Bexar County (TX)
Combination Tax & Revenue Certificates of Obligation, Series 2018
December 13, 2018
On December 13, 2018, SCS served as the book-running senior manager for this offering—SCS’s fourth senior-managed appointment for Bexar County.
The Certificates were issued to finance permanent public improvements to various County facilities, including detention facilities and various law enforcement centers.
Citing an expansive tax base and a thriving and diverse local economy, Moody’s, S&P, and Fitch all affirmed the County’s ratings at Aaa/AAA/AAA, respectively.
The Certificates were structured with serial maturities from 2020 through 2040 and term bonds maturing in 2042 and 2045. Bonds maturing in 2028 through and including the term bond in 2042 are subject to an 8.5-year optional redemption feature and the 2045 term bonds featured a 9.5-year optional redemption feature.
Earlier in the week, pricings for L.A. Dept. of Water & Power, Michigan Finance Authority, and New York Dormitory faced a challenging market environment as fewer investors were in the market due to the nearing holidays and year end. Additionally, many investors were looking to maintain equivalent nominal yields to the previous week where the market rallied and the AAA MMD yield curve decreased by 14 basis points.
Transactions priced earlier in the week, in chasing the market, had to widen pricing spreads, and take significant unsold bonds into inventory when investors sought higher credit spreads.
Garnering early feedback from large institutional investors was key in marketing the County’s Certificates; coupons were selectively structured in certain maturities, mindful of yield targets elsewhere. The early feedback turned to tangible interest and SCS successfully implemented a strategy that resulted in a large book of orders, first with wider pricing spreads than during pre-marketing, and before becoming aggressive in the re-pricing. Nearly every maturity was oversubscribed on a priority basis.
This effective pricing strategy got the anchor institutional investors committed early which then attracted interest from investors who were initially on the sidelines, and resulted in a positive cascading effect. With this heightened investor demand, our desk tightened spreads by 1 – 5 bps in twenty of the twenty-three maturities.
The SCS sales desk generated $577mm (98%) of priority orders and garnered orders from 49 investors including $331mm in orders from 33 potentially new investors.