On March 9, 2022, Loop Capital Markets served as Joint Bookrunner and ESG Coordinator on the University of Michigan’s (the “University”) $2 billion General Revenue Bonds, Series 2022AB (Taxable) (the “Bonds”). The Bonds were rated Aaa (Stable) / AAA (Stable) by Moody’s and S&P, respectively.
The structure of the Bonds consisted of three bullet maturities including $300 million in Green Bonds with a 30-year maturity and make-whole call (par call six months prior to maturity), $500 million with a 30-year maturity and a make-whole call (par call six months prior to maturity), and $1.2 billion with a 100-year maturity and a make-whole call (par call six months prior to maturity). The century bond is the largest ever sold in the higher education space to-date. The Firm’s salesforce generated $117 million of priority orders from Tier-1 bond funds and insurance companies.
The Bonds will finance capital projects and assist the University in creating a central bank model for financing its capital projects. Additionally, the Series 2022B Bonds (designated as Green Bonds) will finance Green Buildings (LEED Silver or Platinum certification), Renewable Energy (geothermal heating and cooling facility), Energy Efficiency (development of a Revolving Energy Fund to finance projects across the campuses), and Clean Transportation (electric buses).
With input from the Firm, the University opted for a third-party verification of the Green Bonds due to perceived investor preference and the complex nature of the Green Bonds that are more expansive and unique than most. Given procurement rules, the University needed to select a third-party verifier through a competitive request for proposal. The Firm assisted in this process by providing examples of request for proposals for third-party verifiers, reviewing the RFP before being released, coordinating with each third-party verifier in the municipal market to provide the University with direct contacts, exploring scoring metrics to consider when selecting a third-party verifier, including higher education experience and timing of the final report. Ultimately, the University selected Kestrel as its third-party verifier and the Firm was actively involved during due diligence and crafting the verification report.
In addition, the Firm worked with the University and its disclosure counsel providing feedback on ESG disclosures for the offering document based on recent ESG transaction of comparable higher education institutions. The Firm worked with the University and the other joint bookrunner to review and provide feedback on the investor presentation, which included two slides on the Green Bond designation and the University’s commitment to sustainability and carbon neutrality.
On February 15, 2022, Loop Capital Markets served as sole manager on the City of Chicago’s (the “City”) $25.2 million Special Assessment Improvement Bonds, Refunding Series 2022 (Lakeshore East Project) (the “Bonds”), which was unrated. Lakeshore East is a master-planned development that began in 2002 comprising approximately 26 acres in Chicago located adjacent to Michigan Avenue and the Chicago River. The Special Assessment Area encompasses most of the development and currently consists of 17 buildable parcels with the entire project to be developed within the next 10 years.
Proceeds of the Bonds were used to (i) refund all of the City’s Special Assessment Improvement Bonds, Series 2002 (Lakeshore East Project), (ii) fund certain reserves for the Bonds, and (iii) pay costs of issuance. The Series 2002 Bonds were refinanced to achieve a lower interest cost and to release eligible reserves in an effort to further pay down a portion of the debt. The Bonds were structured to achieve uniform savings with tax-exempt par coupon bonds amortizing from December 1, 2022 to December 1, 2032 with no optional redemption feature given the short final maturity.
Immediately following the release of the Preliminary Limited Offering Memorandum (“PLOM”), the Firm’s salesforce actively began the pre-marketing process and contacted a broad range of prospective accounts within the limitations of a limited public offering, including current holders of the Series 2002 Bonds. The Firm coordinated three investor one-on-one conference calls with the City and Developer and the PLOM was viewed by 39 investors.
The Firm successfully priced the transaction during a volatile market with MMD cuts of up to six basis points across the curve. Due to strong subscription levels, spreads were tightened by 7 basis points across all maturities from pre-pricing to final pricing. The average coupon of the refunding bonds was 3.109% which was a reduction of 54% from the 6.749% average coupon of the refunded bonds. The refunding generated $6.2 million of Net Present Value savings or $1.7 million of annual savings for Lakeshore East residents.
On February 8, 2022, Loop Capital Markets served as the Senior Manager on San Diego County Water Authority’s (the “Water Authority”) $170 million Water Revenue Bonds, Series 2022A (the “Bonds”). The Bonds were rated Aa2 (Stable) / AAA (Stable) / AA+ (Stable) by Moody’s, S&P, and Fitch, respectively.
Bond proceeds were used to finance a portion of the design, acquisition and construction of various capital projects in furtherance of the Water Authority’s Capital Improvement Program. The Bonds had a maturity structure, comprised of serial maturities from 2023-2042 and term bonds in 2047 and 2052. Serials structured with 5% coupons from 2023 to 2037 and 4% coupons in 2038 and thereafter while the 2047 and 2052 term bonds both had a 5% coupon, all with a 10-year call.
The Firm assisted the Water Authority in developing a comprehensive internet roadshow, primarily aimed at highlighting its credit and financial strength, progress with water supply diversification and water conservation efforts to address the drought and continued success in operating through COVID-19 among other things. The roadshow was ultimately viewed by 29 research analysts and investors. The Firm’s banking team, led by our dedicated credit and rating agency specialist, also worked very closely with the Water Authority to help develop a clear and effective rating agency presentation, which resulted in a positive change from a negative to a stable outlook from S&P.
Following the release of the POS and investor roadshow, the Firm’s salesforce actively began the pre-marketing process and contacted a broad range of prospective accounts. We also helped setup a one-on-one virtual meeting with an investor to help address credit questions which resulted in the investor putting in over $85 million in orders. The Firm was able to bring in orders from 27 new investors who were not current holders of the Water Authority’s debt. The Firm’s marketing efforts resulted in over $756 million in orders from 48 investors in total. Ultimately, the Firm successfully priced the Bonds in a challenging market characterized by heightened volatility, tightening muni market liquidity, and MMD cuts of up to 5 bps across the curve. The All-In TIC for the transaction was 3.08%.
